EP2 - Foundations of Transition- Intent and Ownership Vision

In this episode of the Journey to an ESOP podcast, Jason and Makenzie kick off a new series that will continue throughout 2026: The Foundations of Transition, a workshop-style series focused on owner readiness. Each episode builds on the last, creating a practical framework for navigating ownership transition. The first foundation explores owner readiness and identity, helping owners define their vision for ownership and the future of their business. The conversation centers on identity: how your values and beliefs shape who you are as an owner, guide your decisions, and influence the life of your company. Understanding identity is critical, as it affects not only who your business is today, but also what it becomes after transition. 

Transcript

[0:13] Welcome back to the journey to an ESOP and Beyond podcast where we seek to make all things related to Employee Stock ownership plans both accessible and understandableI'm your co-host Today Jason Miller. And I'm McKenzie worthand I am really excited today because we are going to be embarking on a journey together throughout all of 2026 is I alluded to late last year and in our season opener uh last week what we're calling this is the uh foundations.

[0:51] Of transition and what we're going to be releasing month by month 1 per month throughout 2026is, kind of a workshop uh so to speak around different elements of owner Readiness and you may have heard the term Readiness a lot or the phrase owner Readiness uh as you've looked for resources to help you think about um becoming an ESOP or transitioning your company uh or what what do I need to do in advance of that and we thought that it would be helpful uh to lay the foundations alongside you and with you and for you and today is the first of those and just like foundations are they are fundamental they're going to be taken step by step and build upon 1 another and I'm really excited about today's topic and we're going to start at the beginning and that's, getting Clarity of intent for your ownership vision. And we're going to talk about identity uh we're going to talk about some of the things that you've likely experienced already and then give you some, practical wisdom and ways for you to think through this uh and feel through this for yourself uh and.

[2:17] Hopefully spur you to to take some action uh toward the next chapter of your life and the life of your business.

[2:30] I think we have a lot to to dive into today and I thinkthe key the key theme is both identity and. Uh owner Readiness or preparedness.

[2:43] Amongst everythingI I think some people might be thinking already around a year uh 12 months 1 per month uh you want us to hang on for that long to get to get through this um and I'm I'm positive uh as of the the date of this recording we're a little over a week into the new year that someone has already said in your office, um you know Christmas will be back before you know it and everyone's giving that individual some side I, uh you may or may not have already taken down your your holiday decorations um but we all know that time is fleeting and time goes by quickly. Uh and in that effort um a year will be over before we know it and the intent for these foundations. He's Essentials uh is literally to give you time to breathe while giving a path forward and I I think. Um deliberately about the delivery of of these uh we have them marked out uh and we're we're excited to get into them with youso McKenzie let let's start first talking about, identity it's been my favorite topic for like the last 3 months um so talk talk to us a little bit about ownership and identity.

[4:12] Yeah so if we just kind of start fromjust what identity is. Divorcing from the idea ofownership and just in general identity um what that meansI think typically it. Reflects your view of yourselfumand that is developed through, your values and beliefs that you either grow up with in your your home and throughout your childhood and with the people that you are around and then maybe as you become. Uh more of an adult you those values and beliefs can change.

[5:01] You're always kind of looking fora sense of identityand living.

[5:11] With those values and beliefsliving in line with those through your actionsand I think when we do that. You're typically finding more satisfaction or joy in your day-to-day life when you feel like your actions align. With your identity who who you view yourself as.

[5:37] Living authenticright, so we we have a lot of influences on who we are and who we can be uh and sometimes we know who that is and we can articulate that and sometimes we don't know who who that is uh or can't articulate that and, I think that's the crooks of why we're talking about identity for you listeners as Founders as as owners um, you know that's that's part of who you are todaythe most important part about thinking ahead to the a transition is getting, some insight into who are you going to be.

[6:22] At the time of transition and afterward. And that's not typically as as concrete uh as the identity that you hold today as as a leader or or as an owner McKenzie would you agree.

[6:40] Yeah and I think that.

