Transition

Big Strategic Questions That Will Eat Your Lunch and You With Them If You Fail to Act

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Strategy: the word chills the spine, ignites excitement, or induces malaise like no other word I've observed people use.  When avoided, it can be quite costly but when articulated, integrated, and deployed effectively, can be extremely valuable for you and your organizations.  Strategy is simply "connecting ends with means", "connecting aspirations with capabilities", or as described in The Non-Profit Strategy Revolution "an organized pattern of behavior toward an end".  I think of Strategy like I do metabolism, I may not know everything there is to know about it but I know it's there, whether you think or act on it or NOT!  Strategies can be coherent or incoherent, articulated or unarticulated, designed or ad hoc, no matter what though, they're present in some way or another.  For most people and organizations though, if they're struggling, strategies are either unarticulated or ill-designed, and in many organizations or individuals, it's a product of a strong leader or innate characteristics of your personality or your organizations culture that contributes to your success.  The problem is, as many experience, that these ill-designed and unarticulated strategies do not stand the test of time, change of leadership, or significant change of circumstances.  Good strategies, well articulated, integrated, and deployed, can withstand all these changes but also result in vastly superior performance and bottom line results.  Sounds pretty good to me!

In my article "Going Where the Wind Blows You: The Ills of Having an Unclear Strategy", I described symptoms of poor or unarticulated strategies.  As in that article, I aim here to make strategy relevant and valuable for individuals and organizations in their transitions. This article is about recognizing when you're facing  a "Big Strategic Question", common types, and ways to think about these questions.

What is a Big Strategic Question?

These questions involve a change in circumstances that could have significant impact (both positive or negative) on your income/revenue, operational effectiveness/efficiency, regulatory or tax status, or more essentially on your ability to function well in your life or organization.  They can be a result of big changes  in market/customer base, competitive/industry dynamics, regulatory/tax changes (as we've seen recently), internal operational circumstances (change in leadership, legal or ethical lapses, etc.), or business model evolution (technology, industry available productivity improvements, etc.), and more.  Often, the answers to these questions are not immediately actionable but require architecting a coordinated set of behaviors, activities, resources, and more to fully achieve the outcomes sought in response to the Big Question.

Below are a few examples.  Use them to spurn your thinking about what your current Big Strategic Questions are and then spend some time designing a comprehensive response.  Contact Me for help if you should need it!

Market Changes

What if your customer base suddenly (or unrecognized over a longer period) shifts preferences and the way you currently provide value (products or services) no longer fits?

What if market wide shifts like higher/lower income levels, cultural considerations, or new substitute choices drive your revenues down?

Potential Market Strategic Questions:

  • How will this shift affect us? In what ways, for how long, is it temporary or here to stay?
  • What should our response be? Find a new customer segment? Shift our marketing efforts? Redesign or products/services to fit the new preferences?
  • Does this shift require improving our productivity to lower the price for the customer or does it require deeper changes like to essential components of our organizational model?
  • Our income and revenue has increased (for known reasons like inheritance, failure of a competitor and thus increased market share, etc.), how will we respond and build in a new, sustainable, lifestyle and market position with this new windfall?

Industry Changes

What should you do if your job is getting automated or your skills no longer fit the job?

What happens if your customers think they can do your companies work better than you can?

What if your competitors start competing more on price?

Potential Industry Strategic Questions

  • Should we compete on price? Do we have another advantage we can leverage?
  • Can we learn a new capability or skillset and out maneuver the competition?
  • Should we buy a competitor to gain further economies of scale and thus raise the barriers to entry?

Operational Changes

What if key operational characteristics or resources change?

What happens if the threat of natural disaster increases (as we see in Hawaii!)

What if critical elements of cost suddenly increase, like raw materials or skilled labor?

Potential Operational Strategic Questions

  • Should we improve our succession planning in the event key leadership changes?
  • Should we decentralize our operations to non-related regions so the threat of natural disaster won't have as high of an impact?
  • How should (or can) we incentivize employees in ways other than straight compensation?

