You're leaning back in a black leather chair, slowly but surely closing another deal. Twirling your pencil, finger to finger, with the confidence of being an important component of a very successful small business, your future's set. It's a family business with a solid 25-year history. It's a business with industry-leading suppliers and a long, strong list of clients. It’s a business owned by a well-known and well-respected member of your industry. It's a business that you have dedicated your professional life to and envision going on into perpetuity.
The deal closes as it should have. You hang up the phone and, before you can take your next breath, reality slaps you across the face. The owner, founder, principal, decision-maker, cornerstone of your business is gone.
Unfortunately, this situation was a reality to me and to my rep firm a year and a half ago.
Many of you reading this own or work in companies like my rep firm. They are small businesses, often family owned, and are typically recognized and heavily dependent on their principal. These are companies that can have long histories, incalculable good will and many people who are dependent on their success. An incredible amount of work is invested into such companies, and we want to make sure that they do not pass with their founders. No one wants to think about it, but what would happen to your company if suddenly the principal was no longer there?
My company was much like many of yours. It was a family business that was known for and dependent upon one main person. When that person was suddenly gone, not only did we have to deal with personal grief, we had to react immediately to ensure the continuation of all that had been established over a 25-year period.
We were well aware that this could happen, but never truly believed it would. I do not want to sound like the man on the corner wearing the Dooms Day cardboard placard prophesizing impending peril. But many of you reading this are going to go through exactly what we did. Eventually the principal of your company will be gone and it would be of extreme benefit for you to have a plan in place to handle this transition.
Our need to transition was sudden, but we survived it and our business has thrived. Looking back, I can clearly see certain things that we did that I would recommend to you if you should be faced with the same.
Transparency may very well have been the best decision that we made. Literally, within an hour of this transition, I was on the phone personally calling all of the companies that we rep and each and every one of our customers to notify them of what had happened. I not only wanted them to know what had happened, but I also wanted them to know what to expect concerning their relationship with our business. They were told what had happened, who would be their contact, that our business would be closed for a few days, what day we would reopen and how to take care of anything that should come up prior to that. The last thing that I wanted was to have everyone wondering what would happen to our company or who would be covering their accounts.
Though we were facing something much more difficult and important, I understood that our suppliers and clients had businesses to be concerned about and, if I was not transparent with what we were doing to guarantee the continuation of our business relationships, they may begin making alternative plans. I wanted to limit the wondering.
Being transparent - letting everyone see where we were and where we intended to go - allowed us to take the necessary time to regroup. It took a great deal of pressure off of us because everyone could go about their typical business without having our transition be too much of a question mark.
Beyond calling everyone, I also quickly set up personal meetings with each of the companies that we represented and met with each customer that I had not personally covered previously . I sat down with them, face to face, and demonstrated that we had a game plan to control this transition. In my mind, I could not allow any lingering questions about where we were going. I would need time to get everything back on track and, in order to do that, I needed our efforts and intentions to be transparent to our clients.
The continuation of established and positive relationships is preferred by everyone, and if you can be transparent about circumstances and direction, most people are going to work with you.
One item that was easy for our organization was that I was an established and known successor. Prepare for the future and make sure that successors and the transition are clearly spelled out to everyone.
However, I have to note that one of the things that most surprised me when I was meeting with clients was that I often had to define myself to them. These were all people that I had worked closely with for years covering cabinets, software and training. I had some people ask if I was going to learn cabinets while others asked if I was going to learn software. I was taken aback at first because I had been very successful with both for almost 20 years. It had not occurred to me that not everyone saw the whole picture of my experience, and that they assumed that I specialized in one area or another.
Once I discovered this, I made sure that no matter who I was speaking with, I in some way defined myself and my experience. If you find yourself in a similar situation, I would advise that you do the same. Do not assume that everyone sees you for all that you do within your company. You'll be surprised at how people only see you in certain lights.
Steps for Reorganization
If your company has just lost its key member, there must be a quick and transparent reorganization. Not only do you need to clearly define the roles of current members, but you have to show that you are going to grow the business, not just try to hold on to what you have. If your company is not moving forward, then it will be thought to be falling backwards.
We were fortunate enough to be able to add a few people immediately and have since made even more changes with more to come. While some changes work and some don't, you have to be willing to do what is necessary to keep the business moving forward.
One of the most successful things that we did to move our business forward was recognize previous weaknesses and improve them. By improving our performance in certain areas, we were able to grow our customers' confidence in us.
We found weaknesses in some of our communication techniques, and not only did we improve them, but we openly advertised them to our customers. We were able to improve communication and response times and have issues resolved more quickly.
By being new and improved, we were able to retain the confidence of our customers by showing that the transition could bring new benefits to their businesses.
In our situation there also were innumerable legal and accounting issues that we had to confront. While you might not give a second thought to many of them, they are important and have to be dealt with swiftly. Company name, bank accounts, who's authorized to sign checks and manufacturer contracts are some of the issues that have to be resolved immediately.
If your company is a small business and is registered under the principal's name, a new company name and Federal ID # will have to be established. And, as soon as that is done, new contracts and agreements have to be completed recognizing the new organization.
Don't overlook bank accounts. If you lose the principal of your company and that person was the authorized name at the bank, you could end up with money that you can't access until estates are settled. Or, you may continue to receive checks that can no longer be deposited.
Be sure to immediately resolve bank issues, set up new accounts and notify any company that will be sending or direct depositing to these accounts. Money can end up in limbo, and you must have easy access to it to ensure the continuation of your company.
I have found that, if you have a written agenda, suppliers and clients will have faith that you will have a successful transition. Putting things in writing creates a strong, positive feeling that you have things under control.
I have also found that, if you respond quickly and communicate clearly, clients will have patience with you, even if the transition includes some rough patches. However, if you do not immediately address subjects of the transition, you'll put them off until they end up hurting your plan. Take care of everything immediately.
Enjoy leaning back in your leather chair today. Keep on closing the deals and twirling those pencils confidently. But also make sure that your company will not pass with its founder. Put together a transition plan now.
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This article originally appeared in Kitchen and Bath Design News 7/2005