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Don’t Drop the Baton During Your Business Exit

Pass The Baton - Big Picture Advisors PodcastThe 2012 London Olympics will be beginning soon and with it will come one of the more exciting sporting events to watch. The relay race.

Now visualize that relay race. Place yourself and the next generation of ownership on the track where you think the ‘baton’ transfer should start and where it should end. Will you continue to run forward alongside the new baton holder (the next owner or the next generation of ownership) for a while? For how long? Will you stop running immediately and let the new owners go forward without your assistance?Have you created a ‘baton transfer’ scenario for your business? If so, then congratulations. You are miles ahead of most business owners.

But, have you “practiced” the baton transfer so that you can avoid dropping the baton when the real exit or succession ‘race’ takes place?

The dynamics and ‘choreography’ necessary to successfully “pass the baton” from one business generation to the next or from one owner to an new owner is generally a complex process. It requires a Big Picture approach that includes understanding family dynamics (even if it is not a family to family succession), business operations and most importantly recognizing that it takes time to get it right. There are so many pitfalls that can lead to the dropping the baton during the business succession transition.

The business exit ‘relay race’ is not something to be taken lightly. There is a lot at stake, for all parties, both the exiting owner and the buyer or next generation of leadership.

Why is the Relay Race similar to an exit process?

In very simple terms the exit process is akin to a relay race. Similar to this type of race, the person (owner) running with the baton at the beginning is generally not the fastest one on the track. His objective is to get the baton passed in a smooth and efficient manner to the last runner. Each subsequent runner has the same objective; not to drop the baton. The following schematic gives a very general overview of how a business exit ‘relay race’ is run.

The Family Business Baton Track.

It begins with the critical question of “Why” – essentially why the current business owner wants to exit and moves along the track, choosing a successor, the team that will help transfer the baton and finally the owner relinquishing complete control of the baton as the new owner/generation runs forward toward new business growth and profits.

Simple in theory. Much more difficult in practice. And that is perhaps the most important item to consider.

Very few relay races are won without good communication between team members and almost none are won without practice, practice and more practice.

 

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