[6:43] Before you get to the point in time where you're going through that transition and when it's it's post-transition before then. How intertwined your identity is with your businesscan. Can be botha good thing and a bad thing. It can be good because it's it's fueling you every day and you're showing up to work and um that's what you you live to do and you you, this is kind of like something you prone it's your it's your baby if you will um but it can create barriers when the time comes and there's a either a triggering event or it's an inevitable that a transition has to happen, um so being aware of how. Closely your identity is wrapped up in your business is kind of important when reflecting on. Umthe topic ofsuccession planning.

[7:49] We talked a little bit about change last week uh the the whole idea of season 7 is continuity through change uh and being prepared preparation is uh is optional right changes inevitable and this element of psychology related to who you are plays itself out through any type of business transition or business transaction any sale and an ESOP sale. And listeners what we're encouraging you to do is to evaluate that now and not urge or rush you uh into this uh into a transition into a transaction without acknowledging this um and as McKenzie said you're you're who you are and you've become successful uh because of that and this feedback loop of generating success feeding the identity of of who you are as a business owner and then that returning uh and and yielding results uh that I've created a successful business and and that driving you forwardand. What. What I'd like you to do um and what I'm I'm asking you to do is think about how that needs to change for you to be ready not to be that person anymore.

[9:13] And that's hardit's going to be hard for everyone and. If you're able to handle it on your own terms and your own timing it really comes with self-reflection and a number of different ways. But the first 1 is who who do I want to be who do I need to be, uh leading up to the transition and then afterward it's who am I going to be. Afterwards when I'm not coming in 60 80 hours a week like I have been for the last 30 or 40 years um when that time block that has reinforced my identity isn't going to be the samewhat am I going to replace it with.

[10:00] I think that's huge and that's something that'snot. Really thought about in preparing for a transition that maybe like the afterthought when it all happens and you're like oh. Here we are I did what I planned to do but now whatbut I think to your point thinking about that ahead of time. Gives you more comfort andum maybe motivation even to get through the transition. I'd offer that it also allows you to give yourself permissionto be different.

[10:40] And to accept the change that you're that is cominguh and to be able to do that on on your terms um this is the soft side of of business transactions if if you want to put it that way um but there's a a lot of evidence um that. Post sale post-transaction we've mentioned this before it's something like 3 34s of all sellers end up with some measure of regret after the transaction and it's it's not about.

[11:14] The the transaction itself or that it occurred it's afterward they didn't have anything to replace the block of their life the block of their identity that was wrapped up in the business and the the timing of the change the transition the gravity of it the focus of it being financial and operational and everything else took Center Stage, um which it does in most transactions and that who who am I going to be after this false down on the priority list, and listeners what I'm encouraging what I'm encouraging you to do is well in advance of of any transition again start here. Start thinking about this now so that you're a better prepared for what's coming in the future and your future.

[12:15] Beyond the post-transition who you are what you're going to do butwho you are today and who who you should be or need to be. Need to be evolving into or away from leading up to the transitionumwhat are your thoughts around that.

[12:37] I I don't like change my wife tells me that um I'm bad at at change um for a number of different reasons none of which we're going to get to on a public podcast um. Butit'sit's often difficult to take a step outside of, what demands all of our attention energy and focus or a vast majority of it and apply it toum man what do I need to do differently, today for for a particular event or series of events and I think the way that I would relate that is um if I go to the doctor and I get some negative news. Um the first thing that comes to mind is what. What are the ways that I can do what what's treatment for this and so there could be medical treatment there could be pharmaceutical treatment uh there could be surgical intervention but all of those likely require lifestyle change of some type whether it's exercise or eating or eating better or sleeping better, all of those things correspond to the underlying health of the individual to maximize.

[13:51] The efficacy of whatever the other interventions are again pharmaceutical or Surgical and it's if you lay that over um yourself in relation to the business the the business health or the transition is 1 thing and who I am that got us here is the state of my my health my identity um but for it to be, uh optimal for me and for my leadership team and for the employees and for everybody involved there might be some lifestyle changes that that I can make, um and that's the way that I I would think about that and who do I need to be how different do I need to be in order to achieve what is a successful exit for me. Does that make senseright it does and I think. Those thoughts can probably be overwhelmingto a business owner that maybe has never thought about that before umbut. I think we would emphasize that even just.

