Boundaries Are Critical to Business Transition Success

Monday, September 21 2020

If you sell your business to an outside buyer the new owner may want to retain you for a year or two as an advisor/consultant. This arrangement can help ensure a smooth transition and provide time to transfer your business wisdom and knowledge to the new owners. It can also help calm any uncertainty related to the change that is often experienced by employees, clients, and other stakeholders.

In this situation, your job changes from owner with final say on everything to an employee of the new owners. No more authority to make final decisions.  This can be difficult for you; inevitably the new owners will make changes to the company you’ve spent your life building. You may offer your opinions as an advisor, but the final say belongs to the new owners. The boundaries of your influence and authority are now governed by a contract, which also has a date specifying when you will step away permanently. These contractual boundaries are critical to ensuring the smooth transition of the business to the new owners.

Now suppose that instead of selling your business to an outside buyer, the new owner is your son or daughter. The process should be similar, but it gets far more complicated. Only about 30% of family businesses successfully transition to the next generation.[1] Even if you leave the business, you do not leave the family. And the line between family relationships and family business relationships is often blurry. You will always be a parent, and the business will always be within reach of your influence. So, it is even more critical to clearly map out your transition path including:

  • Your ongoing job role boundaries
  • Your child’s new job role boundaries
  • Your exit timetable

Without these clear boundaries firmly set, your ongoing “helpful” influence becomes interference.

Your child, who is a mature adult, may have been preparing for this transition for years and must be allowed to run the business as the boss and owner. As part of the transition process it is wise to create a new formal employment contract for yourself. Be absolutely clear with yourself and your new boss, who is your son or daughter, about the scope of your work and the boundaries of your new role as an employee or consultant. Include how and when you will exit permanently.

The future success of your business and the health of you family depends on clear boundaries.