None of us owners/entrepreneurs like to think about transition planning and transitioning out of our business, after all we’re never going to get old!
But of course, we do, and eventually we want to spend time on other pursuits like family, friends, hobbies and just generally enjoying some of the fruits of our many years of labor.
To make it all work, owners must be thinking about both Succession Planning AND Transition Planning. Why? Because no matter how you plan to exit, i.e. sell, hand over to family, keep ownership into retirement, it’s very likely it will take more than one person to replace you!
Understanding the Difference
Succession Planning is the process of evaluating your talent throughout the company and figuring out who can step up into higher level roles, maximizing your internal talent. This allows your company to continue to grow and evolve with the changing needs of the market and will likely put more dollars in your pocket as a result. Succession Planning is on-going activity and should be done not just when you start preparing to retire, but while you’re still working hard to grow your business.
Transition Planning on the other hand, is specifically evaluating how to replace yourself in the business. As I mentioned earlier, it’s unlikely one person will be able to replace you, especially if you are a founder/entrepreneur. Transition Planning requires evaluating your contribution to the business and evaluating who/how it will all get done when you’re gone. While it definitely means hiring a new President/CEO (from inside or outside) it also often requires reorganizing the company and may even require creating some new roles.
The Bottom Line
Getting a successful exit requires creating a business that “can run without you”. If you create this kind of business, you will have lots of options when it comes time to retire or otherwise exit. Buyers (both Equity and Strategic) want businesses that create consistent and predictable profit, not contingent upon the performance of one person. And, by the way, so do family members, if your plan is to pass the company on to them!
Becoming good at Succession Planning with plenty of time before retirement, and then shifting to Transition Planning when retirement draws near (3-5 years out) will definitely make those golden years much more enjoyable – although I realize, just like myself, you’re never going to get old!
Strategic Talent Partners has helped many owners with both Succession Planning and Transition Planning. If you’d like to know how to get started, please reach out.