[14:57] Thinking about it once a month is better than thinking about itonce a year and when you think about it once a month what's 1 thing you can do over the next month. To get you closerum breaking it down into small pieces rather than feeling like it's something that you need to be thinking about daily or doing something about it dailyum.

[15:21] Breaking it up so that it's not as overwhelmingas even more effective than doing nothing at all. I think that's the key right um maybe the health analogy was a little on the nose um with yeah you know if if you move more or if you do more exercise if you eat better then your health will be better and it doesn't require you getting uh you know the most expensive personal trainer at the most expensive gym and then eating a arowanas what whatever else you know comes up comes to mind for uh you know organic and and super healthy organic foods um. But if you do 1 Thing, better than you did yesterday then you're you're better it's just in what direction are you taking that step for what purpose are you making that change um. But there are immediate benefits to those changes it's not just I gotta I gotta make this change for something that's a year off or 2 years off or 5 years off uh and I don't I have to wait until the the sale to occur for anything good to happen that's that's not true right.

[16:38] So I I in our uh leadup to this 1 of the things that came out from a Harvard study was that the the single biggest boost to motivation was small wins on meaningful work. So doing something now like you mentioned even even littleSparks that joy and that drive to keep going. And if there's anything to what we're sharing today listeners it'stake a step, in the direction toward discovering who you want to be before leading up to and after a transition or transaction for your business.

[17:23] I think we have. A handful of other stats that we've kind of reviewed ahead of this as well that are are very interesting and worth mentioning just toallow our listeners to reflect on.

[17:39] There's. Seems to be a big a big gapacross Generations in terms ofgenerations that. Taking action earlier over othersum.

[17:57] According to 1 Study only 22% of Baby Boomers and 62% of Gen X owners had completed a formal value enhancement project compared to 84% of millennials.

[18:12] I thought this this spread was.

[18:16] Pretty crazy I did too it was really eye opening but it really wasn't surprising right it's oh let me see it um. You know that that's those are big differences um but after I see it it it kind of makes sense to me um anecdotally for me in dealing with owners of different Generations um.

[18:42] Top first before we we kind of dissect the numbers a little bit um you mentioned uh a a phrase or term value enhancement project. So but talk to us a little bit about what a give us an example of what a value enhancement project is um how how it gets started like what's the the Baseline to enhance value um and how how that relates to this period between today uh when our owners are starting to think about. Found changing Identity or altering identity before transition to leave those together for us yeah I think.

[19:24] First things first is just even having an understanding of what your business value is todayum. So I guess part of that project could be simply just getting a professional business valuation done on your company to understand where you're at today and if that was. Even close to what you had thought or maybe you had no idea at allum or maybe you're. Not even concerned necessarily about the number just yet and from a day-to-day basis you see things in your business that can be improved that would naturally enhance the value or reputation or, um Culture of of your business and maybe that's just improving certain processes umlooking at. Your employees and the roles that they're in or what roles. Exist in the company and maybe where gaps are maybe there's a role that no 1's sitting in that needs to be fulfilled.

[20:32] I think those are a little pieces of a over overarchingproject that would naturally enhance the value of your company over time. I really like that phrase or the terminology of value enhancement project um gives uh intention kind of a a feeling of a definitive period of time like it it's going to get started you're going to operate that you're going to go through the project you're going to end the project it's going to have a result and that result is to enhance the value of your company obviously which is really important leading in into a transition um.

[21:08] And I I think 1 of the uh stats that we saw was that approximately 60% of owners have gotten valuations in recent years uh which is up from something, closer to 20% just 10 years ago so many of you are already taking steps around how how do I know what. What I have what it's worth and then when I get that information what do I do with it. Um and that's what leads to these value enhancement projects so let let's take that back to uh our our Boomer friends um are I I probably said that wrong and I'm sorry if I offended someone I didn't mean to are the baby boomer generation uh 22% of them have have taken on a value enhancement project. Um while 62% of gen xers um and then 80 84% of Millennials um. Stats are always fun um the the 22% of the baby boomer generation that have have undergone 1 of these projects what do you think that. We think that could say uh let's do a positive thing and let's do a not so positive thing about what it could mean and where where people are are landing yeah. I think a positive thing is that.

