When is it time to hang up your boots?

This month my newsletter is going to focus on hanging up your boots!

Knowing when to ‘quit’ is a critical decision, not just for elite athletes like the indomitable Jimmy Anderson, or even politicians, but for business owners and entrepreneurs too. At what point do you step aside and exit your business? Even in multi-generational family businesses it’s a question that has to be resolved; I am sure many of us have worked with or even been part of a family business where the original founder still ‘meddles’ in the day-to-day running of the company, often with catastrophic results!

So, at some point you have to begin thinking about what the end game is and, as with all thing business oriented, having a clearly defined plan and roadmap is critical to success, both emotionally and financially.

Let’s explore some of the options and things to consider below:

Succession (this could include a MBO or EOT)

When I say the word ‘succession’ it’s hard not to think of the brilliant television show of the same name and to reflect on the lessons that can be learned from this. Done badly, with personal agendas and jostling for power coming to the fore, the inevitable results will be fractious and often fatal. For many family-owned businesses handing over the reins to another family member is often considered the only option, but it may not always be the best one!

Think back to when you started your business and the journey it went on and I can almost guarantee that much of that success was down to the drive, commitment and passion of the original founder(s), plus a healthy dose of employing brilliant and experienced people who were equally invested in that growth journey. It’s not always a given that other family members will share those values, especially when they are parachuted in. Robust and strategic succession planning to successfully exit a business is key and sometimes that means employing ‘outsiders’ to run the business and make the decisions for you. They will bring new perspectives and experience from other industry sectors that can have a significant and positive impact on revenue, profits, culture and purpose.

Trade Sale

Selling your business should be the pinnacle of your success and a reward for all your years of hard work. It has to be planned properly and whilst there is no hard and fast rule, most business transfer experts agree it generally requires a number of years if you are to realise full value. You’ll need to ‘think like a buyer’ and give yourself time and control to put in place the necessary steps that make your business an attractive proposition, plus contingency plans for any unexpected circumstances that may threaten the sale of your business (remember COVID!).

Whether you choose to exit your business via a trade sale, EOT, MBO or pass it down through the family or to hand over the day to day leading of the business to a hired CEO, it's vital to plan ahead. Some of the things you’ll need to consider include:

• Retirement planning – what will your life look like when you’ve sold your business? What dreams and goals to you still want to achieve? How much cash will you need? What will you do next?
• Succession planning – Once you are out of the equation who is left? Have you built a high-performing leadership team and management team who can run the business without you being there? Is there a clear vision and revenue goals in place that everyone understands and is delivering on? If you plan to sell it’s usually a good idea to gradually pass over control and decision making; this will allow you to focus on the impending sale rather than day-to-day operational stuff.
• Financial planning – seek personal financial advice from a wealth management expert. Company restructuring may be required to increase the efficiency of the business, trim outgoings, and boost cash flow. Tax planning is also essential when you structure the sale of the business.
• Build value – give yourself time to build value in the business by having a clear roadmap and strategy for growth; this will allow you to generate a higher sale value as buyers will be willing to pay more for a business that has a track record of year-on-year growth and profitability. Set clear and ambitious targets for record turnover, new markets, returning customers, new products and strategic people planning etc.
• Tie up all the loose ends – make sure all your accounting records and cashflow forecasts are up-to-date and you are familiar with them. Collect outstanding debts and settle any disputes with customers, suppliers and employees. It may sound a bit trite but selling a business is also a bit like selling your house: if it doesn’t look good nobody will want to buy it, so make sure the business premises are up to standard, that you have an excellent H&S record and that your workforce are highly engaged and motivated, demonstrated by low staff turnover, positive reviews on Glassdoor and great employee engagement survey results. The buyer will be very interested in hearing what your employees have to say about what it is like to work there!

Making the decision to hang up your boots is probably one of the biggest business decisions you will ever make, so it pays to get it right! At People Puzzles we have a team of amazing People Directors who have all helped business owners to scale and grow and achieve their dreams. We often refer to them as ‘growth agents’. If you would like to learn more about how one of our team can help you transition away from your business and make your dreams come true, please feel free to contact me directly. We also have a number of wonderful case studies from clients we have worked with over the years.

Thanks for reading and enjoy the rest of your summer.