As the successor/buyer, you can envisage three big scenarios:
- Given that you have an entrepreneurial spirit, you may want to take over an SME.
- You may be interested in taking over the family business.
- If you are an employee or a manager at a business, you may be interested in buying that business.
No matter which scenario applies to you, taking over the reins of a business means becoming involved in a succession process whose goal is to secure the future of the business and ensure your success in your new roles. It also a good time to take stock of your knowledge, your competencies, your skills, your social network, and your finances. Doing so will guide you in your choices.
Two Big Challenges for Successors
Acquiring the appropriate knowledge and competencies for your next role will help you manage your new business and develop the necessary legitimacy to mobilize your employees and your business partners. This can involve the following:
- Training and relevant experience: This experience should be connected to the activities of the business, to its industry, or to entrepreneurship and business management.
- A transfer of the incumbent’s knowledge and social network: This type of transfer between the incumbent and the successor requires a good relationship and close cooperation between the parties. For example, if there is a period of joint control or a period of transition during which the incumbent acts as a consultant after the sale of the business, he or she will be able to transfer essential knowledge and expertise related to the business and industry as well as his or her social network. It will be an opportunity for the successor/buyer to benefit from knowledge and expertise that the incumbent has developed over many years.
The other challenge for the successor/buyer is to align his or her expectations with those of the incumbent. The incumbent and the successor can have different expectations with respect to the terms and conditions of the transfer, the strategic vision for the business, and the means of making this vision a reality. There are two possible ways to achieve this alignment of expectations:
- In the case of a transfer within the family or an employee buy-out, good communication throughout the management transfer process can help each party understand the expectations of the other one. When possible, a period of joint control is an ideal opportunity to set common objectives and ensure the success of the transition.
- In any type of transfer process, it is advisable to call on experts (lawyers, tax consultants, financial planners, and organizational psychologists) during the ownership transfer process. These experts will help you negotiate the terms and conditions of the ownership transfer and the sale of the business from a financial, a tax, and a legal perspective, while at the same time fostering dialogue with the incumbent(s). In the case of a transfer within the family, it is advisable to have your own experts so that your interests are well represented.
Avenues of reflection for facing these challenges
Reference:
- Saint-Cyr, L. & Richer, F. (2003). Préparer la relève : neuf études de cas sur l’entreprise au Québec. PUM.