Let me start by saying that there isn’t one magic pill that you can take that will make for a successful transition of your business to a new generation of owners…if there was every business owner would have taken it by now. And since approximately 90% of all businesses in the U.S. are owned by a family this would be a lot of pills…someone would be the richest person on the planet.
No Magic Pill…
So now that we know there isn’t a magic pill, what can we do to increase our odds of having a successful transition to the next generation coming up behind us? One thing I have seen over the years is how the owners relate and treat their “future successors” of the business…the “human capital” side of a transition. I feel this is one of the most difficult aspects of a successful transition, far more complex than the financial or operation side of the business.
Let’s say you have a son, daughter, or close relative that you would potentially like to have as a likely successor to your business. What you do over the next few years can make all the difference as to whether or not they want to run the business and if they are qualified to run the business.
One of the most difficult parts to running a business is dealing with adversity and challenges on a day-to-day basis…that’s part of leadership. Finding out, and teaching, prospective successors this skill is one of the most valuable lessons they can learn and you can identify in the successor. This means simply finding out if they can push through adversity and complications and come out the other side with a workable and positive solution. So how do you find out if they have what it takes to make this happen?
How to Leverage someone’s “natural abilities” to create success
I believe everyone has natural abilities to do certain things and it is baked into their skills and personality from an early age. For example, if you are inclined to be more analytical you have probably gravitated to doing more with numbers than someone else. You excelled at math, accounting, possibly science and other analytical subjects. You enjoyed it and so you found more ways to do more and more of it. Or you were the “natural born salesperson” type that has the gift of gab and loved to interact with people so you found more and more opportunities to do this as you were growing up. We all have a personality style that is dominant and we have not only developed but continued to pursue.
With a successor, often times owners throw them into every aspect of the job so they can learn it prior to taking over the business. While this might be a good thing to give them exposure to the business overall, rest assured they will fail (or be very stressed) about many aspects of the business that don’t fit their personality style. If they are the outgoing highly personable type of individual, they will not only dislike but will probably be unsuccessful if they were in the accounting department or the operations department for a period of time.
This not only causes them to dislike the business, but possibly feel like they really don’t want to run it one day and so they start to get “cold feet” about taking it over…thinking they won’t be successful because they don’t understand these parts of the business that well. This is a mistake from my perspective. Just because they don’t excel in a certain area of the business doesn’t mean they can’t be a great successor and leader.
Creating Leaders
Today, more than ever before, leaders may excel in one particular area of the business but they have to understand all areas AND surround themselves with great leaders in the other areas of the business. From the examples above, we would be better off, as business owners, to help develop the next generation of owners to be great leaders instead of understanding and knowing in detail how to run every aspect of the business.
If we have a team of great leaders leading all aspects of the business where the owner can lead, motivate, and reward these leaders, the business will run incredibly well. Finding the strength of the future owner and helping them to be a great leader will allow the business to capitalize on the strengths of the people instead of just the strengths of the owner. This is a skill I see missing in a lot of transition plans.
Focus on teaching how to be a leader
Most likely you were taught by either a previous owner or yourself to be a “doer” in the business to make it successful. And it worked during the Industrial Revolution prior to the new Millennium. But the world has changed. It is a much faster, less forgiving, and crowded place for a business today. Having the skills to make quick decisions and beat out the competition (which has significantly increased) is more and more difficult. You can’t do it all on your own…it takes a well-tuned machine of leaders to make these kinds of decisions.
Where I see very successful transitions to new owners of the business are the ones that developed the new owner into a great leader, not a great doer. They understand the different aspects of the business for sure, and they excel in their own personality style, but they know how to lead. They know how to get much more done through leveraging the strengths of other people. They can get far more done much faster with a great team of leaders behind them.
The Opportunity…
Take a hard look at your business and see if you have these leaders in place today. If you do, that’s awesome and you should definitely be taking advantage of it. If you don’t, then find a great outside advisor that you can work with to help you develop great leaders (or find them) for your business.
I would also identify your successor(s) and invest much of their training in learning how to lead, not doing. Give them just enough time in the different areas of the business so they know what is going on but invest in giving them leadership training. Help them be the leader you are or would like to be going forward.
The odds of them wanting to own and run the company will go up significantly when they understand their role is to be a leader, not a doer. Their leadership style will be developed from their own personality style so they will be very comfortable leading the way that plays to their strengths. Allow them to lead from a position of strength.
What to do next…
If you ever have any questions about this or any other aspect of your business, just ask and we’ll be happy to answer them. Or if you want to understand succession planning in more detail and how you could start planning for a successful move, I’d be happy to meet with you (complimentary of course) to discuss it further for your own particular situation. And if you found this helpful and are thinking of someone you know who could benefit from this post, please help them out as well and share this with them.
