15 June, 2011

Private business exit: Q6. How do you make yourself unnecessary to the business?

Continuing our series of questions on planning for the sale of private businesses, we now turn our attention to you, the owner. For some private businesses, the owner is also the chief sales rep., chief designer, chief buyer, etc., or some combination of these roles. If the business can’t work without you, why would anyone buy it from you?

Few owners stay on for ever after a sale, so if your business is dependent on you, you need to think about building up capabilities in your people to do the things you do, before you put it on the market.

Your role as chief executive of the business is a different issue. Some buyers like acquiring businesses with salaried general management in place. Some buyers may want to appoint their own CEO/managing director/general manager (possibly one of your people, one of theirs, or someone new). It’s hard to predict, but worth thinking about.

By the way. despite having made yourself unnecessary, a buyer may still insist that you stay on after a sale for possibly several years, maybe running the business, maybe not, and often with some bonus or “earn-out” payment, to make sure that the business continues to be successful.

First posted August 14th, 2008

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