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Forget the Stock Options—I’ll Take My Credenza

At some stage, every CEO must ask himself or herself: Is my long-term goal to sell the business at some point—or will I stay until they wheel me out in a box?

I stepped down as CEO of Paychex 14 years ago, but I still own a percentage of the company and I’m chairman of the board. The circumstances surrounding my retirement have surprised many business pundits, and they reflect my somewhat contrary philosophy about the corporate world. When I finally stepped down as CEO of Paychex, I didn’t have a golden parachute and I took no stock options, even though they were offered. My retirement package was my desk and my credenza, two items I treasured.

Harvard Business Review’s: “The CEO 100, 2019 Edition” lists the best-performing CEOs in the world. It reports that CEOs of the S&P 500 have an average tenure of a little over seven years, whereas those in the HBR list have held their position on average 15 years which it calls, “remarkable longevity.”

I was CEO of Paychex for 40 years which is almost unheard of, so did I stay too long? I don’t think so—running a public company puts a CEO under intense scrutiny and Wall Street is usually quick to oust CEOs once a company goes public. I suppose if I had a secret it was that I enjoyed working with Wall Street and I ran a company that enjoyed incredible revenue consistency. In addition, I never lost sight of my business, I led the company from the front. I was hands on; I’d walk around the building talking to staff, I’d visit the training classrooms, and I’d even carry out spot checks of individual branch’s expenses looking for anomalies. I knew my business and my business knew me.

The question is when and how do you retire? It’s all well and good building a successful company, but at some point you will want, or need, to liquidate your assets. You’ll want to get out with a chunk of hard-earned money or dividend-earning shares. Being company rich and cash poor is to have all the responsibility and none of the fun. Even if you enjoy running your business, you may decide it’s time to retire, or there is always the possibility you might become ill and need to liquidate your assets in a hurry. This, of course, is the worst position to be in if you expect to get a good price for your business.

When to step down is completely up to you; there will be dozens of factors to take into consideration, ranging from how you feel about walking away and the potential value and salability of your company, to the company’s future sustainability.

Whatever your situation, at some stage you will need to ask yourself: “Is my long-term goal selling the business at some point, or will I stay until they wheel me out in a box?” and “Do I want someone in my family to take over the business?” The key is to be honest with yourself.  Do you, from time to time, ask yourself, “Geez, is it time to sell? I wonder what I might get for the company”? If you do, then perhaps you should do some strategic planning.

One thing I can guarantee is that it’s never too early to start thinking about your exit strategy. Early planning can save a lot of headaches down the road. I admit I didn’t have an exit strategy from day one of Paychex, but I soon learned the necessity of planning for the day you want (or have to) step aside. In the end, I planned my exit strategy 40 years before I needed it by consolidating all my partners and franchisees into one firm. That gave me liquidity, which in my case turned out well.

However you exit your business, you will hopefully come out with some cash. The problem is that you become cash rich but have a large hole in your life where your business used to be. Success affects different people in different ways. I’ve seen it all. My advice is that this is not the time to immediately jump into something new. Take some time to take stock of your life and decide what you miss about owning your own business and what you are glad to leave behind. Several of my partners in Paychex decided to cut and run in the early days because they thought they could replicate their success in another industry. Some did okay, but others regret their decision to this day, and they check Paychex’s stock daily to see what they might have been worth had they stuck it out. That’s sad. “Never get ahead of yourself” is solid advice.

For my part, when I retired, I decided to invest in up-and-coming businesses where my expertise and experience might be useful. I currently work with 12 businesses, and they keep me busy enough and, I’d like to say, out of trouble, but hey—this is the world of business and there are no certainties.


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