In your work as financial advisers, you understand the Greek terms that are used in analyzing investments and portfolios, like alpha, beta, sigma, rho and others. I suggest that the fourth Greek letter, delta, also play a significant role when you are planning to sell your financial advisory business, or for that matter, buy another business. First, a little background.
The term “delta” is used in mathematics as a measure of the change in a variable and is signified by the symbol ∆. The Greek symbol itself is used in mathematics and engineering to describe the amount of change. Yet when you look at the symbol for delta, a triangle, it is actually one of the strongest architectural constructs possible; built of the proper material, it exhibits tremendous resistance to deformation and change. This sounds like a paradox, doesn’t it? How can the same concept stand for both change and its exact opposite—resistance to change? Right about now, you may be wondering what any of this has to do with you, dear reader.
What it has to do with is recognizing the difference between change and transition. Change happens to (and around) us all the time; it is actually the only constant force in nature. But the human animal is hard-wired to seek fixed points of reference, and since the only things we think we know anything about are the present and what we create as our representation of the past, we anchor ourselves to those perceptions. Pulling up your “anchors” when life goes through a big change means embracing a process of seeing, reacting and adapting to your new reality. The time required for that process to unfold is called a transition and it’s really tough for most people to do well.
There are three areas that need to be looked at in order to successfully navigate a business ownership transition:
- Your personal financial plan, to forecast how your wealth and lifestyle will fare during and after you sell your business—presumably one of your largest financial assets.
- A business ownership execution program, to deal with the physical and economic elements such as business valuation, tax planning and reporting, purchase and sale and other legal documentation.
- Your life transition plan, to understand and deal with what will happen to your sense of meaning and value during the transition period and help you find out who you can become in the next phase of your life.
Another way to think about it is as a three-sided structure, a triangle or delta—the symbol for change. The secret for dealing with big changes is hidden within itself; it is to recognize the difference between change and transition (two terms that are often mistakenly used interchangeably) and see each from its own unique perspective. Too many financial planners and advisers think only in one or two dimensions in selling their business; they focus on what they know and are comfortable with—their personal financial plan and the business ownership execution program. But that mistake leaves out one side of the triangle, your life transition plan, and we all know how stable that will be when “the boat starts a’ rocking!”
Read more on the three legs, and tips to make each stronger, in my blog post next month.
Sam Hull, CFP®, CPCC, ACC, RLP
Whitewater Transitions LLC