Selling Your Business? A Leadership Transition Plan Can Pump Up Your Sale Price
Updated: Aug 22, 2019
If you are thinking of selling your business in the next 3 to 36 months, then set up your company for continued success by following these tips during the transition
A CEO of an $8 million Los Angeles logistics and warehousing company recently hired me to coach him and his leadership team on how to improve the company. The CEO was honest with me when he said, “I’m burned out and I may want to sell the company in the next year or less.” Whereupon I replied, “If I can get you to fall in love with the business then perhaps we can work together for a longer time. And, if we do this, then I can guarantee you that together we will increase the marketability and value of your company.”
He hired me and we put many new communication and management processes in place, but the desire to exit was too great. I did not get him to fall in love with the business again. But, the sale was a life-changing incident for him. And, so will it be for his employees when the deal closes this month.
A new boss can be intimidating to a team that has worked with the same leaders for a long time. Employees may panic, jump to conclusions and fear for their jobs. They may be resistant to change and a new leadership style, or they may just resent a new person who doesn’t share years of history working together like the old boss. In the company above, the old boss was their friend and as such they are like family.
Whatever the case may be, it is undeniable that transferring power can cause a lot of upset, and that can hurt a company’s efficiency. If you are considering transitioning out of your company’s leadership, here is some advice on making the process easier for your company and your staff.
Communicate openly with the team
Transition in leadership is always a delicate situation – even more so if you have been an active part in managing the organization. If you have developed a culture of mutual trust between yourself and all the varying personalities on your team, they will have come to rely on you and trust your judgment. They have a personal connection with you. It is natural for them to feel shocked and unhappy upon hearing that you plan to exit your role.
You can help alleviate this anxiety a great deal by communicating openly with your employees as soon as a deal is finalized. Dialogue with them about your planned exit, and if you feel comfortable, share with them your reasons for retiring or selling. You might even designate a point person to handle all communications on the transition so your staff can understand the process and get questions answered.
Manage employee expectations
A surefire way to ruin the new owner’s transition into the company is to violate the trust of your employees before leaving. This can take many forms, such as promising raises, promotions or projects that you won’t be in a position to act upon after you’re gone. Such plans are likely to leave the new owner feeling blindsided, and your employees won’t be too happy if the commitments you made get postponed or dropped.
Avoid these pitfalls by managing expectations around the office. Don’t make promises that you won’t be able to follow through on, and don’t let your employees have the expectation of getting promotions or other rewards in your absence.
It’s a delicate balance of encouraging optimism and growth while not creating unrealistic hopes and expectations among the staff.
You may think it best to “co-manage” with the new leadership for some time before you exit, but more often than not this causes confusion and conflict. Delegating responsibility to the new owner or boss must correspond with appropriate authority – otherwise the employees will not respect or acknowledge the new leadership’s role of guiding the team, or they will simply be unsure of whom to follow.
Conversely, handing over the reins too quickly can also be problematic. If the new leaders are not yet ready to take over, this can cause conflict and other difficulties in the transition. The new boss needs to have the appropriate amount of authority, while not being thrown into open water in the process.
Try to find the happy medium by allowing the new owners/leaders to ease into their role (either fully or partially) over a set period of time that gives them the chance to learn the company’s processes and culture before they take full ownership.
Have a leadership transition plan
With all of this in mind, current owners are encouraged to have a transition plan in place. Whether you are a business owner approaching your retirement years, looking to sell the business you’ve built, or are getting ready to pass leadership on to your heirs, a transition plan can make the wheels turn smoothly.
It is best to think of this transition as a process, not an event. Your company won’t change in an instant the moment the papers are signed – rather, it changes over time with a well-thought-out transition plan.
If you can, provide more than a year for the new leadership to take over. The Harvard Business Review wrote about one CEO’s transition that she started five years before her retirement. Whether you go to that length or not, you should give everyone a decent length of time to process the news, then meet and begin work with their new boss, and finally transition fully to the new owner.
This plan looks different for every company, but it is an integral part of passing the torch successfully. If you need help crafting your strategy, Goldhill Group is here to help. We have coached hundreds of companies over the years, and we would be happy to assist you in creating a plan for selling your business that works for you.
You can help your employees be ready for new leadership
Losing a trusted boss is never easy, and it’s important to be considerate of that fact during this process. You may find it difficult to transition away from your company, but chances are that it will also be difficult for the employees who remain. By having a transition plan in place, communicating openly, managing expectations, and delegating well, you can make the process easier for everyone.
Goldhill Group has helped coach hundreds of companies to grow cash flow, increase profits, maximize teams, and build focus, engagement, and satisfaction for owners, leaders, and their teams. Contact us today to book your complimentary strategy session.