Succession and exit planning: When to bring in the professionals
Make your business future fit without you
03 November 2022 • 5 minute read
The story of any successful startup usually starts from chaotic origins, a lightbulb moment gradually formed and developed by the founder into a product or service. It tends to be a journey of continual professionalism, where the founder starts from wearing many hats and has to learn often outside their own field of expertise. The knowledge and skills propelling the startup forward are embodied in the figure of the founder or founders. That presents a challenge when it comes to exiting the business.
Bring in the experts
As you grow the business, it is common to bring in consultants and contractors to help you reach a new phase in development. However, as you turn your attention to fulfilling an exit strategy bringing in permanent and qualified expertise into the leadership is essential.
It's often said that it is the team that sells businesses. Unless you intend to remain in the business over the medium to long-term, the buyer must feel confident that there is a professional and competent leadership team in place to continue growth. Having a qualified financial director or managing director in place for a reasonable period before you sell indicates the company can operate independently of the founder.
Depending on the business, other qualified experts may be necessary to underpin valuation.
Nikki McReynolds, the founder of NMR Associates, a small business consultancy, attributes some of the interest in her original nursery business down to some of the steps she put in place in the years prior to selling. "I recruited an early-years professional to come in monthly to enhance the nurse's training. It was something I could shout about on social media and our website because it demonstrated I was buying in specific expertise."
Professional recognition
Another pillar of Nikki's exit strategy was to make her business award-winning. To receive recognition from a noted or accredited professional body speaks volumes about the standard and quality of your business output. It not only interests new customers and reassures existing ones, it can also raise awareness among potential buyers.
"I set about working towards and achieving a Millie's Mark award, an award dedicated to a nursery where all the staff are first-aid trained. It was a huge achievement for us, and we were presented with the award by the Chancellor of the Exchequer, and great marketing to send out."
Process and procedures
While having the right people in place is crucial, it is also necessary to implement professional processes and procedures. Various ISO accreditation provides benchmarks and assurance that sound methods and good practices are in place. They also indicate that certain risks within the business are managed.
Creating separate manuals and process documents ensures that the business's ways of doing things can be accessed and checked and don't just live in the minds of one or a few people.
Learn to step away
When you start to go through that process, captivating interest from investors and brokers, it's important you step away from the day-to-day. This allows the experts in place to get on with the job and make it clear to any suitors that you are not pulling all the strings on every daily decision.
Joel Hopwood, co-founder and CTO of Shopper Media Group adds: “If you are a growing company that depends on top quality talent, and you have found and developed that talent you need to get out its way at some point and give it the opportunities it deserves, otherwise it will find those opportunities somewhere else.” When key talent moves on that can have a negative impact on any exit plans, particularly if that draws you back into the day-to-day running.
Stepping away will also give you perspective and truly see the business from an outsider's view. Put in place reporting structures that allow you a helicopter view of performance, similar to what a buyer or broker might see.
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