A company President asks us how to start succession planning:
I started my own business 9 years ago, we’ve grown and become quite an established and successful player in our niche market. I’m very proud of what my team and I have achieved; it’s been my life for the past 9 years. But recently I’m feeling like this incredible business I built is almost growing beyond my capabilities. With all the advances in technology and e-commerce, I find myself increasingly out of my depth. This is the first company I’ve ever owned and operated, it’s ‘my baby’ in many ways. It’s hard to let go, I don’t want it to lose its ‘essence’ if I sell it; but I also don’t want to be the reason it falls behind the times. So my question is – how do I develop an exit plan? What does succession planning even mean for business owner like me!?
We threw this one over to our own President and Co-Founder – Cam Macmillan. Cam has a real passion for developing human capital within businesses so they can sustain future growth –
I deal with a great deal of clients every week; a very diverse group that includes the big publicly traded organizations, not-for-profits and owner-managed private companies. I am hearing more and more the need for clear succession planning. There are a number of reasons for succession planning to be so topical; time to retire, time to try something new, financial challenges or simply wanting to cash in following a huge struggle to grow the company. I also see owners who, like you, have grown a successful operation that outgrows their specific skill set and they recognize it is time to sell.
It is so important to have a clear cut exit strategy and keep developing this strategy as you grow your business. Plan this strategy with your team of official and unofficial advisors. Take a long hard look at your business and determine where you have strength and what needs some work.
Where can you build value in your company?
Key areas include:
- Sales and Marketing – have you defined your target market, trained your sales team and executed
- Brand – how strong is your brand and how can you make it stronger
- Operations – are you running a tight team with a combination of efficiency, use of new technology and a focus on service
- Market Share
- Barriers to Entry – how easy or difficult is it to get into your industry
- Management Team – have you made yourself somewhat redundant so that if you were to sell, the company would run well without you.
This can be a tough one for an owner-manager who has tied heart and soul to starting and growing a company! But these areas are key when a buyer comes looking. If you have a clear understanding of each area it will ease your succession efforts.
An expert in the field, John Carvahlo of StoneOak Capital, maintains some of the keys to a successful divestiture of your company needs to show: a diverse customer base, recurring revenue, runway for growth, how well you can forecast growth (visibility in private equity terms) and how scalable is your business. The more work you put into these areas will certainly add value to your company. And for your team it will make for a very focused effort which can only improve your day to day operations and ideally profitability.
It is so important to start now with a solid succession plan. Regardless of whether you want to exit your business in months or years, excellent preparation will make the transition easier and more profitable. There are a number of top tier advisors who can work with you to manage the process. And it can be a very rewarding and stimulating exercise. Often you will streamline your existing operations to realize some immediate impact. Let me know if you would like to learn more on this very important topic, love to help!
ABOUT CAM MACMILLAN
Cam has spent the last thirteen years in the recruitment industry, becoming one of the experts in his field and part of the management team when his last firm was named one of Canada’s 50 Best Managed Companies. As President and Co-Founder of The Headhunters, Cam enjoys developing businesses across Western Canada as a true recruitment partner. Cam specializes in recruiting and placing senior level operations and accounting and finance professionals. He works in any industry sector and with a combination of owner-manager, and large publicly traded companies. Contact Cam at firstname.lastname@example.org