How to Transfer Your Most Important Relationships to Your Successor

Your chosen successor has many wonderful strengths and experiences that he or she will bring to your business. But there’s one thing they lack: the depth and breadth of the relationships you have invested years building and maintaining. They will never be just like you in those relationships and they cannot start with the level of connections you have with your key vendors, customers and employees.

This is a huge concern for a lot of owners because they have been the company’s primary external relationship builders, especially with really significant accounts.

So how do you transition them?

You need to identify what is most valuable or important about your relationships with each of your external connections. Is it the ability to negotiate a win-win? An abiding commitment to shared risk? Or the ability to get to the right person at their company quickly to resolve an issue? If you know what is most valuable, you can set up a plan to pass that along to your successor or another appropriate person within your company.

If you are the company’s top salesperson, things get a little trickier. If your successor won’t be picking up the responsibility for sales, you’ll need to prepare your sales team to pick up the slack, and ensure that your successor is prepared to appropriately support key sales calls.

As you engage in these external meetings, insist on bringing your successor with you. If you are renegotiating a banking agreement or vendor agreement, establishing a new vendor/customer, or sitting down with your CPA for an annual business review, bring them along. Discuss your objectives in advance. Talk about the relationship dynamics, the history of the partnership, the areas you will be working on in that particular meeting.

By inviting them along, they learn so much about your priorities, the relationships you have, the way you handle the meetings, the issues, challenges and opportunities that exist. After each meeting, take time to do a focused debrief and coach them on what you were trying to accomplish and assess the effectiveness together. Use it not only to help them learn, but ask them for input, insight and ideas. They offer fresh perspective and will likely surprise you with new ways of thinking or partnering. Some of it will probably be very useful and directly applicable.

Look for opportunities to get your successor involved in annual events such as your year-end audit or regular tax filing too, so they don’t have to face it for the first time without you. Those internal systems that interact with external relationships are also important to plan for.

Over time, you will have to attend these meetings and be intimately involved in the systems less frequently, and your successor will be in a position to handle more and more.

For one of my clients, the board relationship was really important. The successor didn’t have much of a relationship with the board, which would be guiding and directing his work, but it was critical. They needed to be able to influence and support each other.

Our task was to establish the necessary credibility and rapport so they could call on each other as needed. We brought the successor in to the board meetings and gave him targeted responsibilities that increased over time. We then directed him to meet one-on-one with board members outside the meeting to learn how the board saw the company, its CEO, his role as successor and the risks and growth areas in the business. This all facilitated a deeper relationship. We also had him join the audit committee to penetrate that aspect of the business and work with several key board members in a small group setting.

You’re probably asking the age-old question now: My gosh, how long does this relationship transition take? Depending on the uniqueness, length and complexity of these relationships – as well as how comfortable you are with letting go – you can expect it to take from three to nine months to establish and it could be years before it’s fully in place at the level of the relationships you’ve built. Of course yours weren’t built in 6 months either!

While we’ve been focusing on the importance of transferring external relationships, don’t forget about facilitating the relationship transfer between your successor and the employees who get the work done day in and day out. People such as your administrative assistant, controller/CFO, operational team leaders and department heads, etc… will be invaluable in helping ease your transition and keep the company running smoothly.

Seven Secrets to Successful Succession

Believe me, I get it. Thinking about how and when you will exit your business – and whose hands you’re leaving it in – is daunting. Even if I’ve talked you into starting to plan for the inevitable, it’s still hard to know how to launch this big, lengthy process. No worries! I’ve got you covered.

Download “The Seven Secrets to Successful Succession,” a quick guide that will help you get started. Time spent up front on these seven items will maximize your likelihood of a successful transition on your terms and your timeline. Ready to get started? Contact me today.

When The Apple Falls Far From The Tree

What if your kids don’t want to take over your business? That’s a bummer. Succession planning is often much easier if the transition is to adult children who are already in the business and want to run it, own it and serve in some leadership role for some period of time.

If they don’t want to run or own it, you have a tough decision to make.

The next easiest option would be to sell to one or more key employees who want to own the company. You could do this through an ESOP (employee stock ownership plan), which makes every employee an owner, but there is a lot to consider with an ESOP, and it still requires a strong leader who can run the business profitably and sustainably. More often I see sales to competent leadership-level employees who are interested in buying the business.

The problem with selling to family members or key employees is the financing. The vice president of a $15 million company isn’t sitting on a wad of cash ready to invest in your business. And getting a bank loan of that magnitude is tough.

In most cases, you will have to finance the sale. Doing this will build an opportunity for your successor — the new owner(s) — to run the business while you are still engaged. And you’ll likely want to be engaged, since you’ll still own a good piece of it for years.

The plus side of this arrangement is that the installment payments fund your retirement and give you the flexibility and freedom you want in your life. The negative side is that you are an owner for a long time, and your liquidity event is really a series of payments over time. If the business succeeds profitably, you get paid. If the business suffers, your payments may go toward the survival of the business, and you may find yourself coming back in to re-right the ship or find a new buyer.

This makes it very important that you pick the right people to buy it in the first place. If they can’t run the company successfully and sustainably, there isn’t going to be a payout for you.

If you have no family member or key employee willing and able to buy and run the business, it may be time to seek out a third-party buyer. The wrinkle in this scenario is that it can be really hard to secure an outside buyer who’s willing to pay what you think the business is worth.

Selling to a strategic buyer is a cleaner transition. There is a liquidity event , then you move on with your life and they move on with your business. Oftentimes, this also can be more lucrative for you, too. But it’s hard and can be time consuming to find the right buyer.

While these options may seem daunting – and they likely are — the worst solution is for an uninterested adult child to feel obligated to take over the family business. It’s not good for your company, your wallet, your family or your legacy.

Start now — Find the right fit buyer for your business, and ensure the long term success of your company, your retirement funds, your family and your legacy.