Comments

As you can see, changing circumstances in your life and organizations environments require certain types of strategic questions to be asked.  The examples I include here are in no way comprehensive but are used to illustrate the point.  There is immense power in framing the question accurately and appropriately so that your response truly aligns with your values and outcomes you seek.  Good questions get much better answers, mediocre questions get diluted and mediocre responses.  Spend time crafting your strategic questions well in your life & business transitions and don't hesitate to Contact Me for help!

Resources

 

Succession and Exit Planning 101: Key Components of a Successful Business Exit

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Succession and exiting a business are an often under appreciated and under planned for event in many businesses.  "Succession" most generically really means passing ownership or key management roles to another individual or group of individuals and when eventually, you no longer are involved any longer.  Succession and exit aren't necessarily synonymous with being bought out, from an internal or external buyer, but it often is for small businesses.  However, most people think of succession commonly associated with an owners or executives retirement or exit at the tail end of their time in the business.  This is a common mistake many businesses make and could be mitigated by following a few key practices that will benefit their businesses now as well as when succession time is upon them.

This kind of planning is critically important for business owners to secure their financial interest in their companies before, during, and after they exit.  Beyond that, it is my belief they owe it to their employees, business partners if they have them, their communities and local economies as well, to ensure successful business continuity and thriving beyond their involvement.  Their creation has turned into the livelihood of many more than just them as well as a being participant in the wider economic engine locally and even national if you think of the cumulative effect of small and medium sized business have on GDP and employment in our country.  Plan well, execute effectively is the motto here!

Here are some common failure points for small and medium sized businesses when it comes to being positioned for maximum succession success

  1. Business Structure is not optimal - talk to your attorney and CPA for this but you may not be positioned well from a purchase standpoint but also for best tax efficiency perspective.  Whether you're an LLC, C-Corp, or S-Corp, you'll need to identify your succession strategy and plan and then talk to your local experts to find out if/when you need to transition your structure.  In some cases, it can take up to 5 years to totally restructure.  You CAN still sell a business and transition ownership during that time but working ahead on this can mitigate a lot of stress and hiccups but will also make a purchase more attractive to buyers.
  2. Owner Compensation is Minimal - many owners I've met have not been paying themselves a salary or bonus in a direct way that shows up on their financials.  This isn't any shady dealings by any means but is most often associated with their particular tax structure and how they integrate with other businesses and investments in their life.  To be in the best shape possible, you'll need to clearly identify the compensation/benefits/perks of being the owner of the business and this includes direct monetary compensation.  Talk to your CPA and a Transition Consultant such as myself to find out the competitive compensation structure for your industry to be the most attractive to a buyer.
  3. No Management Beyond the Owner - some buyers might be interested in taking over management responsibilities but if you don't have any other management structure in place when you want to sell you'll turn away a huge potential buyer pool of investors and other buyers who want to own a business but not be the main manager.  Also, this also signals buyers that you as the owner probably wore MANY more hats than just a manager and so they'll want to know more depth about your responsibilities, capabilities, and skills that made your business the success it is.  Having a COO, Supervisor, or Manager a few years prior to succession/exit can make this hurdle a non-issue and probably enable your business to grow a good deal prior to you leaving, which increases your potential purchase price as well!
  4. Process and Employees Aren't Positioned Well for a Transition - if your processes aren't documented, clear, and as standard as possible, buyers will sense a potentially insurmountable learning curve to learn your unique business practices.  Get them documented and standardized.  People side, they need to have their expertise, capabilities, and value to the business clear for buyers and managers transitioning in.  Not only to keep the business running efficiently and effectively through the transition, but to provide your employees grounding and justification for their maintained employment beyond the owners transition.
  5. No Long Term Business Plan - standard practice for medium and large companies is annual strategic and long term planning to keep the machinery focused and aligned for success.  Small businesses can learn from that rhythm, especially when it comes to preparing for an exit and succession.  Buyers will want to see some past performance history but also get a clear picture of your industry, trends, market awareness, customer profiles, risks and opportunities, as well as growth opportunities in the works or waiting to be seized.  There needs to be some facts, data, and meat to this document and it can take a little time to put together.  Once you get over the initial hurdle of making one, you can update on an annual basis with much less effort and be positioned well for your exit.  Additionally, this will keep your key risks, opportunities, and plans in front of you and moving forward that can again, raise the current growth and profitability of the company and thus the potential sale price of your business.
  6. Owner Doesn't Have an "After Exit" Plan - many owners I've talked to, customers or otherwise, have great intentions, some plans and actions in the works, but also seem to be delaying their exit in part because they don't have a clear idea of what and who they'll be post exit.  If you've spent 20-30 years in your business, often you ARE your business, and so leaving it will be incredibly disruptive in many positive and also negative ways.  Looking ahead and doing some level of lifestyle design and planning will immediately help you alleviate fears and uncertainties but also give you clarity on your transition that can be shared with employees, partners, and spouses when the time is right to do so.  This is the place where I work with customers in my 16 Hour, Next Callings Experience to do just that.
  7. Not Planning for Succession Early and Often Enough - planning for business succession and exit is AS critical as proper personal estate planning.  It's immensely important but not urgent and biting at your ankles to take the time and effort required.  However, the negative consequences of not planning and positioning yourself and your business and experiencing an immediate need to depart are SO huge that you can't ignore it.  Once your business is established, has a steady market position, employees, and your livelihood depends on it, part of holistic business practices ought to be ongoing planning and updates for succession and exit.  It will benefit the business now in ways you won't foresee but will position your business for successfully transitioning and thriving beyond your involvement.
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As an owner, one goal is to avoid being overwhelmed with adding an almost new job on top of existing responsibilities in life and business, so start early and understand the roadmap ahead for your transition.  Seek the help of qualified professionals like Transition Consultants, CPA's, Certified Financial Advisors, Valuation Experts, and Attorneys.  If you feel like you're not in the best shape for an upcoming transition out of your business or you'd like to get your succession foundation in place, please schedule a free consultation or via the Contact Page.  Next Callings operates as a project manager for these transitions as well and helps simplify the complicated, clarify the vague, and remove the barriers to a smooth life and business transition.  Contact us now for a free consultation.

