Giving up the President's Seat

Lessons of a business owner who discovered that letting someone else sit in the president’s seat was the best way to maximize the value of his business exit on his terms and without regret.

This is kind of a cool story. A client of mine called me after he had a transaction that didn't go the way that he wanted it to go and asked for my help to build some value in the business and get it ready for transition.

The interesting thing was that he had a great business. A wonderful business. He just needed to take care of a few things. And one of those things was to start being able to separate his identity from that of the business. If you asked him about himself, the business was his personal elevator speech, and it would be very difficult to separate himself from that.

When I first started working with him, we went through my five phase exit planning process (which you can learn about through the Business Owner Transition Academy) and my checklist for ELITE exits, which includes one very important step: institutionalizing management.

I made a number of recommendations, and one of those recommendations was that he get out of the president’s seat. He couldn't be the president and general manager anymore - not if he didn't want to have to stay around after he sold his business. So I recommended that we bring in a new president and general manager.

I went through my network and found 13 or 14 different candidates from across the United States that could come in and do this. Then I called my old friend, CX Kennedy. CX is a graduate of the Business Owner Transition Academy and has an MBA from the University of Maryland.

Now, here's a secret. I've known CX for 30-something years. We flew airplanes together as junior officers in a squadron all over the North Atlantic and Mediterranean and South America and all kinds of crazy places and had a great time doing it.

CX ended up being the right person for the role and took over as president, working very closely with the owner of the business to prepare it for sale. We structured his employment agreement with a sale bonus to help keep everybody aligned to the mission. Sure enough, over the next few years, they achieved an excellent exit result.

I asked CX to share his biggest takeaways for how to hire someone like him for the president’s seat, and how to integrate and use his talents effectively over the time it takes to actually get to the closing table. This is what he told me:

• Hire a leader. “You and I both know how important the leadership aspect of it is. And then they have to have a background to do what you're going to want them to do. And then you need have that conversation to where you get to really know the person that you're going to be working with. I mean, you’re going to be spending a ton of time together. And if it's not a fit, not only from the technical aspect but a personality piece, it's not going to work.”
• Stick with it. “And then when you do decide, pull the trigger, commit and stick with it. I know there were times I was questioning did I really make the right call. I'm sure the owner at the beginning did the same thing. But we were committed and we worked through. And just understand that there is a time aspect of it. You just can't blink and make all these things happen.”
• Start early. “And then the third piece would be time. If you need somebody to come in short term, six months prior to an exit, you can call in a troubleshooter. The troubleshooter may be able to help you talk with your investment banking people or talk with your business broker, but they're not going to be able to go deep in terms of creating a ton of additional value like we were able to do in this case.”

“I remember, at the start saying, ‘Hey guys, this is a three-to-five year plan.’ And guess what? It was three to five years. I believe from my perspective and from what the owner has said to me, it was time very well spent. It was worth the effort. Even if we hadn’t sold the business, we became a stronger company and our owner got to improve his handicap,” CX added.

“I remember that big handshake and hug after it was all over. It was very rewarding. I'll miss the conversations. We'd have some drinks and solve not only the business problems but solve our world's problems too. I'll definitely miss that.”

If you’re reading this and imagining the exit you’d like to achieve, I’d encourage you to start thinking about that president’s seat today. Putting in a great leader with a mandate to help you transition your company could be one of the best strategic moves you can make.

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