12: Complete the Transition

Summary of the Process

A) Complete the initial transition period
B) Manage the seller’s expectations

The length of the transition varies depending on the complexity of the business, ranging from weeks to months, and can involve ongoing consultation with the seller beyond the initial training. This ensures you have the necessary knowledge and support to successfully operate the business after the sale is finalized. It’s also important to manage the seller’s emotional expectations during the transition, as they may feel a strong attachment to the business they’ve built.

A) Complete the Initial Transition Period

The following is more information regarding the transition period:

Don’t Begin Training Before Closing: Beginning training early presents several risks. It’s likely employees and customers will find out about the sale before it’s publicly announced, which can cause distrust. If they do, the business may suffer financial damages, such as lost employees or lost customers, because the sale hasn’t been formally announced yet.

Length of Transition Period: The time dedicated to the transition depends on the type of business and your needs. If the business is a simple operation, a transition period of several weeks may suffice. A more sophisticated operation may require several months or even years. Once an introductory period has passed, much of the transition can be handled through email and phone conversations.

Ongoing Consulting: It’s common to include a set period for consultation post-close in case you need help beyond the initial stages. For this additional period, the seller is often offered an ongoing consulting agreement on an hourly fee basis.

Purpose of the Transition Period: The transition period is for training and consulting, not for the seller to perform routine business work. Asking the seller to perform routine operational tasks during the transition period will quickly alienate them, as opposed to focusing on passing along their knowledge and helping ensure a smooth transition.

Design a Transition Plan: You and the seller should meet before closing to outline the specifics of the training and transition period. This allows you to discuss the transition process in detail to ensure a smooth, orderly turnover. Communication is paramount, and it’s critical that you both discuss your expectations so there are no surprises or confusion later on.

B) Manage the Seller’s Expectations

Note: The following advice applies only if the seller has owned the business for a significant period and is likely to have an emotional attachment to it.

Some business owners experience second thoughts before the closing as they start to consider the personal implications of selling their business. They sometimes delay the sale or back out entirely. This may be due to anxiety at the thought of having to face major life changes after devoting so much time and energy to their business.

Respect the Seller’s Emotional Journey

Most entrepreneurs are go-getters. They need something to do with their time, be it a hobby, a new job, a role in a charitable organization, or something that provides them with a new sense of purpose. After being business owners for many years, they’re often initially relieved to retire. The problem with this scenario is that some don’t know how to “do less” or simply relax. Many owners – the same ones who were excited at the idea of retiring – may experience cold feet when a buyer makes an offer on their business. Once it’s sold, they may find their dream retirement doesn’t meet their expectations.

Help the Seller Find a New Focus

Luckily, there are ways to help calm the seller’s nerves. What happens after they sell needs to be planned just as carefully as the sale itself. You wouldn’t sell your home without knowing where you plan to live. The same principle applies here – aiming to “be retired” is not enough. The seller needs to direct their energy toward a new passion.

Some tips for approaching this conversation are:

Returning to Their Business: A year into retirement, and sometimes sooner, most entrepreneurs look for something else to do with their time. Many even return with a desire to play a role in their former business, which presents an ideal opportunity for you. Ask the seller what areas of the business they most enjoy working on, then align their interests with the activities that provide the most value to you.

Play to Their Interests: The seller’s experience and interests can provide enormous value to the business, such as recruiting, sales, marketing, or establishing key alliances. These are often difficult positions to recruit for, and the previous owner may be talented in these areas and willing to take them on. Sellers are often willing to work in these roles if the position is structured to meet their lifestyle needs.

Flexibility is Key: Most retirees desire flexibility, and if you can offer this to the seller, you may develop a win-win situation in which you retain experienced talent at a reasonable cost and where the seller retains a role that rewards them with more than just financial benefits. Structuring an arrangement like this can also assist in retaining key customers or employees. Loyal customers and key partners will feel more at home if they see the seller’s ongoing participation in the business.

Emotional and Financial Needs: The seller’s emotional needs are often just as important as their financial needs. Keep this in mind during the transaction, and be prepared if the seller experiences periods of last-minute anxiety. Addressing these concerns will help ensure a smoother sale and garner more cooperation from the seller, both during the transition and after.