 

Life Transition: Our 1 Year 5th Wheel Adventure and What I Learned

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I'll be straight right off the plate, we never made our 1 year journey on the open road around the country in our 5th wheel.  We made it to the starting line and life changed tragically for us again.  We parked in my mother-in-law's driveway and lived in the 5th wheel for 9 months with 2 small kids, a cat, and me still working through it all. We made 2 trips around the Washington area to get our wits about us and then we were going to hit the road.  This post is about the journey to that point and what my family and I learned from the experience. 

These are lessons many people learn in their own ways through their own challenges and tragedies.  I thought I'd do my own small part in sharing our lessons so as to potentially prepare a reader in a small way for something like this.  I hadn't written much of the details down until this post and I hope it can be both inspiring and a reality check on getting deeper with yourself and your relationships to be able to weather potential catastrophic upheaval in your life and its transitions.  This is a joyous transition bookended by tragedy.  I hope you find something useful here.

Why would we decide to uproot our family and head out on a 1 year trip around the country?  The following are the main reasons we had for taking on this adventure:

  1. Most obvious answer is really, who wouldn't want to?
  2. The second reason is the slow realization that our lives had fallen into the "mainstream" of American life.  While that's not necessarily a bad thing, where we were in life and who we were, we decided we didn't have the kind of ownership nor the control we wanted.  We found ourselves where many young families do; with a nice home but a 30 year mortgage, some credit card and student loan debt but with solid careers and advancing income growth.  We had a larger than planned house with property as we had bought at a great time at the bottom of the market but as it went, we started filling it up and finding more and more places to put our accumulating "stuff" out of sight and out of mind to the point that it started to feel suffocating.  We had 2 kids and by appearances life was grand and really, it was.  We felt, however, that the stream we were in did not align long term with our visions for life nor ultimately in the values we held.  So, we started to explore options and exercise our creative thinking to explore alternative lifestyles.  At this point, it was only a slowly rising desire to be different and do different things in life...and then....
  3. A much more uncommon experience: My mother passed away suddenly and tragically in March, 2013.  The circumstances I'll leave for a later post but for now, just know her passing was more than catastrophic to us, our whole family, her friends, her community, and the school where she was a well respected teacher.  Our grief was deep and wide and persisted for some time.  I was now the sole income generator for the family and not only that, I had to be a co-executor for my mom's estate.  This is like having one full time job plus a part-time (but nearly full time hours) job as an Executor.

