Four Important Stages Of Transition For You And Your Business – In Conversation with Josh Patrick

Written by Susan Bradley

Susan Bradley, CFP®, CeFT® is the founder of the Sudden Money® Institute, which began 18 years ago as a community of practice seeking to better serve their financial planning clients by developing processes and tools for the personal side of money and clients going through transitions. This think tank created the Certified Financial Transitionist® (CeFT®) designation, and a division for training and certification called the Financial Transitionist® Institute.  

Josh Patrick has spent his adult life running and building businesses. He specializes in working with owners of privately held businesses on a variety of strategic issues. He is known for working collaboratively with his customers to find unique opportunities in both business and personal lives.  

In today’s episode you will learn:  

• Why is transition expertise important?
• Why do managing transitions count?
• What are the four stages of transition?
• How important is it to have the spouse as being an integral part of the transition? 

Skip to the part you want to listen to:  

• Why do managing transitions count? 2:05
• Four stages of transition which I think are brilliant. Could you talk with us a little bit about what those four stages are? What happens in each of them? 3.10
• The business owner’s journey through the development and then ultimately, the sale of the business. 8.20
• We have the stage two hiring process. We have an objective review. 9.20
• Susan, you have a bunch of great tools for each of those stages. You want to talk a little bit about some of them that come to mind for you. 10.30
• Remember my need to be involved in this process. Remember that everything needs to be relevant. 11.36
• How do you make your best decisions? How do you like to receive information? How do you make your best decisions? How do you like to receive information? 12.25
• Could you talk a bit about why it’s important to have the spouse as an integral part of this conversation? 14.39
• You know, I’m happy you’re going to sell your business, but you can’t hang around the house all day.” 16.47
• Having an outside transition is coaching you or as you say, which is my favorite term in the world, being a thinking partner while you’re going through this is that if you’re a thinking partner, they can say. 18.40
• Companies go through transitions also. This is something that’s a brand new thought to me.20.28
• The easiest address is https://www.suddenmoney.com. 22.13

Full Transcript

Narrator: Welcome to “Cracking the Cash Flow Code”, where you’ll learn what it takes to create enough cash to fill the four buckets of profit. You’ll learn what it takes to have enough cash for a great lifestyle, have enough cash for when an emergency strikes, fully fund a growth program and fund your retirement program. When you do this, you’ll have a sale-ready company that will allow you to keep or sell your business. This allows you to do what you want with your business when you want in the way you want.

In Cracking the Cash Flow code, we focus on the four areas of business that let you take your successful business and make it economically and personally sustainable. Your host, Josh Patrick, is going to help us by finding great thought leaders as well as providing insights he’s learned through his 40 years of owning, running, planning, and thinking about what it takes to make a successful business sustainable and allow you to be free of cash flow worries.

Josh: Hey, how are you today? This is Josh Patrick. You’re at Cracking the Cash Flow Code. My guest today is Susan Bradley. Susan has been a friend of mine for like nine zillion years. We met each other at a conference in Bondi going to see Second City in Chicago, which was a very cool experience. She was the only one to stay for the third set with me. Susan is the founder of the Sudden Money Institute and the Financial Transitions Institute. She is the world’s expert on transitions in why transitions matter. That’s what we’re going to talk with Susan about today. Let’s bring her on.

Hey, Susan. How are you today?

Susan: Thanks, Josh. It’s fun to be with you. Thanks for inviting me.

Josh: It’s always fun to be with you. Let’s start with my usual question that was something is waiting this time I usually question. Let’s talk about transitions. Why is transition expertise important? Why do managing transitions count?

Susan: Well, I think it’d be helpful to make a distinction between change and transition. People say, “Well, life is always changing.” This happens that happens. It’s true. That’s how life moves. That’s how we evolve. Most of the changes get absorbed rather easily rather quickly, but a transition is when the norms and the patterns of life have been disrupted.

Sometimes by design, by happenstance, it’s great, sometimes it’s terrible. When that disruption happens, I always think of a jigsaw puzzle and the pieces just blow apart. Then you put the pieces back together, but not all the pieces fit the way they used to. These events that we call transitions change the way life works. Usually, there’s a core part and then it ripples out to the rest.

Josh: So Susan, you have four stages of transition which I think is brilliant. Could you talk with us a little bit about what those four stages are? What happens in each of them?

Susan: Yeah, thank you. We use a model to understand complexity. All professions do that. All sciences do that. When we think about this in terms of life and particularly financial life, we had to understand why these behaviors were happening, why people were getting tripped up with transitions when they’re asked to make some of the most important decisions of their life and they’re at their lowest capability, what is going on with that?

