In today’s video, I talk about what I call the winddown strategy. This is where you don’t even try to sell your business. Instead, you keep the 20% of your book of business that you love and make you a lot of money. You then find a home for the other 80% of your business, even if it means just giving this business away.
Your business that is……
One of the big questions every business owner who is doing an internal transition must answer is when do I turn the reins over. You certainly don’t want to do this too early and if you do it too late there’s a good chance the people you want to run the business will have left.
This is something I went through with my father when I bought his business and merged it into mine.
Don’t make this a conflict ridden process.
I truly hope the answer to that question is a rousing no! Not that it’s a bad thing to work for others, it’s just that you’ve spent years working for yourself.
You’ve spent all of that time giving orders and now you’re considering taking orders from someone else? To me that surely sounds like a recipe for disaster.
I recently read a book by Meg Jay titled The Defining Decade. In this book Ms. Jay talks about how it’s fine to find yourself in your twenties and at the same time you don’t want to waste that decade.
I know that I spend way too much time doing and too little time preparing. Too often I just start doing stuff before even thinking about what I want to do, much less actually preparing for it.
I was recently at John Mauldin’s Strategic Investment Conference. One of the speakers was Neil Howe, a demographer who pays lots of attention to what’s going on in the country. He mentioned during his talk that there are four million jobs openings right now.
Who would have thought that? All we hear in the media is about all of the people who can’t find work. Don’t you think it might be a good idea to spend at least a little time talking about this opportunity……or, is it a problem?
You’re probably a lousy employee.
If you’ve run your company for twenty years or more you’re not used to taking orders from a boss. When the new owners tells you what to do you’re going to balk at orders being given to you. You might even just plainly do what you want and ignore the requests from the new owner.
If your buyer has bought several businesses, they know the drill. They’ll try to work with you for a period of time. After that they’ll just pay you for the rest of your employment contract and be glad that you’re not around anymore.
Your key people know how to take orders.
On the other hand, your key people have been working for you for years. They’re used to having you tell them what to do. A new boss will either do it more nicely or not. That’s not the point. Your managers are used to being told what to do.
Most likely your managers will be more compliant when it comes to requests from the new owner. They might not even ask why which is what you’re likely to do. It just makes it easier for a new owner to integrate your company into their operations.
If you’ve done your job well, you are out of day to day operations.
A business that’s highly saleable will be one that doesn’t depend on you for day-to-day operations. I’m hoping that you’ve done a good job of making yourself into a passive owner. If you have, then you’ve become irrelevant to the operations of your company. This makes your company more valuable and makes you less important in the eyes of a new owner. Both of these are good things.
Change will come more easily for your employees.
Many business owners I know are more than a little stubborn. This is what has made you successful. When someone asks you to change what you’re doing, you often push back. Change for change's sake just doesn’t make any sense to you.
On the other hand, you’ve asked your employees to change how they do things many times. It’s not an unusual event and if they don’t believe in the change, they’re likely to do it. The boss told them and that’s the way it is.
Your managers will run the new companies systems.
When your company has a new owner they will almost surely have new systems. Someone is going to have to change your old systems over to the new systems. An experienced buyer will know you’re not the one for this job. They know your managers are.
I hope you’ve gotten the idea that becoming a passive owner is important to build enterprise value. An effect of this is you know less about internal operations than you used to know. If you let the new owner off easy and gracefully exit your business you’ll do both of you a real service. Most of the time they want to get on with running your company. Hopefully you’ll have come up with a second act in your life that you’ll be happy with.
Let the new owner have your company. You do something else. You’ll both be much happier.
We’ve put together a case study on how to become a passive owner. It’s a step you’re going to want to take as you move towards a succession strategy in your business. I think being a passive owner is one of the two things a business needs for a successful sale, or at least in Vermont it does.
Many founders of businesses dream of the day they can transition the business to their children. There is much in the literature that talks about the estate planning issues. Little is there that talks about what it takes to have a successful business that is transitioned.
I didn’t, and when I learned I said to myself, “this just makes so much sense…why didn’t I think of it?”
A mentor board is an organized group of people that helps younger generation members in a business learn necessary skills to run the business. This board is different from a family council, business board of directors, or board of advisors. Their only purpose is to get the next generation ready to take over the business.