Peter McKnoulty Shares Real Life Circumstances That Highlight The Importance Of Transition Planning

In my experience, transition planning is a critical part of the broader business succession planning process – whether that be a family intergenerational succession plan or a succession plan involving sale of a business to a third party.

While I believe transition planning is a critical part of business succession planning, it is equally important to acknowledge that a succession plan is not complete – and is unlikely to succeed – unless the business owners undergo a personal transition planning program.

The following examples highlight the importance of transition planning in the broader business succession process, and are based on real life scenarios in which I am currently involved.

Case Study 1: Glenn Eases Out Of A Successful Business

Glenn and his wife Robyn are easing out of their electrical contracting business over time. Years of hard work have resulted in a business that delivers high margins, combined with low overheads and efficient work teams.

Working with a Transition Planning Consultant, the first step for Glenn and Robyn was to develop a personal transition plan to decide what to do after full-time work. They can then take this to their financial advisor to work out how much would be needed to fund their retirement.

Glenn and Robyn had this to say about the LIVE with Purpose workshop –

• Glenn: ‘The sequence of activities clarified strengths and weaknesses in my current ideas of where life was heading. This meant that I could throw away some vague aspirations which turned out to be ‘time-wasters‘, and allow more time to consolidate the more likely scenarios. The sequence of activities was logical; the atmosphere engendered a safe yet relaxed feel. The workshop made me stop and take stock – step out of the rat race and really focus without external distractions”.
• Robyn: “I would recommend this workshop to those who are married to their work, or haven’t given any thought to when or if they are going to retire. I left the workshop with clarity, affirmation, and confidence”.

Having completed their personal transition plan, Glenn and Robyn are more positive about moving on from the business over time, to their new lives which they have designed.
Glenn and Robyn’s business transition plan covers issues such as the value of the business and its goodwill, and the potential to increase that value with new systems and processes.

They are exploring two main strategies:

1. Their two electricians, Sam and Bridget, taking over the business over time. While this is attractive to Sam and Bridget, they have limited funds available, so Glenn and Robyn are working with their Transition Planning Consultant and a team of advisors to devise a solution that would see them realise a fair value for the business in a way that Sam and Bridget can afford. They will most likely sell shares in the business over time. This complements an operational transition strategy for Glenn to train Sam and Bridget on key operational aspects of the business such as design and client liaison during the transition period.
2. Creating a charitable trust using some of the proceeds from the business. This would enable Glenn and Robyn to work with their children to help those less fortunate than themselves.

Case Study 2: Margaret Learns To Say No & Create A New Identity

Margaret tackles the consequences of over-committing and learns how to create a new self-identity outside of work.

If there’s one word that Margaret, 58, hasn’t used much, it’s ‘no’. She’s something of an over-achiever with a successful business career, a high profile, an outstanding reputation in the NSW business community, and involvement in many industry and community groups. But she’s over-extended, and it’s taken a toll on her mental and physical health.

Even with deteriorating health and the added burden of depression, she is reluctant to cut back on commitments, admitting that her identity is very much tied to them. But now that she’s recognised the problem, she’s tackling it head on by completing her personal transition plan in a two day workshop to expand her thinking about what she can do in retirement.

At the conclusion of the workshop, Margaret said‘ The Live with Purpose Workshop was an invaluable process in planning for a rich life in the future. It made me take the time to plan, and provides a structured guide to prioritise and implement an action plan – converting vision to reality. If only I’d known about transition planning five years ago,’ she said.

Now that Margaret has discovered that there is more to life than business and “success”, she is developing a plan to reduce her commitments and ease out of business.

Check out the Transition Planning Australia blog next week for more real-life scenarios which highlight the importance of Transition Planning.