There could be any number of reasons you’re leaving your business. You might be selling it, or you could be handing it over to family or key employees to run as you step down, no matter the circumstances, estate planning is important. Learning to delegate control and then letting go of the reins entirely is especially important if you’re selling to family or passing the business on to them.
One of the first things to sort out is when you’re going to leave. Have this worked out well in advance, and take into consideration things like family, finances, your health and the state of your industry. Document everything, so that the new owner can run the business without you. Create manuals that outline all your operating processes.
Although it’s not a good idea for everyone to know you’re planning to step down, there are some people who should be kept in the loop, such as suppliers. Introduce the new owner to them if possible.
Preparing Your Successor
The better you prepare them for their new role, the more successful the handover will be. How you go about it depends on who the new owner will be. For instance, if you’re handing the business over to family make sure they have a genuine desire to run the business, and the necessary skills. You want to be sure they’re in it for the long haul.
If you’re selling to employees, whether it’s a favored manager, a group of employees or a set of shareholders, it’s important that everyone is aware early on of your intentions.
In either case, there are some critical steps you need to take to prepare the new owner:
- Let them watch you work. They need to learn as much as they can. Continually explain why you do things a certain way and how you make decisions.
- Dip their toes in by letting them make some decisions, with your guidance. Work together on key projects. Encourage and correct them.
- As they gain in confidence and ability, give them more decisions to make, with you as an advisor rather than guiding them. Let them make mistakes and show them how to fix them. It’s the only way they’ll learn to deal with failure.
- Give them total control. Encourage and empower them so that they are truly ready to run the business without you. This is one of the greatest challenges for most business owners.
As you’ll see, this process works by gradually easing you out, as they ease in. Following these steps is essential for successfully delegating control. Handing over the reins in one fell swoop almost never works, as the new owner is left feeling overwhelmed and without the necessary skills, while you walk away from the business knowing you’ve left it in the control of someone who doesn’t know what they’re doing. It’s not the kind of legacy you want to leave behind.
Transferring Assets and Control
You need to get your assets valued by an expert to make sure you have an accurate understanding of your business’s worth, especially if you’re selling. This valuation will also help guide negotiations so that the price is fair for both you and the new owner.
As you prepare for the transfer, assemble a transition team to assist in the process. This team should include professionals who are objective and not emotionally involved in the business, such a
s your accountant, solicitor, or business broker. Their expertise will be invaluable in navigating the complexities of the transfer, ensuring all legal, financial, and tax implications are properly handled. Maintain clear and open communication with both your team and your successors to keep the transition smooth and well-organized.
Once the new owner has fully taken control, all decisions will be theirs to make. At this point, the hardest part is stepping away and trusting that your successor can successfully lead the business.
Letting Go
Believe it or not, this can be harder than it sounds, especially if you've built it from the ground up. However, if you’ve followed a gradual transition process, it becomes easier to hand over control and trust that the business will continue to thrive.
- Resist the temptation to check in or drop by frequently once you’ve stepped down.
- If you’ve passed the business to family, avoid interfering unless they specifically ask for your help.
- Recognize that your family or employees will appreciate your trust and independence as they take over the business.
Ultimately, stepping away and letting go requires patience and trust in your successor’s ability to manage the business successfully.
Next Steps
- Start planning your exit well in advance, considering factors like family, finances, health, and the state of the industry.
- Begin documenting key business processes and create manuals to help your successor take over smoothly.
- Gradually transition control by involving your successor in decision-making, and provide them with opportunities to lead and learn from their mistakes.
- Assemble a transition team of impartial professionals, such as your accountant or solicitor, to assist in the transfer of assets and control.
If you’re retiring from work altogether, make sure you have a plan in place. When you make the decision to sell or step down, decide what you’re going to do with your days instead. Just because you’re no longer going to work doesn’t mean spending your retirement in front of the television.
Woodsboro Bank is here to help not only with the transition process of your company, but also for all your estate planning needs. Contact us online to set up a consultation and start the process of preparing you for retirement.