5 Ways To Prepare Your Leaders For Success

There is no doubt that applied knowledge and targeted experience is one of the keys to success. When employees gain the knowledge and experience they need for higher level roles before they get into the position, they are better positioned to lead into the future. Giving employees early leadership experiences and opportunities ensures the sustainability and future success of your business. How can you prepare your leaders for more responsibility?

1. Let them learn on the job. This means allowing them to make mistakes, recover and learn from them. It means expecting them to address issues directly and come up with creative, effective solutions. This helps them learn to think like an executive.
2. Give them “fix-it” or “turnaround” jobs. A stretch assignment will force them to problem solve, communicate across organizational boundaries, overcome obstacles and build effective relationships. They will learn to become more persuasive, tough, and influential.
3. Have them build something from scratch – start up a new project, build a new team. This will teach them resourcefulness, initiative, and tap into their creativity. If it’s a part of their current role, they will have to learn how to prioritize what is most important.
4. Encourage ‘a day in the life’ where you have your leaders switch positions with a colleague in a very different role. Encourage them to go deeper in the organization to see firsthand the challenges your team faces with ineffective systems, poor hand-offs, difficult people, dysfunctional communications, etc.. This exercise will expose them to your business in a very different way.
5. Expose them to the financials so they understand how you make money, what are your most profitable products, who are your most profitable customers, where do you have losses. Help them understand the impact of decisions on the bottom line.

Giving employees and potential successors these kinds of experiences long before they need to step into an ownership or management position is an invaluable way to groom a successor. Giving up control can be difficult, but their transition to effective leadership will be much smoother with these kinds of experiences.

Making A Relationship Sale

We define a ‘Relationship Sale’ as a sale to a family member or key employee — someone you have a ‘relationship’ with in the business already. When planning your exit strategy, a ‘relationship sale’ to a family member or to a key employee can be easier, and perhaps more reassuring, than finding an outside buyer. But many business owners will need to finance the sale of the business, especially if their chosen successor does not have the financial means to cash you out of the business. If you suspect this may be case, keep reading to learn how to make your relationship sale a more successful one.

Start Now

Creating a successful relationship sale is a time consuming process; a lot of hard work and planning must go into a productive sale. Starting early will ensure that you will have the time to work out details and enhance your business while you are still in control. And if you encounter a few bumps in the road, which you will, it won’t throw the entire plan off course.

Know It’s Going to Take a Few Years.

A relationship sale to a key employee or capable family member takes time. The current business owner must be willing to commit to remain in control for between three and eight more years, preparing the business and the successor. If you do not have this time, you may need to explore other options.

Define What You Want Most From the Business.

Ask yourself what do you want to get out of your business once you have exited. Knowing what is important to you will make planning for your exit a lot easier. Do you need a certain amount of money to maintain your lifestyle? Do you want to exit by a certain date, or birthday? Do you want to define a family legacy? Do you want to create a sustainable business that stands the test of time? Knowing these things before the relationship sale is of the utmost importance.

Assess Options

Your exit plan will inevitably begin with consideration of all of your options. Some find it useful to write down each option and evaluate the business benefit, employee benefit and personal/owner benefit. With this objective view, you can map out your plan.

Share Your Exit Plan – Appropriately

When the time is right, you’ll want to share your plan -- not with anyone and everyone, but first with the critical people who need to be aligned to make it happen. Most owners are concerned that by sharing their plan, their best employees will flee. It’s possible they will, but if you have built a plan that demonstrates legitimate opportunities for growth and they can see themselves as a key piece of that plan, they probably won’t. Offering them golden handcuffs or other incentives may be wise, if they are truly key to your business.

Sharing it will take some flexibility away, but it is an absolutely essential step. You need the key people to know your exit plan and to take it seriously, and without a written plan it is harder to get that respect. You are already working with your buyer so having the option to show them your plan, gain their support and alignment to it, and to be able to discuss and edit your exit plan as time goes on is mutually beneficial. It makes the transfer smoother, giving you an advantage that an outside sale would not.

Grow the Value of Your Business

The more valuable your business is, the bigger profit you get once you sell it. Buyers will value (and of course pay more for) your business more if it has the potential to keep growing. Not every owner wants or needs the big payout. Increased business value can also position your capable family members or key employees for their own success and leave you with the pride of business legacy.

