Strategic advice

You own a single-facility factory; your company is in the early stage of the business lifecycle. You’ve talked extensively with your Truist relationship manager, and you decide to use excess capital to lease cutting-edge equipment to increase production. This is a planned and wanted change that isn’t a transition.

You run a large, established business that is experiencing a sudden labor drought for specialized, technical roles. You discuss possible solutions with a Truist relationship manager. You and they determine these labor issues will not subside anytime soon. After weighing your options, you decide to eliminate most of the hard-to-fill roles and purchase cutting-edge equipment that helps get the work done with automation instead. This needed change is a transition because it will permanently alter your operations.

In both cases, the fundamental action—an equipment upgrade—is the same. At the early-stage company, leaders took action when times were good and initiated a change. If that equipment upgrade doesn’t prove profitable, Cagle explains, “the company can revert to prior practices with relative ease.”

At the established-stage company, leaders and their advisory team automated operations in a permanent pivot, leading to a business transition.

The sorts of changes significant enough to prompt long-term operational restructuring in your company are commonly referred to as transformative changes—in other words, business changes that catalyze business transitions.

Cagle explains, “Even ad hoc changes may become central to how you do business, and that can fundamentally transform the structure of your company.”

These are a few examples of transformative changes that can usher in a transition for your business:^{Disclosure 1}

• Scope transformation: An increase in the size of your company to expand its geographical reach
• Organizational transformation: The hiring, training, and continuing education of employees
• Business process transformation: An alteration of your company’s core processes
• Digital transformation: The deployment of digital technologies to reduce costs and improve the customer experience
• Cost transformation: A change in financial practices to reduce overhead through more efficient management of expenditures such as rent, payroll, and insurance
• Leadership transformation: A change in the company’s top leadership or owner (more on this below)

Through ongoing conversations, your relationship manager works with you to provide the resources, know-how, and adaptive planning that position your company to optimize outcomes for each of these transformations.

Of the types of transformations listed, fewer have greater potential to catapult you into a business transition than a leadership change.

Leadership changes can take the form of:

• Succession planning for business owners that hands the company over to a relative or another in-house leader at a set point in time
• An unexpected exit, disablement, or death of an owner, key leader, or executive
• A transfer of ownership to employees
• The replacement of many or all top management personnel
• The replacement of many or all members of the board of directors

A risk companies can often face during leadership transitions is opposition to their transition strategy from key external or internal stakeholders. To help mitigate that risk, 83% have formal governance structures, such as a board of directors or advisory board.^{Disclosure 2} Almost three-quarters (73%) of the same surveyed companies have family boards or councils that exist alongside, or fill the same function as, those formal governance structures.^{Disclosure 2}

Implementing governance structures can help your team prevent or overcome disagreements that could complicate a leadership transition.

“So many people think the pinnacle of a business transition is a sale,” says Cagle. “But in a cyclical, nonlinear business lifecycle—which is how businesses actually evolve—hiring entirely new management can be as much of a business transition as selling your company. Because it requires fundamental adjustments to your preexisting transition strategy that can reset you to a different stage, any adjustments connected with enacting a leadership transition should be thought through and planned out carefully.”

It can be difficult to quantify every type of transformative change that could initiate a transition. What you can count on is that all it takes to put your business into a transition is one transformative change—and that, in the future, your company will undergo at least one major transition.

“When I talk to clients about maximizing the benefits of business transitions, I like to use the term ‘the art of the possible,’” says Cagle. “A sudden, transformative change may place you in an unplanned transition, going down one path that aims to keep your company viable. Then the economy shifts, enabling a pivot. That shift makes it possible to use the systematic changes made to address your transition as a springboard for additional strategic adjustments that help you evolve.”

To advise on a change management process that helps turn changes into opportunities, your Truist relationship manager will connect you to Truist business transition advisors. Together with other specialists, they will deliver business transition planning and strategies calibrated to the shifts and unique situation of your company.

“A better understanding of the relationship between business changes and business transitions puts you in a position to adapt and thrive,” Cagle says. “That’s exactly what the art of the possible is.”