So, you’ve built a successful business. You have a terrific team of people who have helped you along the way. That’s great for now. But what happens down the road when you decide to step away? Will the business go away as well, with all of the commensurate damage that can do for both your team and your community?
The numbers tell the tale of what is really happening out there in the business world in this regard:
• 66% of companies fold when the current leadership leaves.
• 80% of business owners intend to sell the firm to family members or employees, but only 13% complete the transaction.
• 20% of business owners sell to a third party.
How do you transfer the institutional knowledge and business savvy to the next team so they have the ability to carry on? Here are 5 key elements that can help ensure your legacy and hard work continue to live on after you sell.
1. Have authentic conversations. That is more than just cultural window dressing. Everyone in the company must be on the same side of the table when facing challenges or addressing the future of the company.
“The worst place to store business knowledge is in your head. You must create structures that allow for knowledge transfer.”
2. Identify your leadership team bench. Within your company right now, there is leadership latent within key employees. You must create an environment where they demonstrate a will and ability to lead. Have a culture that makes them comfortable self-selecting into a leadership role. But don’t stop there. Have systems in place that help them do just that.
3. Transfer knowledge. The worst place to store business knowledge is in your head. You must create structures that allow for knowledge transfer.
4. Encourage innovation, not guardianship. A successful business will remain successful until something changes. And things always change. So you must build in leadership that can manage change.
5. Trust with confidence. Trusting with confidence happens when people start acting like (and becoming) real owners. For example, they should learn that there is a big difference between signing the back of the paycheck and signing the front of the paycheck. When you are an employee you get paid every two weeks. When you are an owner, you have to figure out what you need to do in advance so everyone has a paycheck in two weeks. Being an owner means that you have a responsibility not just for your employees, but to all their families as well. It’s a big change.
Lastly, but certainly not least, future leaders must also understand that private business ownership is an all‐in family proposition. It is a commitment not just for the leader, but for the spouse. Making decisions like this one have the potential to create tension in the home life if not handled transparently. Shared fate gave us the understanding and the structure to allow families of owners to learn what ownership really means. And since we were all‐for‐one, one‐for‐all, they could learn from the mistakes the previous owners had made as well.
It’s never too early to start planning your exit. I can tell you from firsthand experience, both in my own organization and those I have worked with through the years, your team, your customers and your community will thank you. And you’ll be able to walk away knowing that everything you worked for is in good hands.