By Don Ray, Portfolio Reinsurance
Planning your succession (exit) strategy is an endeavor requiring forethought, wisdom, transition time and intestinal fortitude. Let’s face it; an exit strategy is something many business owners would rather pretend will just figure itself out since it forces you to address emotional issues such as:
- Do I have a capable successor?
- Is he/she ready, am I ready to pull back, when (if ever) should I give up control?
- Will I remain active full time or part time?
These questions can create a great deal of tension and discomfort for you, but the earlier you address them the less overwhelming they become. Preparing for a successful transition takes good, old-fashioned time to be sure. But after your departure; the business can continue to provide for you, your family, employees, and community.
Do you understand the different exit strategies, both the pros and cons? Have you identified what strategy will work best for you, your business, and family? Your exit strategy should identify compatible alternatives. It should include steps to gain personal financial capability to be independent of the business. Finally you must decide if you have what it takes to let go of the reigns and allow managers, successors, and key personnel take over the business.
Your business is a pivotal provider for your family, employees, and community. By being ever alert in these challenging times you will be able to take maximum advantage of the opportunities that exist and continue to be a thriving business through many generations.
Long-term strategic positive thinking could come across as arrogant or out of touch with current reality. Fact is, those who aggressively addressing the core fundamentals of business success are taking advantage of missed opportunities and will continue to gain market share, build business value and develop a long term sustainable operating culture.
I’ve seen real life stories that illuminate mistakes made, and consequences and problems overcome in achieving business goals. Here is what I believe are the key factors in meeting your business and succession goals:
- Understand the 10 factors (listed in an earlier article) that create a resilient, sustainable and producing operating culture.
- Understand how your attitude, motivation, and perspective impact the future success of your business. As the dealer and the leader of your business only you can set the tone both for family and non-family members.
- Identify and maximize the strengths of key management in your organization. Is a family member your successor? If so, which one? If not, who? If you have no one capable should you consider selling the business while you are still in charge?
- Understand the difference between equitable and identical distribution of assets and the impact it can have on your finances and intra-family dynamics. Develop a plan that sets your family up for success…not stress. Identical distribution of assets is usually not the wisest avenue to take.
- Overcome generational and communication differences – Business pressure affecting relationships? Oftentimes an intermediary is needed to bridge the communication gaps within a family. Don’t be too proud, embarrassed or afraid to seek outside help. You are not the only one with this need. In fact you would be in the majority.
- Capitalize on current economic events to develop a training program for successors that will be supportive of their learning needs, are beneficial to business operations, and precludes entitlement attitudes. Consider 20 Groups, NADA and/or Jeff Sacks & Associates training.
- Document expectations and measures of accountability for employed children and mentoring managers. Do you have written and signed job expectations/descriptions? Do your pay plans reinforce your expectations?
- Understand options available for retaining key managers through the use of golden handcuffs to help bridge the gap for your successors. An example of golden handcuffs would include deferred compensation plans with vesting provisions.
- Develop an effective exit strategy that will optimize finances needed for retirement and that will support business performance goals while maintaining family harmony. This is easier said than done and as mentioned before often requires outside help.
If you have a desire to understand the critical issues for developing a compatible and effective exit strategy, there are tools and resources available to help you work through the business fundamentals and strategize for increased market share, increased business value, and long-term sustainable success. Now is the time while opportunities are many.
Don E. Ray works at Portfolio…THE Reinsurance Company for Auto Dealers. He can be reached at 917-359-5128 or dray38138@gmail.com
