You’ve finally decided to retire. But, you have one problem: you don’t feel completely comfortable allowing others to take over. This is a very common feeling. You’ve invested your blood, sweat and tears to grow your business to what it is today. No one knows your business better than you. Protecting its future requires care and careful planning before handing over the reins to employees or a new fractional owner. However, to achieve true financial independence, you must learn to transition out of the business and how to transfer major duties or full operational control to key employees/ management. In this article, we’ll discuss some ways you can establish clear performance standards and conditions that will help you transition out of the Company while providing safeguards for your company’s future.
1. Put Standards in Writing
Create detailed documentation describing qualifications and expectations for those assuming key roles. Define targets for growth, profitability, culture and operations under their management. Putting standards in writing provides objective guidelines. Update standards regularly as the business evolves to keep expectations aligned with company needs. Review these standards often with staff and ask them to evaluate themselves and ask themselves how well they achieve these standards.
2. Set Conditions for Ownership Changes
Specify conditional requirements before ownership transfers occur. For example, mandate certain training benchmarks are met first or tie vesting to financial milestones. You can get creative here, just make sure your conditions align with your goals. Once you and the employees/management agree, consult with a lawyer to ensure conditions adhere to all applicable laws and regulations.
3. Implement Golden Handcuffs
Consider “golden handcuff” incentives to motivate employees to stay during transitions. Bonuses, stock options and severance provisions can encourage retention and performance. Make sure incentives balance motivating top talent while still being fiscally prudent. These types of provisions help maintain a sense of stability within the business as you transition to the Company into it’s next phase of life.
4. Trust But Verify
Remember, if you’re still an owner, the Company is still your responsibility. It is wise to institute processes to monitor the achievement of standards by new leaders/owners. Require regular reports and projections. Check in frequently at first. But foster independence to ease the shift in duties. Designate mentors to provide guidance and support during especially critical transitions.
Thoughtful preparation ensures your business remains in good hands when relinquishing control. With proactive planning and incentives, you can feel confident in the future you’ve built. Whether you sell a fraction of the business, or are just looking to step back and retire, the steps mentioned above will help provide you with assurances as you take your first step out of the business. If you’d like to discuss this further or help create a plan, please reach out.
