What qualities give founders peace of mind and the necessary trust to hand over the reins of their business?
There are crucial components that will allow the founder(s) of your firm to confidently sell to the next tier of leaders. Succession planning is not only a time for the owners of the business to reap the rewards of their labor, but, most importantly, it’s a time to invest in the success of the next generation of leaders. It’s not an easy process. It’s time-consuming because the next generation of leaders must prove they are able to manage, sustain, and improve the business. Would you give the keys to your Ferrari to your young children? I hope not. Why? Because it takes experience to know how to maneuver a high-performance car like that. Your business isn’t a Prius, so don’t treat it like one!
So, what will give founders peace of mind and the necessary trust to hand over the reins of their business? Here are the things you must do:
- You have to be a leader. Being an owner requires you to be involved in all aspects of the business – and people are a major factor in each of these aspects. Leadership allows you to tackle all these multi-faceted problems and get to the right solutions. Any owner must be a leader. They must embody what it means to be an owner and the values of your firm. The caliber of individuals within your business determines its superiority or inferiority. This not only enhances credibility and trust for departing owners but also for those remaining within the firm. Ownership transition extends beyond the current owners; it also involves the perceptions of the rest of the employees regarding the successors. Therefore, it’s crucial for your successors to have a track record of proven leadership. An essential aspect of leadership lies in shaping the culture. Leaders serve as the ambassadors of their firm’s culture. They must embody the values and principles that define the essence of the company.
- You have to deal with the pressure. What if your competitors are consistently outperforming your firm in proposals, key personnel were departing, and there’s a significant debt burdening the business’s balance sheet? How would you take it? Above all, the livelihoods of your employees and their families hinge on the success of your decisions. It’s an immense responsibility that only a select few can shoulder.
- You must know how to sell. Selling is about creating deep, meaningful relationships. The person who produces the most work is a tremendous asset to the firm. Every single future owner of the firm must know how to bring in work. This will allow for the founders to ensure that constant revenue streams are coming to the business while they are transitioning off.
- You must know how to financially operate your firm. I have seen the issue of very talented architects and engineers who do not know anything about the financial component of their business. This is why attaining this knowledge ahead of time will give you an edge over your peers. This is the opportune moment for the student within you to grasp these essential aspects of the business. The better informed you are, the better the business will perform.
- You must know how to make decisions. I was talking to a CEO who was explaining how he would delegate certain tasks to the upcoming second tier group. I asked him how that process has been. He mentioned that tasks which he could complete in 30 seconds would take the second-tier leaders a couple of days to finish. How fast or slow you make decisions can have a great impact on your business. Experience, common sense, and sound judgement are what founders are looking for. So, refine your decision making process!
- You must be a good communicator. Communicating to everyone a clear vision of where the firm is headed is a must. Having no room for interpretation will allow everyone to row in the same direction. Being transparent with the decisions the firm makes and explaining the why is helpful for the people of your firm. Additionally, as an owner, navigating difficult conversations – such as terminating an employee or addressing subpar performance among co-owners – requires tact and diplomacy in language and approach.
While this list may seem obvious at first glance, achieving its items requires significant effort. More importantly, it demands acquiring the experiences that align with what founders seek in their successors. So, are you ready to be a successor?
Ezequiel Tovar is an analyst within Zweig Group’s ownership transition team. Contact him at etovar@zweiggroup.com.
