Business

Industry POV: Thoughts On Transitioning In Business

Your company can outlast its founder, as long as there's a plan in place.
Business

Is there a patented formula for creating a new business and then steering it through the morass of development, growth, maturity, and continued innovation and prosperity? How does a business come into being and remain relevant as its founder earns the right to pass the torch to the next generation of leadership? The most practical way to address these issues is to consider the origin of a business and trace its path toward growth and success.

Most everything starts with an idea or a dream. Let’s suppose you’ve devised a widget or a service that addresses a genuine need—a new tool or process that improves your client’s business operation and, simultaneously, satisfies your own profit motives. (Think Google, Facebook, Uber, the iPhone, Tesla.) The past 20-plus years have witnessed the introduction of a series of genuinely revolutionary products and services that have literally changed our world. (Admittedly, whether these changes were for better or worse in every instance remains debatable.)

Your innovation might not have risen to massive global recognition, as the examples mentioned above have, but you have established a respected and profitable business. And, in doing so, you—whether knowingly or not—have engaged the four pillars of success. Those are (a) satisfying a need; (b) having good timing; (c) being proficient/reliable in your field; and (d) being lucky, which is the all-important underlying cornerstone for all new businesses.

By instinct, intention or serendipity, you have met all those requirements for success. Whether you’ve devised a way to silence heating, ventilation and air-conditioning (HVAC) ducts, programmed a remote that can raise and lower your clients’ motorized window shades, or written a program that eliminates wasted time and simplifies environmentally friendly recycling, you’ve made a worthwhile contribution to your field. Congratulations!

You’ve moved into new offices; you’ve had multiple successful years; you’ve paid both your dues and your taxes; and you’ve built a team whose members not only know their stuff and can finish each other’s sentences, but also genuinely like and trust each other. And now that you’re beginning to think about stepping back and enjoying some quality time with your family and for your avocations, you’re considering your options.

What frequently follows success are buyout offers from competitors or merger-and-acquisition (M&A) firms anxious to help you monetize your business and strap on that fabled golden parachute. But, during the course of your career, you’ve managed to recruit bright, dedicated and extremely competent employees. These are partners and staff members whom you trust to accept increased responsibility—to meet challenges and impossible deadlines, to perform ingenious saves, and to survive and learn from the occasional disaster. Your respect for these people, all of whom have been integral to your success, is complemented by a genuine affection for them.

You can attest that finding these dedicated associates hasn’t always been easy. Mistakes have been made on both sides of the interview desk. The perfect fit in temperament and skill set can be difficult to discern from a résumé, from a series of interviews or even from strong personal recommendations. Time, patience and an instinct you’ve developed after years of hard-earned lessons in human nature have paid off, though, enabling you to establish an enviable team of senior associates. And, in recent

years, you’ve utilized those same instincts to seek out a younger cadre of second-generation team members who have brought new energy and contemporary skills to the party. You listen to them, you respect them and you compensate them properly. Through all this, you’ve learned one lesson above all the others: You don’t know everything—but neither does anyone else. As such, creating a team is the real secret sauce of a company.

As you deliberate about your next move, you have to decide whether (and how) to assure the ongoing success of the business you pioneered. Without a doubt, the easiest exit strategy is to turn over the keys to a deep-pocketed buyer and simply cash in. (Speaking candidly, this opportunity presented itself to me twice in recent years.) But what passionate business founder could stand to watch the client base he or she had nurtured—a client base the team considers partners with whom its members are privileged to have worked—slowly dissolve into a conglomerate culture? And, conceivably, the crack team that had been curated and nurtured over decades could be cut loose to avoid “duplication.”

One compelling solution for business founders to consider is transferring company ownership to a “shared partnership.” By awarding leadership roles in your firm to long-term associates, you would be perpetuating the company’s history and productive shelf life while, simultaneously, extending the careers of your key associates. What’s more, you’d be assuring that your past, present and future clients would receive the high-quality service on which they’ve come to depend. This would serve the skilled, knowledgeable professionals you’ve cultivated—many of them probably 40 or younger, with decades left to contribute—who represent thousands of hours of hands-on experience and who have invaluable client insights.

In such an arrangement, you would maintain partial ownership of your firm, and you’d be available to encourage, support and counsel your team. Moreover, you’d continue to take pride in the company’s ongoing accomplishments—both yours and theirs. This kind of transition plan can be staged in over years, depending on the individual circumstances.

The theory sounds logical and straightforward, but it’s not without potential challenges to overcome. Speaking from personal experience, I can say it’s interesting to watch former employees— now partners—managing critical issues. It’s particularly so when they involve spending profits that are now also theirs. The model we developed allows the Founder—in the case of WSDG, me—to continue working as a designer and innovator, while allowing the new generation of owners and leaders to operate day-to-day activities. The shareholder-agreement strategy put into place ensures that, although I no longer dictate the company’s future, I do have veto power over large decisions related to future growth. (Defining “large” was fun…but that’s another article!) In truth, though, if your company culture has been firmly established over decades, there’s likely to be near-unanimity about the macro-level growth issues.

No company founder wants to see his or her creation sold off and downsized. A transition plan like the one we embraced can help ensure the outstanding team you’ve built and the excellent work you’ve done will continue well into the future.

To read more perspectives from leaders in the commercial AV industry, check out Sound & Communications‘ digital edition.

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