Many think of Succession as a strategy if you plan to keep your company, i.e., who will run my company after I retire?
Succession is also an important element of your strategy when preparing to SELL a company. Look at your scenario as the buyer will see it. “Who’s going to run this company after we buy it?” If you, as the owner and CEO plan to stay on as CEO or President long term, then that will work for most buyers. However, if you want to leave upon, or soon after, the sale, you need a credible plan in place. A strategy of “It is up to the buyer to replace me”, will probably turn many buyers away and certainly drop your value in the eyes of buyers. This strategy will significantly lower the number of buyers you may attract to buy the company and those that are willing to put their own person in place will know your options are limited and lower their offer.
A better strategy is to ask yourself,
- Do I have a #2 that wants to and can step into my shoes?
- Can I demonstrate that he/she is capable?
- Can I demonstrate that the company can move forward without me?
If the answers to all are yes, then you might consider promoting that person to President as you prepare the company for sale. If the answers are no, then a couple of options might be your Plan B:
- Decide to stay on long enough to help the buyer find, hire and prove out a new person to lead the company. This is usually a one to two-year commitment.
- If you have time before you go to market, you might consider looking outside the company and hire a credible leader to fill your shoes. You will need time to hire and assimilate this new “President”.
If none of the above work for you and you simply want to find a buyer that will accept a short-term commitment from you, then you need to really hone your buyer search efforts to make sure you have the right players at the table when you are considering and comparing offers.
It is always hard for an owner to see his company through the eyes of buyers (and not all buyers are alike) so listen to your Investment Banker’s thoughts and advice on this matter.
The long and short of it is that the management team you bring to the table will have a significant impact on your strategy and your value.