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Six Hurdles of Business Transitions

Six Hurdles of Business Transitions

November 6, 2019 | Read Time: 5 Minutes

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Nothing stays the same in life, or in business for that matter. Businesses are seldom at a steady state. They are growing or declining, starting up, or being exited or transitioned to others. All business phases have their challenges, but we’ve found that businesses in transition are especially challenging. This is where Huberty’s Advisory services focused on Analysis, Strategy, and Planning are especially helpful.

What phase of business are you in? And what transitions will you need to experience to get to where you’d like to be? Guiding your business through a transition that you’ve not experienced before often requires assistance or advice around one or more of six hurdles that often inhibit successful transitions.

  1. Team Building. Unfortunately, the team that got you this far may not be able to take you to the next level. First of all, there just may not be enough of them to handle more growth, so recruitment is required. Or, if you’re in decline, you may have to shed some people to stay profitable. Even if your transition doesn’t require large changes in staffing, you may need new skills training to deal with new systems (see #2 below). Transitions may also alter culture, bringing challenges to creating (or re-creating) an effective, aligned team to make the business successful in its next phase.
  2. Systems. The way that things get done in a business, its processes or systems, are vital to accuracy, consistency, and efficiency. At startup, systems may be manual in nature, even somewhat chaotic. Those same processes won’t work in a larger enterprise. Likewise, a dated software system that you’ve nursed along for years won’t be attractive to a buyer if you are looking to sell your business. Your systems have to match the level of your next business phase.
  3. Organization. The structure of a business usually requires ongoing scrutiny and monitoring. Growth means more compartmentalization, and that can complicate communication. The leader’s message is more easily delivered in a small organization where everybody reports to the owner. But messages get watered down in larger organizations and need to be delivered with more clarity. Transitions also may require whole new roles. Managers seldom stop to consider the best structure needed to get all the work done efficiently. At the extreme end of the spectrum, imagine setting up a whole new operation in a new geography. What positions would need to be duplicated, and which ones could be covered with existing personnel?
  4. Financial Understanding & Analysis. Businesses in transition need even more attention to their numbers, and it's not just the need to look back at the historical performance of the firm. More importantly is the ability to forecast, budget, and consider scenarios that help guide the decisions that will get the business through the transition. Many business owners wish they had a better understanding of what their numbers are telling them, but at a minimum, this is an important time to reach out to CPAs and advisors for help with analyzing and interpreting financials. Key performance indicators can simplify this understanding, but help is also needed to help choose those numbers that are truly the “keys”.
  5. Succession & Exit. Planning for the hand-off of the reins of the business can often be the most difficult transition of all, usually because there’s more emotion tied up in this transition than the others. This is the transition that business owners typically only get one shot at; all the more reason to reach out for help and guidance. Considerations include not only the value or proceeds that an owner may receive but also the preparation of the business and its new owner or leader to carry on or even enhance the business into the future.
  6. Leadership. We saved the most significant hurdle for last. When businesses get tripped up in transitions, it is usually leadership that turns out to be the main reason. Change is hard for anybody, and even though leadership involves coaching others through change, leaders can have difficulty with changing themselves. Typical leadership constraints include the inability to delegate, failure to focus on the big picture direction of the business, failure to plan or share that plan with the team, and failure to pay attention to hurdles 1-5 above. All business success teachings recommend working with coaches, mentors, and advisors (or any other name for them), but many leaders still let their ego or independence get in the way of seeking the help that can make transitions easier.

Talk to your Huberty advisors about what our assistance might look like for your transition. Let’s work together to find ways to knock down your hurdles and speed you along your path to the next phase.