Letting Go of the Bush
This week we are revisiting the hard process of “letting go” after the closing with another example. In medium to large sized companies there are teams responsible for checking all the 90-day post-closing steps and leading integration initiatives for people, process and systems to capture economies of scale and best practices for the new company. The best of these will deal with the owner and executive transition issues as a key part of the plan. But in a small to medium sized company, especially with a smaller buyer, these processes are probably not as sophisticated.
Recall from last week the message that you, as the owner, can be a positive or a negative for the future of the company you just sold. You may have an incentive to be involved in some functions by virtue of a post-closing payment based on sales, gross margin or EBITDA thresholds being met. We recommend you optimize the transition and save yourself from dealing with issues that are not your worries any longer. Here is another second real-life example:
Lorraine sold her $2.5 million boutique landscaping company to a local individual who had been working for a competitor for several years. The buyer and his CPA completed their own due diligence and worked with the lender to secure SBA funding. That process turned up some “low hanging fruit” opportunities to improve some sales and operational processes right away.
The buyer wanted Lorraine to help with the transition of the existing customers to his new company and then step away. Unfortunately, with little else to do after closing, Lorraine found herself acting as if she still owned the company. Without realizing her impact, she resisted some of those improved sales and operational process improvements. Since she was in the office, her former employees stopped in and they groused a bit about the “new ways”. They also felt sorry for her and were conflicted about their loyalties.
Action Taken: Lorraine realized that her presence in the office was creating mixed messages for the team and took action. She met with the new owner and they developed a plan (with some help from their friendly Harvesters!) to educate and support the team members about Lorraine’s transitioning role.
Ultimately, Lorraine was able to transfer the loyalties her team had to the new owner. One of the steps they decided on was a cookout/party to mark the transition and celebrate the successes of the past and plans for the future. This kind of event, properly handled, can be a powerful positive acknowledgement and marker for the group to move ahead in their new reality.
There is a reason that humans celebrate major life events (birth, death, marriage, graduation) with gatherings, food and speeches! Acknowledging the contributions of the team to get to this point is important. Equally important is having the founder endorse the new owner and the future success of the new company.
To repeat from last week, you can start this important in preparation for your own transition with the following steps:
- Think about what your goals are for your post-closing life. Travel? Charitable work? A new venture in a different industry?
- Put energy into these new goals. Research and start a plan for that long-delayed trip with or meet with an architect to start the blueprints for that family vacation home.
- Clearly define expectations for what your responsibilities will be and for how long with the buyer. Get those details for clients, employees and processes down in bullet points.
Are you a buyer or seller with questions about how to prepare for this process? If you’d like to discuss your situation, selling or buying a business or preparing your business for sale, please let us know. In the meantime, if you have questions or comments, I can be reached anytime via email: [email protected] or phone at: 224-688-8838.
We’re here to help you Harvest Your Potential.