LEADERSHIP STRATEGY: SURVIVING WHEN THE COMPANY IS SOLD
preparing for a transfer of ownership
WHAT”S YOUR ENDGAME? Unfortunately, few business owners have an answer to this important question. Many consider themselves too busy to even think about the options. Rest assured, every owner’s game will end. Without adequate preparation, everybody will be left vulnerable.
Will they sell the business, leave it to successors, or do they intend to keep performing a daily grind until they die—leaving their family and the government to sort things out?
When transfer time arrives, what will their business be worth? By ignoring end-game options they are acting like they own a job—not the company. Potential investors or successors will have little interest in acquiring their job. SMBs shouldn’t wait until it’s too late—they should start preparing for a transfer of the business now.
Preparing for the inevitable transfer of a company’s wealth & wisdom and being profitable today should be flip sides of the same coin. You’ve always taken care of business but is it structured to take care of you in the future?
In a world that is becoming fiercely competitive, continuing to operate as the company always has, will cause lost market share, and diminished profits—at transfer time it will threaten corporate survival. To prosper in what is being called the “shift-age”, companies must continuously improve. An employee centered approach that generates corporate energy, eliminates waste and rework, and fosters innovation is the best assurance of corporate survival.
Businesses that are overly dependent on their CEO or other individuals are typically less profitable, and hold little appeal to successors or potential buyers. Rather than transferring equitably, they run the risk of dissolving at transfer time.
Facts to ponder:
70% of small to midsize companies will change hands during the next decade. 66% of these will not transfer to the next generation. Companies that transfer equitably, will have a management system in place (as opposed to managing by the seat of their pants).
Radically shifting markets, a plethora of price challenging products, ever changing technology, and the unrelenting hand of time are making aging SMB owners vulnerable. For many, this is a new and uncomfortable mindset. Fiercely independent, hard working, and resilient, a significant number are reluctant to consider life without their business. Many SMB baby-boomer owners have always been at the center of operations and can’t imagine their life’s work surviving without them—all too often, this is a sad reality.
The largest wealth transfer in history is about to occur. SMB owners who continue managing by instinct and personal authority, will find their life’s work bypassed by potential buyers or the next generation of family members. Buyers aren’t interested when operating details exist largely in the heads of aging owners—and, a significant number of the next generation want no part of their parent’s life style. There will be a glut of SMBs for sale over the next ten years. Only those with a strong management team, disciplined processes, and the capacity to operate without the day to day involvement of the owner/founder will survive
7 Steps to secure corporate viability at transfer time:
- Replace profit-inhibiting industrial-age habits
- Eliminate waste and rework with a continuous improvement system
- Make leadership everybody’s business (generate corporate energy)
- Meet the needs of employees, suppliers, strategic alliances, and equity/debt holders
- Minimize the need for personal authority by introducing process discipline
- Transform firefighters into process-savvy team players
- Align everybody in support of the customer’ total experience
This post sponsored by The Baton Management System