The Hard Truth About Succession
Welcome back to the Mid Market Insider!
Let’s jump in…
This week I want to dive into the importance of thinking critically about WHO should be running your business.
Passing down your business is a tough and emotional process.
But it’s something you have to get right.
And take it from someone who has seen how well this can go and how badly this can go.
You can’t afford to make mistakes here.
Hiring from within is always the first option to explore.
Bringing someone up who has an understanding of the:
- Culture
- Industry
- Processes
- Customers
Will save you a lot of money and time.
However, this isn’t always a foolproof plan and sometimes bringing in a fresh perspective can be the catalyst to taking your business to the next level.
Before I go into more detail on this let me give you some background. When we started Four Pillars the goal early on was to buy two businesses:
One for me to run and one for my partner to run.
After a year and a half of running our first acquisition, I realized I wanted to continue working on the next acquisition instead of running the day-to-day of an operating company.
Naturally, I fell into the same pot as other founders who are looking to pass on their businesses to a successor.
I was worried, stressed, and questioning my decision incessantly.
But ultimately, with me being there in a support role, I knew it could work out.
We originally hired from within and they were a great fit for exactly the reasons I listed above. But events transpired and their position was no longer tenable.
Although on paper this seems like a setback, in fact it was an opportunity for us to look elsewhere and take advantage of a wider talent pool.
Fast forward two years and it was the best decision we could have made. I can confidently say that.
As a business, we never could have successfully built Four Pillars into what it is today if I hadn’t made that transition or if we hadn’t brought in that outside hire.
And in fact, the outside hire was better than I could have been. He had more industry expertise and a better understanding of how to grow a business within that space.
Now the takeaway here?
I’m not the best person to get advice from but what I can advise on through personal experience is to accept when you need to get out of your own way.
But that’s not an easy decision for business owners to make. It’s hard to accept that you simply need to get out of your way. The worst thing you can do is be a victim of your own hubris.
I know it’s not as easy as it seems. Heck, it wasn’t easy for me and I only ran the business for one year.
I couldn’t imagine it being any easier when you have built and run that business your whole life.
But the reality is that many founders excel in the early stages but struggle as the company scales and reaches that next level. In my case, it would have been riskier to stay headstrong and let my ego take control.
The moral of the story is do you want to be Icarus and fly too close to the sun?
Or will you stop your ego from being the cause of your own downfall?
The Lessons:
1. The Right Person ROI: If you find the right person then there is only upside. It will increase the value of your business and increase the likelihood that you will sell your business.
2. Transition period: Finding your successor will help you realize if it’s the right time to step away from the business. Working hard to be eventually acquired and then stepping into retirement can be a culture shock. But finding your successor will help you make the transition as smooth as possible.
3. What got you here won’t get you there: Sometimes the founder is not the right person to take the business forward. Don’t let your ego be your downfall.
📅 Next Week:
In next week's newsletter, we will explore why Private Equity could be a good option when selling your business.
Keep building,
Nick
P.S.
If you want to hear more from ‘The Most Boring Guy In Private Equity’, follow me on LinkedIn and YouTube. I dive into the world of private equity, share some tips and tricks for small business owners, and most importantly, share my industry knowledge.
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If you want to discuss your business goals in greater detail book a discovery call: https://calendly.com/nickmclean/discovery-call.
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