If you are looking to sell your company in the future, I would seriously recommend you consider the implications if your business is heavily dependent on you.
Many advisers will say it doesn’t matter. You can work with the new owner for a period and get through this, put in measures to compensate, develop staff and then move out. This is true. But it can be a barrier that makes some potential buyers think twice and, so should you.
Let me ask you a couple of questions:
- How will you feel about working for someone again, producing monthly reports for them and answering for your lack of sales to the new board? Chances are you didn’t create your business to end up asking people you hardly know whether you can do X or Y.
- Are you happy with a significant amount of the value someone pays for your business being paid perhaps 12 to 24 months after the sale and, subject to performance or other conditions? Ideally, you want to sell and move on, not worry about whether you’ll have to hand some of that hard-earned cash back a little further down the line.
It doesn’t mean you can’t sell your business if it’s dependent on you, and I know owners who have been in this this position and have either had no choice or had just had enough and were prepared to take the risk and go to market. Unfortunately, many admitted they could have done a better and less stressful deal had they been more prepared and not rushed it. Others were back to the drawing board because they failed to sell.
Here are 5 things you can do to reduce the reliance on you as the owner and, hopefully, avoid the complications above:
1. Have a succession plan
This could be highlighting someone from within the business, or recruiting externally, and coaching and supporting them to fill your shoes.
2. Make yourself redundant
Some owners struggle with this as they prefer to be hands on or care too deeply about the company they have built from the ground up. If you are looking to sell your business, however, you need to essentially get hands off. Empower others to do it. Now is the time to let go.
3. Introduce key performance indicators (KPI’s).
measured usually gets done. To make a success of this you should only measure what is really important. Potential buyers can then latch onto these as part of the road map for moving the company forward without you.
4. Look after your Key Staff
Incentivise high performing and essential staff to stay with your business and begin handing over key customer relationships to them.
5. Document the key positions in your business.
This will make it much easier to recruit and train your team when you need to, even if you aren’t considering selling. Most importantly they, and potential buyers, will know what is required of them when you are not around.
Having a business that is not dependent on you is good for both sides. Buyers don’t have to worry about upsetting or demeaning the original owner and you can confidently hand over your company with less fear. For many owners, this can be a difficult thing to balance and get right. When you have put your heart and soul into developing a company, it’s difficult to let go of the reins and give over control to someone else.
The truth is, if you are planning to sell your business in the future, you need to ensure that it can operate without you. It will facilitate the process of selling and make sure you get a broader range of buyers who know they can take over without having to depend on your extensive experience and iron control. It may also save you money in the long run because your business is fit to change hands and the appropriate staff are all in the right place to make the buyout a success.
Every company is different; however, the starting point is understanding where you currently are, and where you need to be. Even if you are a few years away from selling, seek advice now from a reputable adviser who can guide you in implementing the keys above. It won’t take as long as you think and will make a significant positive impact on the final deal and terms you achieve.