Often the hold up to selling a company is that the owner isn’t confident in the management team beneath him or her.  Succession planning and leadership development frequently take a back seat to more pressing matters of the day, and this can have tremendous negative impact on the business valuation and sale.

Ralph Nader said he believes “that the function of leadership is to produce more leaders, not more followers.” This certainly is true when operating a business, and it’s critical when selling a business. A strong management team is among the most important criteria for selling a business and for making it successful after the sale.  Potential buyers want to know if the business can run without you.  You need to do the hard strategic work in the face of relentless day to day activities to make sure that it can.

Smaller businesses frequently fall into the trap of being too owner dependent. If that team is not in place, creating it should be your top priority upon deciding to sell. Assess your team honestly, using an outside expert for ‘fresh eyes’ if needed, and determine how to bring their skills up to the level needed. This could include internal and external mentoring, on-the-job training or professional development classes.

If you decide to hire senior executives from the outside while planning your sale, you likely will contract with them for a payoff when the sale concludes. If you have a longer sale horizon, offer tax-advantaged incentives through equity or synthetic equity arrangements. Always consult a tax advisor about such matters.

The time to estimate this kind of endeavor is difficult. It must rise to the top of your priority list in order to sell the business for a higher price.  As Champy said, “work is infinite and time is finite… have a laser like focus on doing first things first.”  Developing your leadership team has to be a ‘first thing’ especially when you are considering selling a business.  Work on the business and selling it, not just in the business making it operate.

It also depends on how ready your people are now to pick up additional education and responsibilities, how available relevant education is, and, if you choose to go outside the company, how accessible top talent is. This could take as long as two to three years.

Top business owners always develop and delegate authority to appropriate people. While it should have been an ongoing process throughout the life of the business, initiating the sale process is an opportunity to see how your company can lessen reliance on you. As Theodore Roosevelt advised, the boss should have “sense enough to pick good men to do what he wants done, and the self restraint to keep from meddling with them while they do it.”

Many times we have worked with business owners who won’t let go of control and hold on too long to the business.  Is this you?  Who would run the business right now if you left?  How can you help them gain the skills to be as successful – or more so – than you?

I invite you to use these ideas as you start the journey to sell a business.

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