[22:34] Owners are probably just so immersed in theirday to day and what they are what they've been usedto doing and. Ummaybe it'sthey don't feel there's time to allocate. Succession planning or thinking about the future or they think it's too early or or it's not necessary to.

[23:02] Maybe it's not priority of over what they are doing day to day.

[23:09] Which is I guess a positive because you're continuing to grow the business and making things happen like you always have um. But I think the downside isit leads tomore of an last minutetransition rather than. Feeling prepared.

[23:32] I think that could be accurate um if if I look at this over a span of time how much time do you each of these Generations have left, uh in in front of themum you know the the positive on why only 22% have taken a value enhancement project on could be because they feel like their company is valuable enough already. And it it may already satisfy uh whatever it is that that they need monetarily or what they're projecting ahead to to a future, um and they they don't need to enhance it further or uh are thinking about where they're spending their time and energy and it's not an enhancing value it's enhancing the quality of life that they have as the leader of this business until they're not uh and then living out the rest of their days in accordance with what what they've already planned so that's the positive spin that I'll put on why that generation has has less umthe the leap to uh we can skip over Gen X I'm Gen X we're the Forgotten generation uh any any way it's it's material it's 22 to 62 good job guys keep keep going uh but the Millennials at 84% uh taking value enhancement um projectstalk about that for a minute.

[24:59] For me what comes to mind immediately is justI feel like it's often.

[25:08] Seen or or I guess observe that umMillennials are just. People in that generation areless loyal to. The companies they work for or if it's even a company they're growing themselves they're kind of always looking at the next. Best thing or the next the next thing and kind of thinking okay I'll start this business but my intent is to start this business to sell it. Um whereas I think maybe in in the past when there's like family-owned businesses that start like. Very tight Niche within the family it's something that you like take a lot of pride in and it it's kind of like what you wrap your identity and whereas I feel like Generations now are kind of always looking for. I'm doing this now so that I can do X Y and Z and I feel like it's called it's always a constant likeum.

[26:09] I don't want to say like recycling but just always changingthat that was an interesting part of that I don't know if it was in that same study or if it was in another 1 that we were looking at um that many Millennial business owners are looking to have multiple exits throughout their lifetime and so serial entrepreneur Gene is strong in the millennial entrepreneurs and to your point they're looking at growing the business to successfully sell, so that they can take on another project and start another business and do the same thing and have multiple exits throughout, their lifetime the exuberance of Youth um because time is on their side to to do that and being intentional about it uh brings a very very interesting Dynamic to thinking through uh the just the cycle of life in general and the the impact on statistics around around transitions um.

[27:10] The interesting thing about this is that intent and those those value enhancements like I want to grow the the value of the businessis still different than being ready. Uh and we'll we'll kind of transition away from the psychological side for a moment and then get to the Practical side of just having an exit plan or a secession plan um however you you want to call it and, uh what what did we find around um. The the number of of people that have a um a formal secession or Exit Plan. So we found that approximately 60% of small businesses lack a documented succession plan. Andeven building off of that wasthat.

[28:10] Those that claim they have a succession planthe definitions of a plan are inconsistent or unclear.

[28:20] So there's no uh. Scientific definition of what is an exit plan for everyone to compare notes and say yes I have 1 or no I don't but there are a lot of people who say yes I have 1.

[28:39] And I think that can look like yes I have 1 my son is taking over or. Yes I have 1 um I've been working with an investment bank or you know there's different. Very different angles to look atandDefine as a plan as.

[29:03] I think uh you mentioned something really um really neat which is part of the plan could be I I have a professional uh already working with me to help me through this this whole thing. Um and that was another element of this statistic was uh I think it was 78% of individuals who say they have a plan.

