Are you wondering how to transition after selling a business online? A smooth transition after selling your business is of the utmost importance for all parties involved.
And yet, 68% of business sellers selling their business don’t have a clear transition plan, although 75% to 95% of their net worth is tied up in the business. These shocking statistics are from ”Ready for Next Cities.”
The report continues and states that 70% to 80% of medium and small businesses will fail to transition to a new owner that has bought the business. The Family Firm Institute found an even higher figure of 88% of failure-to-transition when family businesses are being sold.
These figures are scary and point to a lack of planning on the side of owners that are selling a business.
Insufficient planning during a transition can create numerous problems. A lack of planning leaves everyone involved vulnerable, including family, employees, customers, and the larger community.
There are several reasons why sellers and buyers don’t plan for the transition, and we will briefly explain to them so that you can be aware of these pitfalls.
- Too little time. You are so busy with the day-to-day running of the business that planning for the transition is not on your list of priorities.
- Emotion. The prospect of not being an owner anymore is hard to handle. It’s part of your identity. It’s what you have been all these years!
- Way too early to worry about it. You are used to taking chances as a business owner, and this is just another one. You may believe that time is on your side, and maybe it will work itself out somehow.
- A friend has had a bad experience. It’s common to measure our own experiences against that of friends.
- Overwhelming fear of the unknown. The planning of transition takes time and effort and there is no clear-cut way to succeed.
Planning the smooth transition after selling a business or a professional practice often will present complex financial and emotional decisions for the owner.
We will elaborate on a few ways in which the whole process can be planned in advance to make the transition as smooth as possible and as rewarding as possible for everyone involved.
A transition is a time during which the seller can go out with dignity while the buyer can build a good reputation as an honest, transparent, and a good person that can be trusted. It is a time during which new relationships must be nurtured in order for the financial well-being of all parties involved.
1. Set A Time Frame
The first obstacle that must be addressed is whether the owner/s is really ready to sell or transition the business management and operation to the new owner.
Many business owners that want to sell a business they have worked at building up over the years are reluctant to just step away from it. Over the years, the business might have shaped their lives as well as the lives of the employees.
Some business owners have difficulties in accepting that they won’t be in charge anymore, and a definite decision is necessary to help them.
It is important for a business owner who wants to sell his business to set a clear timeframe of when the transition will start and the time he will hand over the business. This planning will be done in all transparency with input from the new owner.
The buyer and the seller should discuss the time frame and all the stages of the transition should be clearly stipulated within the time frame.
Meeting between the transition period will give the buyer the chance to take over the company in a streamlined way. Everyone will know what stage the transition is in and who is responsible for what.
2. Good Communication And A Focus On Transparency
Good communication and transparency between the buyer and the seller from the start when negotiating the whole transition process is essential. It can create an easy and joyful transition.
Every stage when taking over responsibilities by the buyer should be discussed in detail so that the whole transition process is straightforward for them.
A transition process is a complicated scenario for employees. During the whole process, communication and transparency about the change in roles between the buyer and seller should be communicated.
Good communication with the vendors and suppliers must be done to know what is happening and what to expect. A personal meeting with the vendors to introduce the buyer is a good idea.
Don’t overlook your customers. The buyer might want to reassure them that they can expect the same if not better service under new management than before.
The buyer might even solicit with customers on ways of improving his service to the customers in the future.
The buyer is buying the business’s assets, operation, and ability to generate profit. Through good communication you can also understand the history, lessons learned,m and accumulated knowledge as a bonus.
3. Be Upfront And Honest
The most significant and most important rule you should start from the beginning when you are planning to exit the business is to be open and honest with your employees.
It would be best if you tell them the truth from the beginning and what outcomes they may have to face during the process. If you don’t, they will find out by themselves as potential buyers start digging into the company, and that will create a breach of trust.
This can result in a wave of people leaving the company, which might have a detrimental effect on the business’s profitability. The worst scenario is that it might kill a sale altogether.
Make your intentions clear from the beginning and assure them that their future with the new owner will be part of the negotiating process. Inform them of what to expect and what to say publicly about the transition.
The buyer should use this transition period as a period to gain the trust of employees by clear communication and be open, transparent, and honest.
4. Don’t Overload Your Employees
Your employees might be overwhelmed by the news of the sale, and it is essential to keep things as steady as possible and as natural as possible to make the transition smooth.
Try to handle additional work because of the transition yourself instead of overloading your staff.
Keep things natural and don’t change the workflow away from what it was in the past. You want them to stay relaxed and confident about their future with the company.
If you suddenly change things and overload them with work, they will become negative, which might lead to unproductiveness and even an exodus of people out of the company.
For the buyer, the same principle applies. Let work continue as normal until after the transition process before introducing changes. In that way, you will gain the trust and cooperation of your employees.
5. The Sellers Role During The Transition Process.
The previous owner should be phased out gradually during the transition process. The gradual transfer of powers should be well communicated to employees so that they understand exactly where they stand.
During the initial phase, the seller might be required to work as usual to allow the buyer to observe and see how the business works.
As negotiated by the seller and the buyer, all changes in seniority must be communicated to employees so that they are clear on how the flow of control changes.
The seller must be phased out slowly and, later on, can be required to only be available on a consultation basis. This whole process must be clearly stipulated in the transition deal between the two parties.
6. The Future Business Planning
During the transition phase, the buyer should keep to the way the seller has been doing business to give himself a chance of understanding exactly how the company is working.
Employees have to change their whole idea of who is boss, and implementing changes during the transition will have a negative impact on a business.
Tapping into the experience and perspective of the seller is a good idea for the buyer. That way, he or she can learn from the mistakes of the seller and run the business even better.
New ideas of how the business should operate should be evaluated. Discussions with the seller on these topics might be very insightful.
What happens to accounts payable when a business is sold?
Small transactions are easy in that accounts payable and account receivable are part of the business being sold. The buyer, therefore, assumes responsibility for accounts payable as well as the asset of the receivables. On some occasions, the seller might be responsible for paying the payables and receive the receivables.
How do you motivate employees to stay after the business is sold?
5 Ideas to keep your employees motivated.
1. Provide supportive leadership. Leadership is one of the main factors in employee motivation.
2. Empower the individual. Every employee should feel that they are valued as an individual.
3. Develop a positive environment.
4. Encourage teamwork.
5. Recognize and reward.
Why is confidentiality important when selling a business?
Selling your online business is a one-time event. During the selling process, it is important for an online business owner to keep their focus on running their business. Maintaining confidentiality helps avoid potential pitfalls and ensures a smooth transition.
How do you write a letter announcing change of ownership?
The Change of Ownership Announcing letter should include relevant details like changes in the existing contracts and renovation of policies. It must briefly include the history of the new owner, work background, experience, qualification, and USP to run the business without endangering its smooth functioning.
Handing a business over to a buyer is not easy, but planning everything from the start in a transparent and honest way will make it a smooth process.
Communicating everything with everyone in a transparent and honest way will ease the whole process for everyone. It is a complicated process for all parties involved, but if everyone wants to make it smooth and easy then, it will be that way.
One of the most challenging things about a transition is the seller must remember to let go of his responsibilities as agreed between him and the buyer. Just put it behind you and get it over and done with, and don’t make it difficult for everyone. Bear the burden yourself.