As a business owner, your management team is vital to the success of both you and your whole organization. Even if you’re not interested in planning an exit now or anytime soon, you will eventually need to consider either a sale or succession plan. Taking steps to improve your business by strengthening your secondary management team now could potentially leave you with more interested, high-quality buyers when it comes time to sell.
While this may sound counterintuitive, you need to make yourself as irrelevant as possible to the business. Buyers understand the owners may depart after closing, and they need assurance that customer relationships, operations, and “tribal knowledge” will remain in the owner’s absence. Assess how dependent the company is on you? For example, can you take an extended vacation without spending much time on the business? If the answer is no, then you need to augment your management team. A strong management team is very appealing to potential buyers, as few buyers have their own management team “in waiting.”
How Do I Know if I Have a Strong Management Team?
They should possess most or all the following characteristics:
As Jim Collins explains in his book Good to Great, you should have “the right people on the bus in the right seat.” Make sure to play to team members’ strengths, not their weaknesses.
The converse is also true; you must remove the wrong players off the bus. Not only can unfit players be toxic and demoralizing, but they can also bring a significant valuation discount with them. You should never expect the buyer to take care of this problem for you.
Improving your leadership team is a great way to enhance your company’s value at any stage. ACT Capital Advisors has been working with businesses in various industries since 1986, developing strategic plans before they go to market to ensure they get the best value possible.
If you are interested in learning more about ACT’s sell-side services, use the following links:
