I Don’t Want to Sell…But I Do Want to Retire
by Don Moore
“I love this company, but, I have a lot of things I’d like to do other than work 60 hours a week for 50 weeks a year. My wife and I want to travel, we want to spend time with our kids and grandkids, we have a vacation home we don’t use, I’ve got a hobby but I don’t spend time on it….60 hours a week doesn’t allow for any of that. The solution I keep hearing is to sell it. But, If I sold this company, what would I do with the money? Put it in the stock market? Then I’d have an investment that I neither understood nor could manage. And, this company makes more money than I’d ever earn in the market. And, I like the people here and the community. If I sell, the company could move and everyone’s out of a job. I just don’t like my options.”
The paragraph above is an actual quote from a conversation 6 weeks ago. I have had a nearly identical conversation with a dozen owners every year for many years. Some have an additional complication; they have children in the business who don’t have an interest in buying or are too young to be sure whether they are capable of running it. Naturally, the owner wants the children to have a long career path.
About 10 years ago, we suggested to a client that they hire someone to run the company for them. This idea wasn’t readily accepted. Our client felt that many, many decisions required their unique knowledge, talent, and experience. So, they felt trapped: They didn’t want to keep working so hard but they felt they couldn’t afford to let go. We were able to influence the owner’s thinking by identifying a few competitors that were very capable and which were run by “hired guns” rather than the owner. These companies were clearly successful and clearly well run. Over a period of time, the owner came to a point where the importance of life outside the business made them willing to try.
This was our first time in hiring a president for a highly entrepreneurial company and we were very concerned about whether the owner would be able to “let go.” It was difficult and took a couple of years of coaching and guiding to help the owner avoid micromanaging. But it worked very well and the president and management team are still there and the business is thriving. It is, in fact, performing at industry leading levels by almost every measure. Slowly the concept of “hiring a President to run your entrepreneurial company for you” has gained momentum and we do many every year, 4 so far in 2018.
One of the outcomes of our first effort is that we realized the need for a process to prepare an owner for their new role. That preparation must start before we begin looking for their “successor.” Describing the new President to an owner as their “Successor” is often a shock. We are asking an Owner to agree that, “I am being replaced as the senior operating officer, thus delegating senior operating authority to someone else.” The owner’s new role is Chief Executive/Chairman. It’s a different role and it needs to be understood. There are a number of tools that we’ve developed to help owners transition from their old roles and prepare for the new one and we believe that these are the reasons that our process has been successful.
One thing we teach an owner is that “delegation is not abdication.” The owner is not giving up control of the company, they are delegating operational activities. We need to help them find the right balance in decision making so that they allow the president to run the company while not ceding ultimate financial and fiscal decision making authority. We need to help them govern, but not micro-manage.
The best approach to addressing this is to establish a Board of Directors that includes at least two outside directors. Again, this is a new process for most entrepreneurs and we help them structure it and learn to use it.
The bottom line is this: It is entirely possible for an owner to move from 60-hour work weeks to 10-20 hour work weeks. It is entirely possible to move from 52 weeks in the business to 40 weeks or less in the business. But, it takes a process, a process that involves pre-planning, visualizing, and re-thinking to prepare an owner for their new role as “Chairman of the Board.” Done right, it works better than most owners expect. In Decision Associates’ ten year history, 85% of the companies now perform better than when run by the owner alone. We didn’t expect this and certainly the owners didn’t either. The reason is pretty simple: The company now has a great chief operating officer and a great entrepreneur and a great board of directors. It now has three levels of high impact business resources where before it only had one. As one owner put it, “I was successful because I made the right 3 decisions a year. The rest of the time was spent implementing those decisions. I still have the good ideas, but, now I have a partner to implement them and who brings ideas that I didn’t think of. I didn’t have to sell my company to get my life back. It doesn’t get better than this.”
If you’re wondering if the time is right to hire a company president, or have other questions about Succession, contact Don Moore at 814-528-9400 or email DonMoore@DecisionAssociates.net.