COACH'S CORNER 
By Barry Knepper 
As Seen In Queensborough - The Magazine of the Queens Chamber of Commerce

Exit Strategies

Tab Member's Question:
I currently have nobody in my business that is capable of taking it over, and I want to exit the business within five years. I would like to find a successor from outside the business who will either make the business salable to a third party or eventually buy it from me. I have discussed the usual avenues for finding a potential replacement, but I would appreciate any creative ideas regarding how/where to look.

Tab Coach:
Thinking about recruiting a successor before putting the mechanisms for transferring equity is putting the cart before the horse. Any really good candidate would want to see that the path to succession had already been paved before taking the leap. The owner should be able to communicate to the potential successor the mechanics of the transition, how it will happen, what's the timing and what the qualifying measures will be. That way you will be able to recruit qualified candidates with solid plans to support the effort.

You should also use TAB's Strategic Business Leadership tool to determine whether you are really ready to give up control of your business. When the owner is still involved on a day to day basis in the business, the first person that is hired for the CEO role will fail in a very high percentage of the cases. Expectations of what the role of the owner will be during the transition is the most important factor in a successful transition, besides finding the right person. The right person will fail if the owner is not on board completely with the plan the new executive has been sold on.

In today's environment there are executive outplacement firms that are full of an assortment of talented and available executives. Floating a well defined opportunity in their direction may snag you a superior candidate with some latent entrepreneurial desires.

Another alternative is to approach a business in the same field as yours, but with non-overlapping offerings, about a cross referral program.  As both businesses benefit from the relationship ultimately the other business owner will likely suggest a business combination of some kind, which can be  a very effective exit strategy.

Make sure you read How to Run Your Business So You Can Leave It In Style