Is A Leadership Transition in Your Future?
In this midst of a most challenging time, my owner, like many others, never dreamed the impact of the COVID driven recession could and would linger long after the US economy re-opened for business. Yet for many businesses, the question remains, have we returned to our pre-COVID state?
This has remained a challenge for even the most experienced founders or stewards of businesses. And if trying different methods to improve the business hasn’t worked, why a business expert?
No financial or emotional stake in your business.
Detached, objective, and open minded.
Understands what to look for and where.
Offers clarity of choices and options, to help you to act.
This is the benefit of having a ‘fresh’ eye take a look, perhaps, a deeper look. It’s important to have a monitoring process over revenues, profits, risks, and bottom-line growth so you know your facts. Also, purpose- driven operating plans that are aligned and leveraged within your existing human resources and financial capital.
An Example
An example of past work: A second-generation ownership in a 40-year-old company, formerly $175million in revenues became increasingly concerned with less than 10% profits, flat revenues and staff and advisers who were not able to help. The Chief Executive Officer reached out to Carl for help. After struggling for 5 years, he was ready to step down, but the business had no game plan for seeking a replacement.
None of his 5 adult family members were interested in taking on this flat lining company. A sale at this point would have offered subpar results; a low valuation leading to a low net realization of between 40–60% after taxes.
The Expert’s Roadmap over a 1-to-3-year timeframe
The first phase
Benchmarking the business in the here and now. Revenues and profits were already documented but unseen and intangible risks were never identified and measured. There was no understanding of the relationship between risk and business value. There was no consideration of the business’ industry or market growth prospects nor a determination of whether this was the best time to sell. These elements were addressed and incorporated in a shared Plan.
Also in this first phase is the time to get to know the business, and family dynamics and potential sources of dispute that may arise during this time of change so these can be addressed — Robin does this if she is available.
The second phase
Identifying the key value drivers and mitigate or manage the intangible risks in addition to the already identified and measured risks. As risks declined by 20% this inversely and disproportionately drove bottom line value upwards. This is due to the leverage they exerted within the overall P&L and Balance Sheet.
The third phase
(Robin may participate here with Carl to gain clarity of the CEO’s wants and family member expectations) starting a conversation that would allow the CEO to step down with a full or partial divestment or a 2-step monetization process through discussions with equity owners, passive and active stakeholders, qualified candidates, and teams.
This third phase has another common challenge…a business struggles in the first year or more after its original founder or owner steps down. The opportunity for an owner to step down and hold his voting stock for now and to be able to support the new owner(s) makes a world of difference.
The fourth phase
Identifying sources of financial capital to leverage people skills; involving both the existing and potentially new management teams plus external resources; to enhance revenues and equity value.
This would position the business, for a potential future sale, at a higher price with higher revenues and far less risk. All of this preserves the opportunity to continue to operate the improved business into the future with a new management team, as your own private equity asset.
The fifth phase
Discussing transfers, a planned future sale and why, and wealth management with a happy client. This is a Robin role. Holding a business longer term can have negative consequences as the centerpiece of family wealth. Much of the same attention to it becomes necessary for as long as it is held. It is possible to replace his income from his business with a structured portfolio of CEO private equity investments which Carl can manage in the same fashion to enhance revenues and equity value and reduce risks.
Again, Carl is an expert with the depth and breadth of insight, wisdom and experience needed to create unique solutions to your wants and needs! Your business and your family will thank you!
