The Secret To A Seamless Owner Transition Process Is Starting Early
If there is one thing commercial real estate companies have in common, it is that their circumstances are constantly changing. Risk, market ebbs and flows and economic changes can impact the failure or success of a company. A willingness to embrace change is in a commercial real estate professional’s DNA.
One of the most significant changes that many CRE professionals will face throughout their career is the transfer of ownership. The identification and transfer of power to a successor can hit a company hard if its management is not prepared. But by leveraging the right tools and taking proper measures early on, owners can ensure that the experience is seamless for all parties involved.
“It’s never too early to start thinking about your transition and succession strategy,” Baker Tilly partner Jaime Lawson said. “Because succession is about business continuity, ongoing jobs and building capital value, preparation is key.”
Lawson has spent much of her career helping commercial real estate companies identify and work through business challenges. She advises clients on how to navigate succession planning and the transfer of wealth and ownership.
The first step in any ownership transfer is identifying a successor or successors. Lawson suggests thinking about what the current owners are doing, and how those skills can be transferred. This can also help companies identify which skills are currently missing from the company so they can find a successor to fill those gaps.
“I advise businesses to think hard about what type of successor makes the most sense for them and what structure they want to arrive at post-transition. We can help business owners think through who the successors may be,” Lawson said. “If it is a family-owned business, is there a family member in a position to take over the business? Will the transition be gradual with the transfer over time, or will it be a quicker transition? Are you going to sell to a third party? Is selling the business even a viable option? These are all questions business leaders and owners should be asking themselves.”
Many owners choose to transfer ownership to an employee or group of employees who they trust to see the business into the future. To choose the best person for the job, owners should determine who the top performers in the company are. Lawson and her team have also provided services to help identify potential leaders through a competency assessment.
Still, a number of modern challenges have made transferring ownership increasingly difficult. For example, it is harder to retain employees today than it has been in previous years.
“People do not stay at the same company for their entire career anymore,” Lawson said. “So retaining quality employees long enough to position them as candidates for succession of ownership may be challenging. Many younger workers may also be more risk-averse and uninterested in buying into a business since it’s a more permanent decision.”
Lawson recommends implementing an incentive or retention plan for key employees who show potential as future successors. Owners can use this approach to help employees build capital so that it is easier for them to buy in at a later time.
Another trend Lawson has seen throughout the succession process is a decrease in legacy transfers for family-owned businesses. Rather than passing the torch to their children, many real estate company owners are considering selling their companies to non-family members.
With the future of an entire company and its employees on the line, owners must align their own goals with the best interests of the company. Every business has its own set of challenges and circumstances. Creating a transition road map early on and following through can simplify the process for everyone involved.
This feature was produced in collaboration between Bisnow Branded Content and Baker Tilly. Bisnow news staff was not involved in the production of this content.