Part Two... Exit Strategy

Most successions have the owner remaining active for a specified period of time.

By Bob Piper, Principal, The Talon Group | October 31, 2004


Bob Piper, Principal, The Talon Group

To recap the highlights from last month:
You have built a successful organization, but now find your desire to continue managing the daily operations waning. Your options are:

Having a successor in place enhances both options. If you decide to sell, potential suitors see greater value in companies with strong management teams that will remain after your exit. The asset value increases beyond your land positions. Much depends on the strength of the people you have in place, especially if one of them has what it takes to succeed you. If you decide to retain ownership but pass the baton, the benefits are equally obvious.


So, the next question becomes: "What type of person would be best for my company?" Before you answer that, take a look at your own strengths, weaknesses, communication and leadership style. Identify what your company needs now and in the future. There are no wrong answers here. Strive for an objective recognition of how you and your company have been operating to date. This will become the basis for your candidate Success Profile.

The Success Profile in Reverse
Most successions have the owner remaining active for a specified period of time. Rarely have I seen an owner bring on a successor, toss him the keys and retire to his boat in the Bahamas. Usually there is a transition period of one to five years, during which the founder/owner continues directing portions of the business. Using this scenario, the heir apparent and founder should form a working partnership that plays to each other's strengths.

Identify some key areas where the new person could make the greatest immediate impact and use this as part of the Success Profile. For example, let's say your company desperately needs to streamline internal operations, improve reporting systems, reduce cycle time or raise quality levels. Why not look for candidates who have succeeded in those areas? This will give them and your organization a quick "win," helping the newcomer earn the trust of the team and thus building morale and momentum.

Second, focus on intermediate and long-term goals (years two through five). Assuming the heir apparent succeeds with the first year's objectives, what additional responsibilities can he or she now take on? Whatever they are, use that as another element of the Success Profile. Candidates should have demonstrated success and experience in these areas.

Focus On The Long-Term
Finally, identify your long-term objectives - say, year five and beyond.


  • The bad news:
    This is where the process becomes more subjective and less foolproof.

  • The good news:
    You have ample time to make preparations and adjustments.

  • Example:
    If you have been serving as the de facto vice president of finance and that is clearly not a key strength of your successor, expose him or her to those areas that help them gain the requisite knowledge to oversee the function.
  • All candidates for this position should view the opportunity as a privilege or honor.


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