In almost all exit scenarios the capability of your management team will play a part in how well you achieve your objectives. Apart from a situation where you are forced, or decide, to close the business an ownership transfer, in whole or part, will be influenced by the team you have built.
An article in The Economist* this week bemoans the lack of business management capability in Britain and highlights this shortfall as a material inhibitor of growth for the country. Citing the Chartered Management Institute and separately the World Management Survey, a lack of training and professionalism in management is seen as a drag on business success. Furthermore, the relatively high incidence of family firms being passed from one family member to another (in UK compared with other advanced countries) is another symptom of sluggish growth.
Are you contributing to this situation in the way you run your business? You may be less concerned about your impact on Britain’s overall growth, but the same factors may be materially harming the outcome from your eventual business exit.
We have written previously about the value of your management team in allowing you to delegate and step back – so making your business less dependent on you – and that team’s influence on the success of a sale, its value and the conditions associated with payments to you.
If your exit is likely to be through an internal sale or transfer – for example a management buy-out, establishing an employee ownership trust or a transfer to a family member – it is tempting to see this as an easier option than putting your business on the market. You know the people, they know the business, you’ve seen them in action and time is often on your side to agree and execute the transfer. However, this apparently easier option may also incline you to see the positives and overlook limitations.
This is one of the issues with businesses being transferred between family members. Mum and Dad set up the business and pass it on to daughter and son. Great in principle but if the future owners haven’t had the training, experience and development as business owners there is a significant risk of the business underperforming. The same is true of a transfer to a management team but without the potential ‘blind spot’ that family ties can introduce.
Needless to say, the corollary of this is the importance of training and development of your management team. It goes without saying that you would invest in them to help them be more productive and to reach their potential in the roles they currently perform. But what about training and development for future leadership and possibly business ownership? This doesn’t necessarily mean funding MBAs for everyone, although in some cases that will be appropriate, but it does mean supporting their development for a role they are not yet doing but aspire to reach.
It’s not all about finding money for ‘training courses’, a lot of their development can come through the opportunities you provide, the approach you take to their development and an open approach to the future of your business. This is important whatever the make-up of your team and perhaps even more so if you have aspirant family members wishing to take on the mantle of business ownership.
You may not be in a position single-handedly to fix Britain’s growth problems but you can do yourself a big favour by investing in your team to build a better business and give yourself a better exit plan. And to do that, investing in an adviser will provide considerable benefits; contact us to find out how.
Source: The Economist 28 January 2023
(Photo by Francois Olwage on Unsplash)