Groom Capable Key Employees or Family Who Desire Ownership

A team of leaders that can operate and run your business without you is highly valuable to any buyer. In a relationship sale, it is critical that the new owner be willing to invest in their business, personally and financially. Developing and grooming your team before you leave is crucial.

Ensure Your Buyer is Ready for New Role

Transferring ownership too soon or to an ill prepared employee or family member can be detrimental. The new owner must be prepared for his/her new role. Being a CEO/Owner requires a very different level of responsibility than a C-Suite role. The risks are far greater. If your buyer is not ready, be prepared to stay an extra few years to build their skills, experience, confidence and competence…. Or be prepared to step back into the business if it falters.

Expect to Finance the Sale of the Business

Make sure that your buyer realizes that they will have to invest real money to buy the business. Drawing out a financing plan will make it more likely that you get what you need and want out of the sale, and will give you confidence that the new owner is capable of paying you the full value of your business. Often in a relationship sale, owner financing is done through the cash flow in the business.

Keeping these factors in mind when preparing for a relationship sale will help you make a successful sale to a key employee or family member. Good luck!

Fundamentals of Exit Planning

Establishing a well thought out exit plan is crucial to the successful transfer of your business, without sacrificing all of the hard work and financial success you’ve gained over the years. It is an inevitable fact that all owners will leave their business someday. Preparing yourself, your company, and the new owner is essential to leaving behind a successful business that will continue to flourish in the future. Many business owners don’t know where to begin. Some business owners worry whether they will have enough money to last them through retirement, while others are concerned with the integrity of their business. Either way, having a strong exit plan before you are ready to leave the company will help ensure that the business will be able to go on successfully without you.

A few key steps are essential a well thought out exit plan. Begin by asking yourself the following questions: (possible resources are in parentheses)

• Do you or will you have enough money to live comfortably? (financial advisor)
• How much is your business worth right now? (business valuation expert)
• Have you started taking steps to increase the value of your company? (Investment banker and The Leadership & Legacy Group)
• Do you plan on staying involved or walking away without responsibilities? (you)
• Are you planning to sell to an inside or outside buyer? (you and broker/investment banker)
• Do you have a business continuity plan should something happen to you? (you and The Leadership & Legacy Group)
• Can your management team run this business without you? (The Leadership & Legacy Group)
• Do you know what you plan to do post-business? (The Leadership & Legacy Group)

Honestly answering these questions, either by yourself or with the right mix of resources, will help you determine the necessary steps it will take to make a successful exit plan.

Important Considerations For Successful Exit Planning

Timeline: There is no better time than right now to start planning. But if you are looking for a quick exit, you may need to rethink. Exiting quickly will likely make achieving your goals more difficult. Building buyer value into the business before you actually decide to exit the business will likely increase your financial return.

Planning: It is smart to hire a reputable business advisor, broker, or investment banker to assist with the transition. There are so many complicated tax laws, insurance and estate planning vehicles and more, that trying to do everything yourself could seriously hurt your end of the sale.

Flexibility: Your exit plan must be flexible enough to navigate a changing economy, industry changes, staffing changes, and more. Most owners want to sell their business for a good price, or pass it down to a willing and responsible heir or both! They don’t want to liquidate the company.

The Plan

Your exit plan should be a combination of personal, financial, and business goals and objectives that create the outcome you most want. It is important to look at the following areas to ensure a successful exit plan:

• Your Business Plan – focus on the future even if you’re not going to be a part of that future business. Making both your company and your key employees more valuable is a major asset to the sale of your business.
• Your Exit Plan – it is so important to have a written continuity plan in case something should suddenly happen to you. Also, prepping your key employees for your inevitable exit helps make the transition much smoother.
• Your Financial Plan – know how much your business is worth and how much you will need to live off of after you exit.
• Your Estate Plan – make sure to look at all aspects of your wealth, not just your business. Protect the wealth that you depend on by being proactive about the assets you have other than your company before the transition.
• Your Team Planning – developing your team to prepare them to run your company profitably and sustainably will give you the peace of mind that your company will be run successfully after your exit.

As unsettling as exiting the business that you have poured your heart and soul into for many years can be, having the right plan to be able to successfully exit will not only make you feel better, it is necessary for the future of your business. Using the tips discussed in this post will help you organize your ideas about exiting, and get you one step closer to the successful exit you have dreamed of.