There are two roles to transitioning a business, the one getting out and the one getting in. The process of striking the deal so that there will be a change is the easy part.
According to a study by BDC Capital, a Canadian government-owned institution with the charter of providing capital to small- and medium-sized businesses, only about 40 percent of companies meet their financial expectations in the first year after a transition.
Typically, companies fail to adequately prepare in several ways:
- They don’t properly prepare for a disruption in business.
- They don’t build in enough financing room.
- They don’t consider an insider succession.
- Hoped for synergies with new buyer don’t meet expectations.
- The new managers don’t know enough their new business.
Thames Management Resources has worked with dozens of companies over the years to make sure a transition isn’t a hurdle but instead launching pad to more growth and more profit.
What we’ve learned is that to have a successful transition of power – much like the presidency – you need to assemble a transition team. You need professionals who specialize in taxes, business valuations, investment management and succession planning. Even if your company has experience in handling business sales or mergers, you need advisors who can identify complexities of the plan as well.
Thames works with two types of organizations – those that have not yet developed the transition team and those that want to exit their business but don’t know how to do it profitably. If you fall into one of those groups, perhaps we can help.