Navigating the complicated terrain of private and family business transitions is both an art and a science for everyone involved: owners, successors, their families, and us, as Transition Guides. On the art side of the equation are experience, intuition, careful listening, open-mindedness, humility, confidence, humor, and the attitude that others have the best of intentions. On the science side are setting and prioritizing goals, choosing a transition path, assessing family members’ preparation, willingness and ability to transition successfully, and preparing successors to lead. Today we want to introduce you to some of the “scientific” tools that we use and have assembled in our Family Business Transition Tool Kit.
The Objectives Matrix™
Our transition process, The Transition Roadmap Developer™, is based on six questions:
Why?
What?
Who?
When?
How Much?
How?
Having worked with owners for years, we have found that the first questions they usually ask themselves when they think about the transition of their businesses are: How and How Much. We also know that by starting by asking these two questions, they can easily become stuck and often become discouraged.
Rather than jump to How and How Much, we ask owners to begin by asking themselves Why. Your Why consists of the collection of objectives that drive you, guide you through tough decisions and motivate you to do the work necessary to successfully complete your transition journey.
Your Whys fall into two categories: (1) those that make you want to leave your business, and (2) those that attract you to your Next Adventure™ (or post-business life).
We designed The Objectives Matrix to help owners and wealth creators (and, later in the transition journey, business successors) paint a picture of a meaningful and exciting future. We ask owners to think of “the possible,” no matter how far-fetched, and give them prompts like:
- What is important for you to have or to be doing?
- What family, friends, etc. are you spending time with (or want to), and what are you doing together? How often do you spend time together?
- How do your important relationships feel/work?
- Where are you living? Do you have more than one home?
- What things make you happy?
- How is money working in your life?
- What are you doing for your health?
- What is your spiritual life like?
- How are you spending/enjoying your time?
- What are you exploring or learning about today (art, hobbies, travel)? How?
After identifying the goals they have for themselves, we ask owners to think about the goals they may have for their spouses, families, extended families, business partners, employees, successors, and businesses.
We then ask them to indicate whether a goal has already been achieved, is achievable in the short term or in the long term.
Finally, we ask owners to choose their Deal Breakers™. In other words, we ask them to identify the goals that are so important to them that, unless the transition will achieve them, the owners will not continue on a transition path.
Once owners have identified their goals and Deal Breakers, they can begin to answer the other five questions.
Transition Paths
Once owners have answered (or have a reasonable idea of) the questions of What, Who, and When and reach the question of How, we encourage them to use a tool we call “Exploring Business Transition Paths.” This tool gives them a bird’s eye view of their lifetime transition options:
- A transition to an insider via gifting, a combination of gifting and sale, or a sale
- A transition to a third party of the entity and/or assets
- Liquidation
And because no transition goes exactly as planned, we ask them to identify their Plan A and Plan B.
If owners do not plan to transition their businesses to successors during their lifetimes, the transition paths available to them are (1) passing their businesses according to their estate plans, or (2) having their heirs liquidate their businesses.
Family Business Checklist
The transition of family businesses can be complex because the financial and emotional stakes are high, but they also have the potential to be the most gratifying journey in both a parent’s and adult child’s lives.
We designed The Family Business Checklist to help owners (1) asses the foundation they’ve already built for the transition of their companies from one generation to the next, and (2) identify what remains to be done.
The Checklist asks question related to six categories:
- Prioritizing healthy relationships
- Clarifying the business’s culture and legacy
- Managing the distinction between business and family relationships
- Establishing respect between and among generations
- Setting a vision for the future
- Acting with gratitude
The Family Business Checklist is just one tool in our Family Business Transition Tool Kit that we use to help families craft successful intergenerational business transitions.
Effective Successor Development
Owners of successful businesses are talented people. In addition to making decisions and acting decisively, they can see situations from multiple perspectives, lead through change, ask good questions, really listen to responses, communicate their vision for the future, acknowledge the contribution of others and, yes, ask for advice.
Rarely have successors developed all these skills, so it’s the job of owners to teach them. We’ve compared that teaching or mentoring process to a three-phase dance:
Phase 1: The owner teaches a successor the steps.
Phase 2: The owner and successor alternate the lead.
Phase 3: The successor leads, and the owner follows.
No two dancers can be consistently graceful, so we use the Effective Successor Development tool (and others) to help minimize the number of bruised toes. We have organized successor development into five steps:
- Model and teach key leadership attributes.
- Invest in curriculum development.
- Align legacy with the values of the rising generation.
- Have owners step into their successors’ shoes.
- Leverage the experience of skilled consultants.
The Family Business Transition Tool Kit
These are just four of the tools we use in our transition process, the Transition Roadmap Developer. For the past 20 years, this process has delivered successful transitions for 100 percent of the owners who have completed it.
Whether you are an owner or successor, we encourage you to take charge of the transition of your business and learn more about how to maximize the odds of a success. Sign up for a free consultation, our monthly free 90-minute workshop (Metamorphosis), or for a deep dive, our Transition Masterclass™.
As Transition Strategists we work educate all parties involved in business transitions — owners, successors, families, and advisors — and craft transition plans that position individuals and businesses for success. Let’s connect and begin your journey to your Next Adventure.