So 20 years ago, we set out to understand this. We now know that there is an anticipation stage and a preparation stage. Business owners know that when they’re getting closer to the time that they’re going to sell their business that is an anticipation stage. People who retire have time for that. Not all widows have time for that there can be a sudden Death. We don’t always have an anticipation stage, but it is more than just common. It’s kind of a norm. There’s a break of the norm. That could last any period. That’s when you know something’s happening, but you don’t know exactly when. You might not know how much but you know, it’s going to happen and you’re changing your thinking and behavior.

Then it happens, and then the event happens. Then there’s usually no going back. There’s no Mulligan. There’s no do-over. Life, as it was, has changed. That’s when the puzzle blows apart. Then those pieces need to come back together. Those pieces have to do with relationships with money, with cash flow, with routines and patterns in life. It isn’t just the technical side of a tax change or something like that. It takes about a year, maybe a year and a half to put it together depending upon how complex things are and how overwhelmed people get with it.

Sometimes there’s a lot of fatigue and overwhelm so it can stretch out which is fine. You want to just get to the point where you or someone can help you get to the point where you can make your best choices during that time. The pieces are pretty much back to the big pieces that are there. Then we’re moving into the third stage which is passage. This is the stage people usually miss. They think, “Oh, this is all done. The money’s taken care of. The cash flow is taken care of. This is what we’re doing.” But most people know that they’re not done yet. They haven’t adjusted.

They haven’t adapted. They say that, for instance, in the financial planning world widowed women and divorced women leave their advisor in the second year 70%. It’s a big indicator. It doesn’t tell about everybody all the time, but during that ending stage, you’re focused on the details and then you focus on adaptation and adjustment. It feels more subjective. That’s when people want to maybe change everything. Maybe they want to rethink or to reinvent. If they have enough guidance then they can make a very conscious transformation to the next version of themselves and their life.

Then you move to the final stage which is the new normal. That’s when patterns and routines are established. Expectations kind of have leveled out. The skill there, Josh is to look back. You’re looking back over the years. That passage states, by the way, takes years, not months. So you’re looking at five, six years here. They can be productive, sometimes the best years of your life, but something big is happening. So when you get to the new normal, you want to look back and say, “What worked? What didn’t work? What do I wish I had known? What would I tell somebody else?” You can kind of write it down and with your advisor, do it together so you know kind of your process and your style. Next time life changes, you have a place to start. Those are the four stages: anticipation, ending, passage, and new normal.

Josh: That’s great. For a business owner, I’m just going to take a run through the business owner who’s going to transition out of their business. Sometimes they sell. Sometimes they transfer, and sometimes they close. There are all sorts of ways of leaving your business. Here’s what I’ve learned over the years and tell me if this makes sense to you that business owners tend to live in anticipation for 20 years or more.

They’re always thinking about how they’re going to leave their business when they’re going to leave their business and the big payday that comes into their business. It’s not something they think about all the time, but it lasts for a long time. Anticipation seems to be with a business owner for a long thing, and then we get the really fast ending.

You go and you sign the contract and you’re done. Now, you’re saying what’s next to my life. The passage is where they sort of live in what I call seller remorse. Back in my early days when I was young and foolish, I used to think I could prevent the seller’s remorse. Now, since working with you, I’ve realized I can just help people get through it. Then eventually they do end up and have a new life and do stuff that goes on. Does that make sense?

Susan: Yeah, yeah. Of course, there are lots of subtleties. Because you live in breathe, the business owner’s journey through the development and then ultimately, the sale of the business. You know that there are so many twists and turns. Sometimes we kind of gloss over it and say, “Oh, well, you’re in this stage or that stage.” There’s a heck of a lot going on in those stages. The reason I think you can tell me that this model helps is because there is so much going on. It’s good to be able to get a big picture to get this feeling that you’re just not there yet. This is what’s going on next because you can get lost in this stuff, in this experience.

Josh: Yeah, one of the things that you’ve taught which I think is an important thing for folks who are listening to understand is that what this process does is allows you to name what’s going on in your life. Anybody who’s worked around me for a while knows I name everything. I name all our processes. We have the stage two hiring process. We have an objective review.

We have the sale ready company. All these things that we’ve named. There’s a reason behind that it makes it easy for you to understand what you’re about to go through. I think that understanding is four stages of transition and being the name it should help with giving you great comfort. That one, you’re not unique in this. Two, there are stages you’re going to go through and we can help you think about the right actions in the right stage. Again, Susan, you have a bunch of great tools for each of those stages. You want to talk a little bit about some of them that come to mind for you.

