If you are fortunate enough to own a successful business, you have the ability to forge your own way. Some business owners spend decades building their business up only to see them come crashing down shortly after an ownership transition. Do not let this happen to you! By taking some important steps now, you can greatly improve your chances of a successful transition. With careful thinking and planning, you may even increase your take home pay as an added bonus. Whether your dream is to sell at top dollar or leave a lasting legacy, make sure to avoid these mistakes:
1. Waiting until the last minuteSuccession planning is easily procrastinated. Simply put, it is not tangible or quantifiable. Even worse, it is not a short-term item. For most business owners, succession planning is not even on their radar. Then the years go by, and suddenly retirement age or a life event provokes a major wake up call. Attempts at succession planning that would take 5-10 years are crammed into 18 months (or less). Like any task not carefully planned and executed, these attempts cause disruption and frustration. Future leaders need to be thoroughly trained, not via trial by fire. Make sure to take the time to plan your exit. (If you do not have that time – we recommend working with an outside expert to salvage the most of your situation in your condensed time frame).
2. Always focusing on the trees and never on the forest
Being able to change your focus is one of the hardest responsibilities for any business owner. If you are an assembly line worker, your job is to do your one or two tasks as accurately and as efficiently as possible. Your focus has laser precision. If you are a floor boss, your job is to monitor the assembly line to make sure it runs smoothly. This job can be tangibly measured and graded. If you are the CEO of the company, you have to manage every facet of the organization; some are day to day tasks and others are ten-year project goals. Switching focus from the day to day grind to future direction of the company (and vice-versa) is an acquired skill. All too often owners focus on today – with tomorrow being ignored in the process. Succession is all about setting up future success.
3. Vacuuming profits out of the company
No matter how successful the business, every business needs capital and resources to operate. Striking a balance between investing in a company and reaping the fruits of your labor is key. Specifically in the startup stage of a company you should err on the side of caution. As a company becomes well established, the conversation may shift to debt ceilings and an owner’s personal needs. If the company is perennially cash poor, it likely will miss out on opportunities by viewing investments as obstacles rather than openings. Having a solid cash reserve can open doors for future success. In general, anytime you are able to leave profits in the company to help growth, you are cultivating the business for the future.
4. Micromanaging your company
You must be willing to let go of certain tasks to be an effective manager. This requirement is amplified during and through succession planning. For some people, this is extremely difficult. Out of good nature, they want to serve the customer in the best way possible and therefore want to take responsibility. For others, it is a control issue. Sometimes it is a trust issue. When doing succession planning, these are all unacceptable excuses blocking you from your goal. The more you are involved in processes, the less you will have in time and ability to move forward. Old habits are difficult to break, but you must break this habit to be an effective manger.
5. Old equipment, old processes
Not renovating your business equipment and processes every so often can be disastrous. An archaic company that has been left to rust for one reason or another is in a state of decay. An effective leader has a mindset of running his/her business indefinitely – continuing to improve and grow year after year. Certainly, investment in updated equipment and processes costs time and money and can be viewed as a short-term sacrifice for long term growth. If these small (or sometimes large) sacrifices are not made, the following issues typically result:
We just went over 5 things to avoid as a business owner. Keep in mind there are many other things business should embrace. Opportunity is beaconing if you know where to look. Where you place your focus plays a tremendous role in the heading of your business. Like any good investment, smart business decisions and cash outlays can result in returns of a large magnitude.