What is the Number One Value Destroyer When You Go To Sell Your Business? Not Addressing Owner Dependency….. But How?
Strengthening Owners and their Leadership Teams for Transition
Evolving from Operator to Seller
For many business owners, selling their company is the final step toward retirement. If an owner’s goal is to retire within a year of selling their business, the time to start planning is now. Selling a company that is dependent on its owner can limit buyer interest, reduce valuation, or prolong the sale process. The owner can and should take deliberate steps in advance to ensure a smooth and successful transition. Chinook can help with this process.
Below are the critical actions owners should consider to ensure a timely retirement following the sale.
1. Establish Repeatable Processes and Improve Transparency
Get it out of your head on onto paper. Standardized operations and knowledge increase investors’ confidence in business sustainability. It is essential to document key processes, establish clear reporting frameworks, and ensure that critical sales, onboarding, inventory, and accounting workflows are not reliant on verbal instructions or ad hoc decision-making.
Well-documented systems reduce transition risk and provide buyers with the assurance that the business can scale, adapt, or integrate smoothly without the business owner being significantly involved post-closing. Successful leadership teams have used systems like EOS to stay accountable and focused on long-term growth. These systems represent an organized format to ensure that leaders are in the right “seats” and determine who is really “driving the bus” forward.
2. Transition from Operator to Strategic Owner and Visionary
Businesses that operate with a leadership team independent of the owner garner higher valuations. Owners currently involved in day-to-day operations should consider hiring or promoting a leader able to assume operational responsibilities. Over time, this individual—typically a general manager, president, or COO—should be empowered to make decisions as an “integrator,” manage teams, and drive performance. In this scenario, owners end up assuming a “visionary” role – consulting with the leadership team on long-term strategy.
Investors are comfortable acquiring businesses with strong, self-sufficient leadership in place, with successors in place for the medium term. By moving into a supervisory role, owners create space for the leadership team to manage the business, demonstrating to prospective buyers that the company will operate smoothly after the close. Chinook can help with connecting owners to leading executive search or recruiting firms that specialize in your industry.
3. Incentivize and Reward Leadership Team
Identify the key members of your leadership team. Business owners will need input and support from these individuals at critical parts of the M&A process, especially when introducing them to prospective investors at the right time. In addition, owners will need their leaders to continue to stay motivated with the new owner after the sale.
Retention Agreements are a creative solution for owners to sign with key employees. By signing the agreement, each employee receives a bonus upon the closing of a transaction, and typically another bonus is paid 12-24 months later. The retention bonus keeps the leadership team motivated and acknowledges their hard work in supporting transaction efforts. Bonus amounts vary depending on the employee’s seniority. Chinook can introduce you a legal team that has decades of experience with these issues.
Conclusion
Exiting a business successfully in under a year is possible—but only with proactive, strategic preparation. By transitioning leadership, professionalizing operations, and engaging expert advisors, an owner will increase the value of your business and reduce the time and complexity involved in closing a deal.
The earlier you begin planning, the more flexibility an owner will have to exit on your terms—and step into retirement with confidence. Start today with a strategic assessment, which every business owner should complete. We are here to get you retired.