The story goes though, specifically relating to a 5th wheel adventure on the open road, when our family was on our way for a bike ride we passed a farm house with a big Class A RV.  I said to my wife Michelle, with little thought, "We should just huck all our stuff and get one of those and live on the road, go see the country and our family and friends, to heck with all this non-sense we've been through..." And we had a few comments about it but left it at that.  Well, I found out 2 weeks later that I had planted a seed in Michelle's mind that had blossomed to a new vision for our family.  I caught her talking to the wife of a friend we had about the notion of getting a 5th wheel and leaving for a while.  "WHHHAATTT?!??! That's the first I've heard about you taking that seriously at all!" And so it began.  We were committed from that point on.

From there, we both went into action and I brought bare a few methods and tools to help us plan for this transition and move forward as fast as made sense.

  1. Clear Vision for The New Life:  Michelle and I already had a sort of a life vision and 5 year plan and so we took all that learning and understanding of our values and really dug into what we wanted to make of this adventure.  We wanted it to be educational for our whole family, deepen relationships with friends, family, and new people we'd meet, and broaden and strengthen our relationship together through it all.  There is a lot of detail beyond this but what really manifested was we started a blog called RVingForLife.com and started posting before we even left on the trip, about what we wanted and how we were preparing.  The depth of the name for us was in the fact that it was a new life for us for a while, as well as we were going to share our story about various tragedies in our lives and speak to others about theirs and collect money for a few foundations that meant something to us dealing with disease and ailments our family had been afflicted with and ultimately passed away from.  Additionally, we wanted to contribute to brightening life across America by hosting communal dinner events at the campgrounds or communities we visited (we both love cooking and I'm a Dutch Oven cooking aficionado) and we'd also facilitate deep conversations with these folks on a variety of topics.  That's the philosopher in me coming out.  At least, that was the idea behind the vision.
  2. State Our Assumptions and Challenge Them As Needed: We spent time diving into this vision, our plan, where we were in life, and extracted a variety of assumptions we had about it that needed to be clearly articulated, discussed, and challenged.  One simple one I recall had to do with the timeframe we'd be on the road.  Events seemed to line up with a likely disembarking in winter 2015 and our daughter Lila would have kindergarten starting the following fall.  I really dug into the need to start her in kindergarten in the fall instead of the following winter term.  We weighed the options and decided while it's not a perfect scenario, 3-4 more months on the road would mean so much more to our family than having to figure out how to get back to ordinary life and get her into school.
  3. Write Out An Integrated Plan: Being a planner and engineer by nature and education, I felt for this to work and us to stay sane individually and as a family, we had to have our priorities straight and the timing of things out in the open and visible for us.  So naturally I got a white board up on the wall and we pieced together the puzzle of the major streams of life and the sequence of events that were going to happen.  We decided we had 3 distinct streams that each had important elements to be worked as well as some cross-over dependencies.  The streams were: my work life at Boeing, our current personal life (both before and after the trip), and then the pieces specifically required for our journey.  We laid them out, challenged dependencies, accelerated some things and pushed others off.  Doing something like this with a complicated transition helps in so many ways I can't really say enough.  We weren't 100% strict on things but seeing things flow helped us communicate so much more effectively, get the things done we needed, and understand the critical elements that had long lead times to getting done.  This plan spanned about 8 months time, included all the work we had to go on my mom's estate as well as the streams I mentioned before. This also inspired us with a feeling of ownership and progress as we were still reeling for our recent tragedy.

Our plan came together about the time we needed it to and we moved out of our house, got rid of a ton of stuff, the rest went in a storage unit, and we bought a new truck and the 5th wheel.  We moved into Michelle's mom and step dad's driveway and began the start of our transitioning life.

