Exiting your businesses is inherently emotional. You became an entrepreneur to create more freedom for yourself and your family. But as the business grows, business owners often find themselves with less freedom and less choice, bound by the demands of the business they helped create.
Simultaneously we feel a deep commitment and connection to our companies, primarily because we have invested so much of ourselves into our businesses. Deciding when to exit is often hard enough, but knowing how to execute your departure in the best way for everyone can be incredibly challenging.
When my partner and I sold our business a few years ago, it was a learning experience to say the least. We were forced to pick up every rock of our business and look in all the dark places. Areas that we had neglected, we had to improve on in preparation of the sale.
To help us with the process, we took the time to build a great advisory team made up of legal, financial and organizational experts. And while readying the organization was a complex undertaking, it improved the health and the value of the business and helped us command a higher price.
Looking back, I wish we had started the process sooner.
But what if you are considering handing off to a successor rather than outright selling the business? You still need to perform organizational readiness work, and the sooner that starts, the better.
Here are some things to think through in preparing your company for such a transition.
1. What are your long-term goals both personally and for the business?
Simply thinking through where you are trying to go can be very helpful in establishing a timeline and getting an idea of the work that is needed to get there.
2. Who are the stakeholders?
How and when should they be informed of your plans. How can you prepare them in the best possible way for your exit from the organization? How crucial is it that they accept your successor?
3. Develop a strong advisory team.
Most times, you will need a financial strategist, an attorney and an organizational consultant, at a minimum, to help you develop and implement an exit strategy. Look for people versed in succession and transition planning as well as people with a solid knowledge of change management.
4. Develop a strategic plan.
If you currently aren’t running your company with a strategic plan, now is the time to do it. When exiting a company well, there are a lot of moving parts. You’ll need a system for monitoring your goals and guiding you towards them.
5. Do an Organizational Gap Analysis.
Now is the time to get clear on the challenges for your organization, as well as your strengths.
Map out how to strengthen these areas between now and the time you plan to exit. Look across your organization.
Where are there weak spots? Is it with critical positions? How about process? Is there an ongoing issue around client retention that needs to be addressed?
Financially, is the organization performing where you want it to be?
Don’t just look at financial factors either. Improving your company culture is one of the best ways to increase and drive value.
6. Identify criteria for your successor.
If you are planning on handing the company off to someone else, what skills and characteristics does this person need to have? What will the company need moving forward?
It’s important to look at this as a “windshield” exercise as opposed to a “rearview mirror” exercise.
Your organization will change after you leave. But you can certainly strongly influence where it is headed by putting the right person at the helm.
Even if you have identified a successor, it’s a wise exercise to hold up your criteria to that individual. We can easily have blind spots in this area. It may be worth double-checking your assessment of your candidate choice with someone who will talk straight with you and whose opinions you can trust, such as an executive coach or other trusted advisor.
7. Prepare your successor.
Even if you find someone who matches your criteria for a successor quite well, they still need to be adequately prepared.
This is one of the most common reasons successor transitions fail. Not only do you need to ensure that your successor has the skillset and character to run your organization, but they also must have the knowledge to do so. Begin transferring the information they will need as soon as possible.
8. Manage the transition.
Stay focused as you enter the final lap of the transition. Now is the time to really hone in on the needs of the organization.
Do everything you can to prepare people for the change. How you choose to communicate the transition and the facts around it can be critical to how well the organization accepts and adapts to your exit and to the new leader.
Remember that you are working with multiple people whom all have different personalities and behavioral styles. Recognizing that, especially during this transition, and tailoring your messaging to each of those styles can significantly increase buy-in throughout the organization.
In closing, I’ll circle back around to my first suggestion. Ultimately you need to be clear about what you want for your company and yourself.
What is really most important to you?
Entrepreneurship is not the easiest path. But letting go of the organization that you’ve dumped blood, sweat and tears into can feel impossible.
You likely entered into entrepreneurship with a goal of having more control and choice over how you spend your time. Preparing your organization so that it can thrive and provide for you in whatever capacity you choose after you’ve moved on is one of the best ways for you to create more opportunity and choice for your future self.