by Susan Hileman, NWIRC Strategic Business Advisor
I recently heard an employee say, “I’ve been here a long time, and I’ve really enjoyed working for (the owner), but when he leaves, I’m outta here!” In manufacturing, each owner brings their own personality and skills to the table. Making a mistake in deciding who will continue the leadership of your company can be costly, resulting in the loss of well-qualified employees, customers, and suppliers. Owners must be able to position the company for transitioning to the next generation (or buyer) successfully and seamlessly, especially when the business itself is the retirement plan. So how can this be done?
• Step back early. Your business must become LESS dependent on you running it. The more your business can operate without you at the helm, the more options exist for planning your own retirement. Ideally, together you set objectives and allow the next generation to take on more and more responsibility—while you step back from the decision-making process to take on a more advisory role in the business.
• Assemble your best team. The most successful businesses have an engaged team of employees, who may or may not be family members, but who are empowered with both the responsibility and the authority to make decisions independently. Qualified employees, customers and suppliers are much more likely to stay in place, even during a major leadership transition, when they know the company will continue to move forward “business as usual” without obstacles.
• Maximize your potential cash flow. Even if passing the leadership of the company to your sons or daughters, you’ll want to increase efficiencies and diversify. Get expert help with process improvements. Reduce over-reliance on any one single customer—ideally, less than 15%. Evaluate your competitive advantages and differentiation. (There IS a reason customer’s buy from you and not your competitor. If you don’t know what that reason is, find out!) Then provide expert customer service to your top customers to ensure they will not be at-risk of becoming inactive. These efforts will help maximize the cash flow in the business to continue operations during the transition.
• Build value. The single biggest area of success—for both family owned businesses and non-family owned businesses—is found in “positioning”. This means taking the time to plan and then act on those plans. Build the value of your company while you’re actively running it. Using CoreValue or a similar business valuation tool can help determine where to achieve the highest growth objectives with the lowest potential risks. You can then break those areas down into smaller goals. Assign metrics to help you see when you’re achieving those goals or falling short. Then adjust the goals as needed to steer back on track and build the value of the company over time, positioning it for a strong transition or sale.
Taking your business to a level where it can transition seamlessly is a win for everyone involved—your family, customers, suppliers—and for your retirement income. Contact NWIRC to help with a business assessment or simply to discuss your best options for building value or planning for a transition.
Susan Hileman is a Strategic Business Advisor at NWIRC. She is a Galliard trained Family Business Advisor, an Innovation Engineering Green Belt, and has degrees in Business Management and Speech Communications from Clarion University.