Transition planning, or succession planning as it is often called, is commonly associated with the idea of transitioning out of the business by one means or another. Truth be told it can also be the key to growth.
The reality is, we as humans have a life cycle. If all goes well, it is predictable and over time our energy and interests in our business wain. Of course, unexpectedly our option to continue can be lost. Let’s talk about both as they relate to growth.
In a situation where there is one leader and no successor, the decision to continue to grow past some ill-defined point can certainly be risky. If I am 80 years old, is it actually responsible for me to buy another store?
But in the case of many of our growth partners here at AWG, there isn’t a singular person at the lead and the energy and excitement to grow isn’t limited to one person. With the confidence that their organization is bigger than themselves, a grocer might be actively looking for growth opportunities at a time in life when most would be logical candidates to sell rather than buy.
A variation on this theme is another successful AWG growth partner. The following two situations are actual member stories and their outcomes.
A dynamic duo of father and son have completed the transition to the next generation but the previous generation remains as a valuable asset to the next. Experience, passion for the business, and knowledge of the financial side of things are all strengthened by bringing both parties to the table. Dad may not be in the day-to-day operations at the level of his son and indeed he may not be on the title of the next acquisition, but his fingerprints are all over the deals and ensure that the family legacy will continue to grow.
Of course, transition planning is not always from one generation to the next. A successful organization has shown the grocery world the power of employee ownership in the independent grocery segment. Here, the transition to the ESOP happened only once but the opportunity to continue as a growth partner can continue without relationship to the life cycle and energy level of a single person or group of persons.
Then there is the unexpected.
The examples above address the anticipated life cycle of energy and focus. Beyond that, they provide varying degrees of protection in the event of the unexpected. Tragedy can happen at any age, and by addressing change while all parties are capable, there is the ability to support these changes in the event that the unexpected does happen.
Ideally, the next generation will view the process similarly and seek the inclusion of others to protect the whole.
To that end, looking beyond the family tree, one may find the “next generation” of leaders is not a family member. A recent transition took place within a single store operator who found his successor in his store manager and spouse. Again, by addressing transition while still very much capable, the seller was able to consider transaction structures which would only be appropriate to the extent the seller would, if necessary, be able to step back in to operate the store. It also means the buyer has someone alongside to help them succeed. From this position, it is very possible the new owner (who otherwise would likely have remained an employee rather than owner) will be a growth partner in the future.
Transition can take on many forms. Within the family with the current generation still in place, within the family with a change in ownership to the next generation, to the employees through the formal arrangement of an ESOP, or to a select employee through a sale to an insider, and many more.
All of these options carry with them many positive outcomes, including the ability to enable growth. If you don’t plan for the future of your business, it is very difficult to take on another opportunity—even if it might be a great opportunity.
Contact your member services director to find out more!
