A CEO was skiing with his family and had just finished a run from the summit. At the bottom of the mountain he ran into friends who were just arriving for a day of skiing. Wanting to know the conditions of the slopes they asked the CEO, ‘how is it at the top?’ The CEO’s answer: ‘lonely’.
This short quip illustrates an important point that all business owners must confront in their strategic and tactical planning because the job of a CEO is a lonely job. This isolation can have an impact on the performance of the person in the top role. When you add planning for an exit to this fact the formula becomes even more complex because the business is often the owner’s largest financial asset. If monetization is critical to the owner’s retirement, which is the case 85% of time, then it is understandable why exit planning can truly be a lonely task.
In fact, the January, 2012 edition of Chief Executive Magazine highlighted a new survey from RHR International which reveals that over half of CEOs (54%) felt the job was not what they had originally expected and that half also felt isolated in their role. First-time CEOs are particularly susceptible to this isolation, with nearly 70% saying it can negatively impact their work performance. The article went on to explain that ‘to some degree isolation is part of the job. A CEO can share only so much with his colleagues before he is open to favoritism or is ill-advised by those who may have their own agendas.’
Favoritism and Being Ill-Advised
The job of CEO requires a constant balancing of priorities and delegations. Unfortunately, the owner-operator of a business, in a fast-changing world, needs to make the best strategic decisions that they can with the information that they have.
If the owner relies too much on one person for their planning, it can be detrimental to their relationship with others and the owner only gets one perspective. Furthermore, when managers, key employees, family members and other influences in this owner’s life begin to participate in the exit planning decision, their contributions are often influenced by their own agendas.
Strategies, Tactics & Communications
Perhaps one of the reasons that owners do not successfully plan for their exit is because they are more alone with exit planning than they are in running their businesses. And, given the challenges of the current economy, most owners likely decide to simply ‘wait things out’ before engaging in exit planning. Most often successful CEO’s seek the counsel of others before making important strategic decisions. However, if the same sources relied upon for strategic decisions, like the owner’s management team, are also relied upon for exit planning decisions, the responses or opinions may be influenced by their own self-interest. Further, assuming most managers are not shareholders, communication regarding the owner’s exit can be risky—delivering the critical information at the wrong time could cause irreversible damage. This factor alone tends force the owner to make exit decisions in isolation.
Who Should the Owner Trust?
CEOs of successful businesses often pride themselves for recruiting and retaining key managers and employees to help operate and grow their businesses. They should feel the same way about assembling a team of trusted advisors to help them through the exit process.
This team of advisors should include multiple disciplines because exiting is a complex process that generally goes beyond the scope of any one advisor. The team should include an attorney to perform the legal documentation, an accountant to assess tax strategies, a wealth manager to oversee the investment of liquid assets, an insurance advisor for risk management and a merger and acquisition professional. This team should also include an experienced exit planner to help quarterback the exit process with the other advisors. This team of qualified professionals will help mitigate the owner’s ‘going it alone’ syndrome that often accommodates exit planning and implementation.
A CEO may feel lonely when faced with the operations of their business, but when a CEO’s isolation leads them to become the sole planner for the exit from their business they are doing themselves, their businesses and the constituents to that business a great disservice. Recognizing these challenges, being proactive and pulling together an experienced team of advisors to help navigate the exit planning process will help ensure that the right exit options are evaluated and the best decision is made with the greatest amount of clarity that an owner can obtain. Only at that point in time will the owner / CEO know that the wealth they have worked so hard to build within their business will be successfully reaped for the next stage of their life.
Copyright Business Exit Timing LLC and Pinnacle Equity Solutions © 2012