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We learned a great many things during this stage of our life, only some of which had to actually do with living in a 5th wheel and preparing for leaving on a year long adventure.  I'll save the other learnings about those transitions for another post.  What ended up happening at this time was my mother-in-law was diagnosed with a very rare and aggressive adrenal cancer.  Much of our time living in the RV was actually spent outside of it, going to and from Virginia Mason Hospital and elsewhere around Seattle. This was yet another beyond wild ride for everyone in our family, packed full of extreme hardship for my mother-in-law, her husband, and my wife Michelle.  Not to mention our 2 kids who had just lost their other grandma not 2 years prior!  Well, as life would have it, Michelle's mother passed away within 5 months of diagnosis and so, as you might imagine, the life on the open road no longer fit with how life had happened to us.  With these extremes in our life, making the choice not to go on the road (and have zero semblance of any sunk cost feelings) was easy and the transition into buying and remodeling a new home near our old one (half the size, in a wonderful community, closer to our step father than before) was tough but necessary and we made that happen as quickly as possible.  We sold the 5th wheel a year later and started another chapter in our lives. Now with the other bookend in place on our would be trip around the country, I'll share some of the lessons we took away from it all:

  1. Continuously cultivating and enriching your relationships will help you weather any storm life throws at you.  My wife and I went to even newer depths of understanding and relationship through this experience.  We also grew closer with other family in our area in a variety of ways only this sort of trauma to a loved one can bring.  The lesson here seems cliché but there is endless depth to the truth "never take your relationships for granted, in life or in business".  Even in tragedy find ways to strengthen, deepen, and enrich those relationships.  Challenge your ruts and how you may think "you are" in the various relationships in your life.  We found we tend to have a lot of baggage we pile into relationships that really has nothing to do with them directly.  Lots of stuff from your past history that's more about defense mechanisms and protecting your perceived sense of self or your ego.  Do this work pays dividends beyond your wildest imagination.
  2. Life can happen in 10 square feet or in other words you can live in ways and spaces you may not think are possible. My fondest memory of this time (amid the storm of Michelle's moms trials) was sitting on the couch in the RV, attempting to take a "zone out" moment before I had to deal with some RV maintenance task, while Michelle folded clothes, our son played with his tractors on the floor, and our daughter showed us her latest dance moves.  This was all taking place in approximately 10 square feet of floor space.  What a contrast it was, to be living in this 5th wheel, having been inspired by and planned this journey amidst tragedy, trying to live and enjoy life in 10 square feet, when in the bigger picture we were in the middle of another epic tragedy unfolding everyday. We were making it all move forward, such as it was.  This also plays into how incredibly resilient we are as humans but more about how our children were in the late hours to and from the hospital and observing all the stress and emotion around them.  We parents tend to project WAY too much on our children and assume how they can and will be in hardship.  This first hand experience with them continues to teach me daily about their resilience and adaptability beyond anything I could have pictured before it.
  3. Transitions though tragedy and hardship provide many lessons and will forever, if you reflect and learn. I continue to have new insights and learnings, almost daily, upon reflecting what we witnessed across my father's 10 year illness and passing, my mother's death, and my mother in law's passing. Pay attention and deepen your experience, face your harsh reality and you will learn a great deal.  We humans have innate tendencies to try to avoid pain but pain is also one of our greatest teachers.  The pains through these times were unavoidable but my family and I have grown so much more out of all of it.  No, we're not perfect by any means, but I feel as though the depth of experience we have to draw on is vast and so if we can take the time to reflect and apply our lessons, we come out of hard times faster and more easily.

These tools and lessons I've shared in this post are only a few and are some of the most important.  Much of what life has brought and taught us through these tragedies and healing is why I'm doing the work I'm doing now at Next Callings.  I hope to do good work and apply my lessons to ease many of the innumerable transitions we have in life and I hope this post helps someone in even a small way. I welcome comments or emails if you'd like to talk more.

This post is dedicated to my father, Bill Prestin, my mother, Chris Prestin, and my mother-in-law, Sharon Caster.  May they all Rest In Peace.