The following is an excerpt from Ice Miller's Business Transition Strategies to Preserve Wealth Guide, which provides insights on a variety of topics to help ensure a smooth business transition.
Confront the Brutal Facts
Admiral James Stockdale is credited with articulating what is known as the "Stockdale Paradox." The Stockdale Paradox says that we should not confuse our faith that things will "work out in the end" with the discipline that is necessary to confront the brutal facts as they are today. The brutal fact is that business succession planning is all about the business outliving the owner and even thriving after the owner's exit. There are only two ways to get out of your business: voluntarily or involuntarily. The voluntary ways include sale and retirement. The involuntary ways include the "five Ds:" disability, divorce, distress, dispute and death. All of these potential obstacles require planning to avoid a bad outcome. Once a business owner comes to grips with this reality, it's time to think about what to do about it.
Begin with the End in Mind
Stephen Covey (The Seven Habits of Highly Effective People) is famous for adding the phrase "begin with the end in mind" to the business lexicon. That phrase precisely captures what successful business succession planning demands. Every management person hired into a small or closely held business, and every member of the family brought into management, has the potential to be the next generation of business leadership. Therefore, every evaluation of new and existing talent contemplates the possibility of that new leadership taking over some day. That leadership will not only have to be hired, he or she also will have to be developed and trained. There must be a plan for transition of day-to-day operations, administration, sales and marketing, as well as control and accountability for the management of the business and critical decisions. Businesses have their own complex cultures and unwritten ways of doing things—those also require transition. The business owner's knowledge, routines, skills, relationships and methods must be transferred to the business enterprise, to the extent that is possible. If it is not, then those valuable intellectual assets will leave with the owner. These intellectual assets often can be transferred through the implementation of standard operating procedures and the long-term training of managers. It takes time – often years – of focused effort. Business owners who begin this complex process, knowing the end result will be a potential transition of the business, create an entirely different perspective.
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