In a consecutive number of weeks, three business owners presented the same challenge to us: I want to stop working in my business, but I want to retain my ownership.
The three situations were different, but all shared the common thread of distinguishing between an owner’s time spent in the business from the money they have as a virtue of their ownership. For one owner it was desirable to step away from the business to get married, travel and start a family; for another it was having two businesses that created the need to step away from one to focus on the other; and the third owner is planning to row across the Atlantic, a challenge that will take months to train for and accomplish. In all cases they want the option to retain their ownership and have the potential to get involved again in the future.
How can a conversation about exit strategies help?
Firstly, exit planning isn’t necessarily about selling your business. It is as much about planning to reduce the business’s dependence on you i.e. getting your time back even if you retain your ownership. That may lead to an ownership transfer at some point in the future but that is a decision that can be made later.
Secondly, developing an exit strategy is as much about you and your personal journey as it is about business plans and targets. An effectively executed exit plan focusses time on creating the shift in an owner’s role. This involves practical steps such as building up the management team and delegation, and also the emotional journey of a changing roles so that you’re no longer the key dependency that makes the business tick.
The conversations with the three owners followed a similar flow. From the outset, it’s important to clarify personal objectives, for example by when do you need to be free of day-to-day to involvement, how long do you expect ‘to be away’ and what do you envisage being in place should you decide to return?
Then we explore the current situation in the business. For example, what decisions and dependencies sit with the owner, is there a natural ‘number two’, is there financial headroom to bring in a senior person to ‘cover’ for the owner, is there time to improve processes and management capability?
The next step in the conversations was to explore different options, all with the objective of allowing the owner to take time away but without selling the business. As it transpired the three owners tended towards different solutions, which was entirely right given the different businesses and personal goals they have.
For one the focus was on process improvements, increasing the responsibilities of the management team and working on ‘letting go’. The owner with two businesses concluded that with some help they could adopt a light touch approach to one business whilst committing the bulk of time to the business that needs attention. The third owner is exploring potential partnerships with a select few other business owners who might be suitable partners – in essence this is a growth and development strategy that secures the business (and value for the owner) within a larger entity.
In each case exit planning advice has helped clarify the options and understand the relative merits of each option. We provide the help and guidance to formulate and support the chosen route – and we can help you too.
(Photo by Nighthawk Shoots on Unsplash)