[29:25] Don't have a formal team to help them Implement that that plan and that's where for esops it's where we we would come in and be a part of that team, uh your CPA is part of that team your personal financial advisor is part of that team your corporate counsel is part of that team and um you know for different exit yes and Investment Bank could be part of of that team um that kind of begs the question when should I get all of those people involved um, and I I think we're not there yet we're going to talk about that throughout this year uh it's just interesting to highlight um. H we don't have a standard definition of what a a detailed Exit Plan looks like yet um but we do know that there's there's no support team in place in most of those, um and the the question is should should my plan detail for me the timing of when to hire the right people the answer is probably yes that should be included in your plan um that's the way I would look at that.

[30:38] I think amongst highlighting all these surprising statistics 1 thing that was umI guess. Relieving or nice to see is that umthe exit planning Institutes. Data showed that formal exit planning education has risen sharply over. About a decadeum. In 2013 only 35% of owners had any formal education versus almost 70% in 2023.

[31:17] The silver tsunamiright is is still raging um and depending on where where you Source the information No 1 know what every privately held business is worth but uh that that idea of 14 trillion dollars of business Equity or in small business, is going to be transitioning in the next number of years whether that's 5 years to 10 years it's within the next decadethat's that's a lot of value. In businesses that's going to be going from you uh listeners to someone elseuh and that it's.

[31:57] The idea of being educated around what exit options you have um and then getting a plan together formalizing a plan and getting the team to help you in in the right timing, that may feel a little overwhelming and again your time is back to the beginning your identity is operator leader. Executive ownerand. Facing these and making them concrete uh or at least tangible um I think is is a better way to to kind of describe it making the the idea of of of a transition or a transaction tangible, is it core to who you are today which is why we're encouraging you to uh start thinking about this transitional period um for who you are going to be when you are no longer owner and when you are no longer operator. And you may still be executed for a period of time after a transition especially in an ESOP transaction um. But those other um the those other mantels that you wear um are are going to be changing at some point in the future.

[33:13] And so don't be daunted by the activity. Uh be intentional about itand the the good news isn't just that you're more aware that you have to do something it gets back to what McKenzie had said earlier on. Take small actionsbecause those are going to create momentum for themselves uh to help, push you uh when you need to be pushedbut from a place of clarity and not from a a position of inconvenience or something being forced on you uh in in the moment so the more time and attention that you you put into it today the better prepared you're going to be for that uh in in the end.

[34:02] And if you feel maybe overwhelmed or still still maybe a lost after listening to today's episode we'd encourage you to hang with us over the next 12 months as we continue toum.

[34:18] Unwrap and dive intomore of what we've touched on or introduced today.

[34:28] So if you need some additional help um you know I do have to make a confession in my opening last week for this season on season 7 I did say that there was nothing to download and work on and I I lied, uh for each of these segments um we're going to put together a 1-page. Um we're calling if you want to call in a workbook um we're just going to label them page 1 that goes with episode 1 for our our foundations, of transition um and it's going to give you promptsto think about, what we talked about today it's not going to be numbers uh it's not going to be quantitative at least not this first 1 at all it's to reinforce the psychological side The Human Side, of what you're going to be stepping into and giving you those prompts and a space to thinkand a space to express it for yourself, um I would encourage you uh throughout this entire season grab 1 other person, that you know that's in a similar spot to you uh that you can bounce these ideas off of and have these conversations so that it Carries On, the podcast and that.

[35:49] It supports your line of thinking as As you move in into into transition and into a hopefully uh from many of you listening to the ESOP podcast um and into an ESOP transaction.

[36:03] Iwant to thank you. For joining usfor yet another season and embarking on yet another crazy idea um that that we've had around finding ways to to help. You think through what's important and acknowledging what's important without it losing that that's important in the emergency of everything else that you're holding. And so we are uh encouraged that you're here we are glad that you're here we are looking forward to uh this this whole season ahead of us, and for whatever season that you're entering into if we can help reach out to us at journey to an esop.com that's where your workbook page will be uh on our podcast section um and we look forward to seeing you next time here on the journey to an ESOP and Beyond podcast.