When I talk to my clients about business transitions they usually think about a planned transition such as selling their business or transferring it to their children.  However, business transitions can be planned or unplanned, and it is important to anticipate both situations and incorporate that into your basic business planning.  This is not only important for business owners, but also for their advisors: accountants, financial planners, and lawyers.

 My Story

Several years ago I was working with a client who owned a small chemical research company in Cincinnati, Ohio.  He has a partner who was in Salt Lake City and was the business side of the team.

The owner was Dr. William Vanooij, a professor from the University of Cincinnati who started a business with his partner in 2003.  Dr. Vanooij was world renowned in his field, and the lead technical person in the company in addition to being an owner.  The business was built on his shoulders. Shortly after I started working with the company he got cancer and died a year later.

At the time I was advising the owners on business strategy and was familiar with the operation and business strategy.  Needless to say, this was a very difficult and stressful experience for everyone, just a nightmare.  The rest of the story is that I agreed to join the company, and but its survival is questionable.

What I regret is not that I could not convince Dr. Vanooij to create a transition plan as soon as he became ill.  He wanted to focus on getting well, and I did not want to dwell on the possibility that he would not survive.  I took the cowards way out and did not persist when he pushed back.  That was my mistake.   As a business advisor, whether you are an accountant, a lawyer, financial planner, banker or consultant YOU have a responsibility to assist your client in establishing a business continuity and transition plan. So how can you help to avoid the problems created by an unplanned transition.

But why would a brilliant, 71 year old man, with cancer not plan for his exit?  There are lots of reasons, most of them based on emotion not logic. But as a business owner or advisor, you are not being fair to the family, employees and other stakeholders if you do not address this issue. If you are an advisor to an owner, you are not doing your job if you avoid this subject.   Take it from me, you do not want to look back and say “I should have”.  At the very least, you should suggest a business continuity plan, ONE of the what-ifs being the exit of the owner.

What Lessons Did I Learn?

So what happened, and what lessons were learned that I can share with you?

Ecosil Transition issues

Luckily, there were several factors that allowed the company    to have the time to execute a transition plan.  The company  had an OA that dealth with transition, a long term reserarch grant from the National Science Foundation, and a business advisor (myself) who was willing to step in and execute the transition.  These factors provided the company with the resources to survive.  These factors were

Unfortunately, there were also a number of factors that were  not in place which made the transition difficult.  This was an emotional time, and not conducive to good decision making. Has these been in place, the transition would have been less stressful and less risky.  It is critical that business owners and advisors take the time and effort to create a transition plan.

What I learned is that it takes courage for business owners and advisors to face the fact that a business transition is very likely and that a plan is essential to reducing the risk of the transition.  The first, and one of the most important steps in business transition, is to assemble the right team.  The team makeup depends on the type and structure of the business.   A well-run company normally has a core of professionals supporting it such as a lawyer, accountant, financial planner, but not the specialists needed for effective transition planning, such as the business broker. All team members should knowledgeable in the specialized aspects of business transition and be current on the business situation. A business transition is hopefully a one-time event for most business owners, and it is critical that it be done correctly.