Jumping On a Flying Plane
By Maurie Cashman
Planning and executing an ownership transition can be like jumping on a flying plane. I remembered that today as I worked with a couple of long-term clients. It is one thing to get a plan on paper â€“ it can be quite another to see it all the way through. It takes a good plan, patience, flexibility and a strong team to hit the doorway of the flying plane.
What do I mean by that? Hereâ€™s a fun video to help illustrate:
Now hopefully it wonâ€™t be as difficult to â€œstick the landingâ€ as this insanity, but once you have an ownership transition plan in place, you need to be prepared to guide it in for a landing. Depending on your plan, it make take years.
Today I met with a client to review progress on his transition plan, which is a transfer from father to son. We put the plan in place after nine months of planning at the start of 2016. The plan called for a five-year initial transition period for a portion of the business with the final purchase from dad happening in five years. Diligently following the transition plan and achieving very strong financial results has created a problem.
They are three years ahead of schedule with the ownership transition!
That creates some significant issues for this plan:
- Is management ready to take over and complete the buyout this far ahead of schedule?
- What opportunities have been created by this performance that we didnâ€™t anticipate?
- Is this business the same as when we started working on it?
- Dad has had more taxable income (as have the rest of the ownership) than planned for, and this will likely continue.
- Dad is in a much stronger retirement position than he planned, and he seems to be enjoying himself.
- The value of the business has increased.
Pretty nice problems to have, huh? We will be spending some significant time next month to adjust the plan to this new reality.
We discussed the adjustments that may be needed or desired and it became clear that there were some keys built into the process to allow it to flex to meet the new reality:
- We put in place a very strong management team at the start of the process. This included management, legal, accounting and financial advisory professionals.
- The stakeholders were very patient with one another as duties shifted and decision-making was shared.
- Management was very opportunistic in capitalizing on its strengths to add new business.
- Planning has allowed the company to attract strong new talent to build upon.
In short, the company has been able to adjust on the fly with a plan that was flexible enough to allow for change, growth and the creation of a new reality. They are closing in on the flying plane!
Â© 2017 Aspen Grove Investments, Inc.