Exit Strategy Part 3 – Start with Reducing Owner Involvement

Exit Strategy - Reduce Owner Involvement
⏱ Reading Time: 2 minutes

When a small manufacturer starts the company, all functions and decision-making rest on the founder’s shoulders.  Now, ten or twenty years later and considering an exit strategy, if that founder is too integrally involved in every process and unable to “let go,” the business is dismissed as a poor investment.

Whether because all the company tribal knowledge rests with the one person or because support teams have never been installed, investors simply want a clean business decision based on financials, market opportunity, and frankly free of internal dramas.

Any new habit takes time; including working out at a gym, keeping to a strict diet, or ridding oneself of a bad habit. “Control freak” manufacturing owners are going to find the exit strategy more painful.  They have micromanaged every step along the business’ journey. There is a way to gradually phase out, so when Accelerated Manufacturing Broker finds the ideal buyer, the seller has already relinquished some of the control.

Reducing Owner Involvement

There are some fun tests to evaluate the degree of “control freak.”  Can an owner take a month away from the business and still have it operate smoothly and efficiently?  If not, then delegation must start immediately. The new buyer is buying a company without the founder.  They must be assured that the company is not dependent on the founder.

Another test is to have employees create their own job descriptions. Accelerated Manufacturing Brokers’ executive team has found sellers often believe they are more integrally involved than when factually reported by employees.

We understand this is a process and, frankly, really uncomfortable. So much life effort has been placed in building the company. By gradually reducing owner involvement, a natural transition will take place over the six months to a year when the company is finally acquired.

Part 1 and 2 can be found here:  Choosing an Exit Strategy Part 1 and Exit Strategy Part 2 – Disclose Problems to Buyers

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