18 Jul How to Avoid Pitfalls in an Ownership Transition
There are a many types of ownership transitions in privately owned businesses, ranging from gradually giving more control to family members to selling the business to outside parties. In every type of ownership transition the participants can learn a great deal from the failures of others. In fact, many people who sell their company report that they later regretted their decision. Often these regrets are due to making mistakes in how the transition was handled.
For Sellers: Have a Solid Transition Plan
When owners sell their business, they often hope they can get all the money at closing and go off and retire in peace or start the next chapter in their career. However, buyers always want to make sure that they will be successful so they often protect themselves by keeping the seller involved with the business for a year or two. That means that it might not be so easy for the former owner to walk away. It is important to anticipate what the new owner will need and have a solid transition plan in place. That way you’ll know what to expect and won’t be in for surprises when you find you can’t simply jump on a plane to Hawaii.
For Buyers: Don’t Make Changes Too Fast
If you’re buying a business or taking over control, there will already be a business model in place. Communicate the strategy and goals of the company, but don’t change the business model too abruptly. Another key point is, empathize with the employees, take care of them, and communicate how important they are to the company’s success. Employees are apprehensive about change, but they need to understand that ownership transitions can be beneficial and address their needs. That may start with improved compensation and insurance. When employees have their fears eased in regards to keeping their jobs with equal or better pay and benefits, they will be far more likely to stay with the company and be positive about the transition.
For Buyers and Sellers: Identify New Leadership
Both buyers and sellers can benefit from identifying leaders. Take a good look inside at your staff and look outside the company to figure out where tomorrow’s leaders will come from. If you’re planning to sell your business, it makes sense to start grooming these individuals far in advance. Keep all employees informed and provide frequent communications that address the most common questions. Sometimes it can be beneficial to bring in a transition consultant to advise you and answer the questions of those who are concerned.
Ownership transitions can be complicated, and that’s why it is essential to always think of things in a strategic manner. When a proper strategy is in place you’ll have the best chance of a smooth transition. Austin Dale Group offers ownership transition services to help you achieve your goals.