The average tenure of a CEO in a large corporation is 7.2 years. Meanwhile, most sporting coaches do not even last four years in the job!
However, successful business owners typically have a far longer tenure. The reasons for this are various, and include:
- They are passionate about what they started.
- They have built a significant amount of capital.
- They have family members working in the enterprise.
- They have strong and deep relationships with staff and customers.
- They do not know what they would do after they exited the business.
- They have not thought much about the future.
The decision to exit a business or professional practice by selling it or retiring is difficult for many, and impossible for some. Each business owner has their unique perspective on business and life.
The longer the period of ownership, the more difficult it is to face “the reality of mortality”. Business owners hang in there because it is less painful than thinking about the confusing alternatives. There is also the “endowment factor”, which behavioural scientists tell us means the longer we own something, the more value (financial or emotional) we attach to it.
For many, the best time to sell a business is when the logical reasons are high, and the emotional motivation is low. Using the principle of “leaving a little for the next person” helps business owners sell before the sigmoid curve takes a dip. When we delay selling the business for too long, we can become emotionally motivated to sell. This makes it very difficult to portray apathy (“I don’t care if I sell or not”) to a prospective buyer. When we leave it too late, we are often motivated to take anything just to get out.
The deep relationships we have with clients and staff may cause us to hang on to the business for too long. It may seem contradictory, but these people may be detrimentally affected by our decision not to exit or plan our succession. We must also consider the financial security of their families.
I recommend business owners and professionals in practice:
- Always have the end in mind.
- Design your exit strategy once your business is established.
- Revisit your exit strategy at least once a year.
- Seek input from a trusted mentor or adviser.
- Decide what the business is worth to you before listing it with a broker.
- Consider an internal succession plan, which can maximise the sale price.
- Consider including a period of consultancy with the new owners post-sale to make the transition as smooth as possible for your clients and staff, as well as for you as you enter the next stage of life.
If you need help creating an exit strategy for your business, email me at firstname.lastname@example.org.