Susan: Yeah, there are some and they’re all personalized which is the interesting part. That’s why we have certified financial transition. It’s not just a computer program that you can do. You have to think about this person, but one of the things that we would do in the anticipation stage is we would determine what the business owner wants to make sure is protected, while they’re going through the building and then the sale of their business.

What’s at the core? What’s the driver, the purpose? What’s the why as Simon Sinek would say so we have a process of checking in with that? Then designing steps of action to achieve the goal, but also to protect what was most important. Another thing we do is work with people on what is their communication, and strong spot. What are their preferences? If they could create the most productive, comfortable way to meet and discuss these important topics, what would it be? Some people want to be short and sweet.

Give me the bullet points. Some people want to be very personal. Some people want a lot of information to digest before a meeting. Some people are pretty quiet as they go through meetings. That’s how they learn and they hate being interrupted. Some people never want to be told what to do. They want options and they want to understand that’s not you of course.

Josh: Literally, every business owner I’ve ever dealt with is a control freak as they need to be.

Susan: Yeah, well, that’s something that everyone who is working with you as a professional needs to know. Remember my need for control?

Josh: Yes.

Susan: Remember my need to be involved in this process. Remember that everything needs to be relevant. Cut the fluff, get me right to the point. They may have a non-business owner, spouse or partner who wants a lot of personal conversation. You may have two different ways of communicating if you look at it, you can blend them and make both comfortable. But understanding those personal preferences for, how you prepare for meetings, do meetings, and follow up with meetings.

How do you make your best decisions? How do you like to receive information? Do you want just a one-page overview? Do you want the whole?

We all have our own style. We socialize. We sort of accept the way it is. Many advisors do it their way. Their clients have to adjust to them. We think it’s the opposite. You ask a client what works best for them and then the advisor adjusts to that.

You find that meetings are shorter. They’re much more enjoyable. Implementation of ideas is much faster because it’s all relevant and it’s all done in a way that’s best for the client. Those are two quick tools. There’s a decision-making process and decision-free zone certain prioritize. There is managing the expectations of the client, the business owner, and other people in their life, maybe employees, and maybe family members. But seeing all of this in advance of the sale makes the sale better timed and the terms fit life, not just the money. It doesn’t mean you give up money for life.

It’s just you don’t have money outside of life as one component and life is over here. You blend the two. Those kinds of tools that we use in the anticipation stage, we use again in a passage. We use it in the ending stage. It becomes a sort of personal skill set, a way that they work with people that are important for them to talk to.

Josh: It becomes a decision-making process that you use in all areas of your life when you get right down to it.

Susan: Yeah, yeah.

Josh: Especially when you’re working on the why. Because the why has lots of components in it. Besides, why are we doing this? There’s also, what’s our purpose before doing it? What’s the outcome we’re trying to get to? How do we have an evidence procedure that there is an outcome that’s right for us and not just some silly feeling?

These are all things that are all part of that which are important. You mentioned something that I want to circle back on because it’s something I think that most business owners miss in the transition process. That’s their spouse. Could you talk a bit about why it’s important to have the spouse as an integral part of this conversation?

Susan: Well, I’ll avoid the obvious when they say, “Happy wife, happy life or happy husband and happy life.” That kind of thing. You want some harmony in the household and the relationship, but more importantly, those relationships can be nurtured. They can be so much stronger. It’s not just surviving. It’s that whole experience of evolving the relationship.

Doing this kind of work with partners, helps partners understand each other, and function to a much higher capacity. It kind of comes down to all that noise in the background and all those old feelings that pop up later. We’re not therapists. We’re not doing relationships, but so much of a relationship is anchored in money and in identity, which is a big part of a business owner’s life and the responsibilities that they take on. To have a way to talk about all of that with your chosen partner in life is powerful. Interestingly, we accomplish that through a financial planning relationship, but you can. Money is so powerful that you can affect and impact the relationship and the family. Over and over again, we see that.

Josh: Here’s something that I’ve learned about business transitions is that the spouse is going through the same four stages of transition as the business owner is, but there’s a big difference. The spouse’s four stages of transition are completely different than the business owners' because the spouse has different things to consider.

Specifically, what am I going to do with this jerk who’s hanging around the house all day? I’ve had many, many conversations with owners who are selling their businesses and their spouses, and the spouse will very timidly pipe up and say, “You know, I’m happy you’re going to sell your business, but you can’t hang around the house all day.”

Susan: That’s true. You know what we’ve seen is some of them have gotten part-time jobs or even full-time jobs for the first time in their life. They’ve been the CEO of the house and their spouses, the CEO of the business, and two CEOs in the same house don’t always work. That’s one option. You’re right. There are transitions and consider the fact that there are two.

