Six Hurdles of Business Transitions

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

What phase of business are you experiencing? And what transitions will you need to get to where you’d like to be? Guiding your business through a change it hasn’t experienced 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, there 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 significant changes in staffing, you may need new skills training to deal with new systems (see #2 below). Shifts 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 things get done in a business, its processes or systems, are vital to accuracy, consistency, and efficiency. At startup, systems may be manual, even somewhat chaotic. Those same processes won’t work in a larger enterprise. Likewise, a dated software system you’ve nursed along for years won’t be attractive to a buyer if you want 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. Managers seldom consider the best format to get all the work done efficiently. 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 must be provided more clearly. Transitions also may require new roles. At the end of the spectrum, imagine setting up a new operation in a new location. What positions would need to be duplicated, and which 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 firm’s historical performance. More important 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 better understood what their numbers are telling them. Key performance indicators can simplify this understanding, but help is also needed to help choose those numbers that are the “keys.” Still, at a minimum, this is a critical time to reach out to CPAs and advisors for help analyzing and interpreting financials.

5. Succession & Exit. Planning for the hand-off of the reins of the business can often be the most challenging transition of all, usually because there’s more emotion tied up in this transition than the others. Business owners need to consider: the value or proceeds that an owner may receive, the preparation of the business, and its new owner or leader who will bring the company into the future. It is the transition that business owners typically only get one shot at; all the more reason to reach out for help and guidance.

6. Leadership. We saved the most significant hurdle for last. When businesses get tripped up in transitions, leadership usually turns out to be the main reason. Change is hard for anybody, and leaders can have difficulty changing themselves even though leadership involves coaching others through change. Typical leadership constraints include the inability to delegate, failure to focus on the 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. However, many leaders still let their ego or independence get in the way of seeking help that can make transitions easier.Talk to your Vesta 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.

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