Case Study 6 - Using the Question of What to Craft a Successful Business Transition

*Names and business names updated for client privacy

“I want to sell my business.” These are the first words many owners say when entering an investment banker’s office. Seems obvious, right? Business is what owners have and businesses are what investment bankers sell. Yet, as transition strategists, we see businesses as multi-faceted entities, and the more facets a business has, the more options its owner has when thinking about transitioning to a new owner. Consider the following (fictional, yet realistic) example.

Clyde Shine, Sr. was the owner of Pickup Motors, a 60-year-old company located in New Jersey. Clyde’s son “Junior” had driven for his father’s luxury black car service during high school and college vacations and before going to work on Wall Street. He’d been working as a bond trader for about 10 years when his father died suddenly. As the only child, Junior’s mother turned to him and asked him to take over the business.

Junior was ready for a new adventure, so he agreed and quickly decided to move in-house some of the company’s biggest expenses: towing, repair, and maintenance. He bought land, constructed a six-bay garage, and purchased three used tow trucks. His attention then turned to party buses and wheelchair-accessible vans. In 2018, he bought 20 taxi medallions and launched a small fleet of cabs.

When we first met Junior, he was wrestling with how he could transfer the company to his four sons (who were all working in the business) in a way that would be fair to all of them and keep them working for the good of the company and family rather than working solely for their benefit.

These two conditions: being fair to all his children and motivating them to work together as a team were just two of Junior’s Whys (or goals) for his transition. (Check out this video to learn more about the Whys of a business transition.) Junior promised to tell us more about his business transition goals using The Objectives Matrix™ after we shared with him some of our ideas about how he could structure the transfer.

“How will I structure the transition?” is both a natural question and one that typically keeps owners going round and round because figuring out how to transition a business is almost impossible if you don’t have some idea about your Why (or goals for the transition), your What (what you have, want and don’t want to transition), your Who (your successor(s)), and your When (the timing of your transition).

In Junior’s case, he’d told us about two of his Whys, he knew that he wanted his sons as successors, and he was flexible about his When. It was our turn to ask him about his What: What did he have to transfer? What did he want to transfer? What did he want to keep?


What do you have to transfer?

After Junior told us about his business, we asked him to think about its components: black car service, towing, vehicle repair and maintenance, taxis, party busses, handicap-accessible vans, and the real estate on which the garage was located. By considering the business as a collection of parts rather than as one entity, Junior opened a world of options for himself. As just two examples: He could sell one part to each son and sell the medallions to a third party. He could sell the most valuable parts to a third party and sell to his sons the parts they could afford.


What do you want and not want to transfer?

Initially, Junior thought it made sense to sell the taxi medallions, transfer all the operations of the company to his sons, and keep the real estate. He wanted the property to generate cash for him and his wife until he decided to give up the income stream.


What does your successor want to buy?

Once Junior clarified his thinking about which parts of his business he wanted to sell, transfer and keep, we asked whether he knew what his sons wanted to buy. Junior explained that his sons naturally fell into two teams. Three of his sons managed all the vehicle operations and one managed the garage. It was likely that they’d want to remain where they were.


While no transition is perfect or can be all things to all people, Junior had several options for how to structure the transfer to his sons. He could transfer 25% of the entire business to each son. He could transfer a majority ownership in each entity to the sons working in that entity while those not active in that entity received a minority interest.

We suggested that Junior use his two Whys to evaluate his options.

  • Which option would be fair financially to all four sons?
  • Under which option would his sons benefit from their own efforts and keep all four working for the good of the entire family?


Using the Question of What to Craft a Successful Business Transition

Junior didn’t make any decisions our first conversation, but he saw that by starting with his goals he could create a plan for moving forward. He also left knowing, at least in part, what he wanted the transition of his business to accomplish. He understood that 1) his business was far more than a monolithic entity; and 2) by thinking of it as a collection of parts, he had far more options than he thought he’d had at the beginning of our conversation.


Ask Yourself The Right Questions.

The process we use to help owners understand all their options and make thoughtful choices among them begins with six questions, a tool we call The Bix 6™:  Why, What, Who, When, How, and How Much.

We’ve created an online, six-week program during which a small group of owners and our Transition Guides will dive into each question so participants can begin to gain clarity about their options and establish a means of assessing which of their transition options are best for them. Click here to learn more about the next session of The Big 6 Program.