You know, Josh there can be other things happening. Selling a business doesn’t mean that the rest of your life ends. There may be a change in health with family members. There may be an inheritance that comes. There may be a divorce in the middle of the sale of the business. Life is happening along with that.

These transitions, these big events, I would consider all those transition events, we could consider all of those overlapping transitions that can add to the complexity and the confusion, but if you can understand each one, you name it, as you say, and then you name where you are in it. You can understand the confusion and overwhelm and you can understand decision making differently.

Josh: One of the things I think train transitioners bring to the party is that if I were to ask a business owner, their spouse, what stage they’re in when it comes to transitions? They’re almost always going to tell me the wrong stage.

Susan: That’s right.

Josh: That’s not where they are. Having an outside transition is coaching you or as you say, which is my favorite term in the world, being a thinking partner while you’re going through this if you’re a thinking partner, they can say, “You know, I know that’s where you feel that you are, but from the outside, this is what it looks like to me.” I’ve had some really good conversations with people who once we’ve got everyone on the same page of where they were we moved a lot faster.

Susan: Yes, you will move faster. You’ll see that people understand each other and themselves better. They know that they’re not stuck in something that they don’t want to be. They just know that they’re not where they want to be yet and so you get movement rather than feeling of being stuck.

That’s why we say transition expertise matters. You use the term thinking partner and I like that term too. But a trained thinking partner is different than having a good friend that you talk to while you play golf, or something else. It’s someone who brings a different training and knowledge to the experience. We’re talking frequently about something that is less objective. It could be quite subjective.

People say, “Oh, that’s the soft stuff. That’s the nano or something like that.” What the neuropsych people tell us is that the personal side, the emotional side of the brain is the driver. They say 70% of decisions are made with the emotional brain and 30 with the rational side of the brain. We have developed processes in our culture. We like the objectivity. We like hard numbers. We like data and all that, but it’s that personal side that’s still driving the bus.

Josh: Susan, we have time for one short thing. I want to do a little pivot to this because this was something that just occurred to me a couple of days ago after I did the presentation for your group, which is people are not the only ones going through transitions. Companies go through transitions also. This is something that’s a brand new thought to me. I never thought about it a whole lot. I’m going to have to spend some time on it. Do you have any thoughts about that?

Susan: You did just bring this up to me today. I am thinking, quickly I say yes because I know that transitions are what drives all of what we have on this planet. Of course, it’s yes. How you would break it down? There wouldn’t be many transitions within businesses. We’re talking today with Coronavirus, changing patterns, and all.

That might be ending the way some businesses do aspects of their business and they may have to stop pull things back into place, and then enter an adjustment stage. That could happen over and over again. I don’t think you ever in this world, build a business and do the same thing for 25 years. It’s just not there yet or not there probably ever. It’s understanding when life circumstances, choices, whatever pivots your business in a new direction, you are in an ending stage.

It’s time to respond, not react, step back, understand what is happening, and what is most important, do some real clear thinking about what you want next and then start to keep your cognitive functionality high and make one good decision at a time.

Josh: That sounds like great advice. Susan, unfortunately, has to end it here. I’ve been a member of your tribe for a long time. I’m highly supportive of it. Please give us an ad for where we can find and if financial advisers are listening to this podcast today. You need to go to wherever Susan sent you, check it out and have a conversation. So Susan, where should they go?

Susan: Thank you, Josh. The easiest address is https://www.suddenmoney.com/. You’ll see on that website that you can find out information as a financial adviser on how to do our training, whether it’s the short training or the whole certification. There’s a range so go to that. The other thing you can do is you can download what we call the Transition Journal.

For you who are in the financial advisory business. It’s your primer. It’s your Cliff’s notes on how to do this work, for you who are not, who are living real life in your transitions. It’s a great self-guided through transitions, whether it’s personal or business or both. So https://www.suddenmoney.com/ and we’ll be listing all the different events coming up were rearranging just like all of it. We’re 20 years old. We’re rearranging how we deliver our training and making the training even deeper. We do that every year.

Josh: Cool. There’s something that might be of interest to you. Also, as we’ve been talking about, you go through stages of transition and change. As a business owner, I often tell people, you need to change your relationship to your business. I wrote this eBook years and years ago called Relationships and Roles and talks about the four roles that business owners can play in their business, and how they need to go from being a player to being the owner of the business.

From helping clients navigate decisions around their finances, to helping them feel that they are going to be okay emotionally, to navigating the stages of transition, our experiential program has you covered. Check out our training programs today.