We spoke about ownership, and how management and ownership should not be confused, even though many owners are also the CEO or MD. This provides a high degree of day-to-day control for an owner; however, it can also tie the owner to the business in a way that provides little flexibility, especially as people get to a point where they no longer want to be front and center.

Working as the leader in a full-time capacity is not the only way of controlling a business. Developing a management team and fostering some alternative leadership can be a very effective way of stepping back and in some cases becoming a non-executive (no longer working day to day), where you simply attend a monthly board meeting providing advice, guidance, and support to the management.

This is not necessarily an easy thing for an owner to do, typically owners are used to running things and being in total control. In many cases owners are also highly technical and experienced and this can present a challenge when developing new leadership. However, when it’s time for the owner to step back from working 50 hours a week, a lack of genuine succession can severely limit the options.

Selling the business!

Selling the business at this point is often seen as the way out. Unfortunately, the process of securing a successful exit will not always coincide with the owners’ personal plans or circumstances. To quote John Lennon, “life is what happens to you while you’re making other plans.”

Having a well-executed alternate leadership and management plan can move the owner-manager from having a stressful job requiring a continual superhuman effort every day, to having a well-managed investment in a business with a robust future apart from your day-to-day involvement. If this is overlayed with the management being, in some cases, better than the owner at certain aspects of the role, then you have a strong go-forward picture which can help take the pressure off.

When this is done well, it’s a fantastic outcome, however like anything, if it’s executed badly, it can be expensive and painful for everyone involved. The good news is that when it works, it often encourages buyers who value the fact that the business is under management apart from the owners who are in many cases wishing to exit.               

We have acted for many owners looking at their options around management and have developed a well-tested playbook aimed at avoiding the most common mistakes when undertaking management succession, so if you are weighing up your options in this area feel free to talk to myself or one of the Partners at Oasis.

Meanwhile, stay safe and good luck.    

References:

1. The Troubleshooters Podcast with Mick Spencer https://www.oasispartners.com.au/podcast/overcoming-a-set-back/