How to develop a business transition plan
that meets your personal goals
By Brian Goodhart, Director, Wipfli
Construction workers have some of the best jobs in the world. At the end of the day, they can step back and say, “I made that.” There’s a real, tangible result from a hard day’s work.
But construction companies aren’t just creating structures and roadways and vital infrastructure. They’re also building value. Owners are building wealth to support their families into retirement (and beyond).
Transitioning out of a company at maximum value requires careful and continuous planning — and sometimes contingency planning, too. Here’s when — and how — to develop a transition plan:
Start transition planning early
When owners are proactive and transparent about succession plans, they have more options. Decide what you’d like from a transition. For example, do you want to spend less time in the office, or to completely walk away? Do you expect family members or employees to take over? What do they need to be ready?
Conversations about the future can be difficult, but it’s critical that everyone be on the same page. Internal transitions require long-term coaching, skill-building and financial planning — not to mention desire.
Early planning helps you identify the best option for you, the business and its future leaders. Take the time to consult with financial advisors, attorneys and accountants to collect multiple perspectives. When appropriate, encourage successors to do the same.
Regular valuations can also serve as valuable “health checks” to identify strengths and weaknesses that impact succession planning and negotiations.
Drive value through stability
Companies increase in value when they’re stable, sustainable and profitable. That means day-to-day operations and key relationships can’t rely on a single person (i.e., the owner). Owners can increase company value by retaining and developing key employees.
A robust management team ensures continuity, which customers and investors both appreciate. And it can protect the company’s value if a succession plan falls through or an ownership change is needed unexpectedly.
Gradually delegate responsibilities to future leaders, and start to spend more time coaching and driving strategy. Give employees opportunities to grow professionally — and increase the company’s value.
Build succession into strategy
A good strategic plan is firm but flexible. There’s a clear goal or end-state, but more than one way to get there. Similarly, succession planning should include some latitude to deviate from “plan A,” without giving up on the goal altogether.
Succession considerations should account for a range of “what ifs” — from “what if” the intended successor changes their plans, to “what if” a transition happened tomorrow instead of two or 10 years from now.
As with strategic planning, consider how internal and external pressures might affect the business. Market shifts, legislation, tax incentives and labor availability have material impacts on how (and when) construction companies pursue, win and deliver business. Make sure your succession plan is aligned to the current strategic plan so you have the right people and skills lined up for the future you want for the company.
