Growth to Exit planning – focus on your management team

An experienced management team is a key indicator of a company’s growth potential and a highly prized asset for investors and acquirers.

A management team doesn’t necessary have to be a formal board of directors; it could be an “operational board” that runs the day to day activities of the business without the owners’ involvement.

After all, running a successful business is an evolving process requiring different skills as the business grows, particularly for SMEs.

 

The much-quoted Steve Jobs said “A small company depends on great people much more than a big company does.” He recognised that a skilled, motivated and stable team is a massive value driver.

SME owners often find it difficult to take a step back from the operational aspects of the business. Not surprising as it takes a lot of self-confidence and resilience to be an entrepreneur and, certainly in the early years, owners have little choice but to be totally involved in all aspects of the business.  But growing businesses need different skill sets and no single person can expect to have them all. If business owners can’t delegate operational responsibility they limit their company’s growth potential. Successful businesses recognise this and employ, develop and retain the talent that their businesses need in order to create sustainable shareholder value.

Owner reliant businesses restrict their growth and also their saleability; the majority of acquirers will not consider them and if they do that owner-reliance will be reflected in a low offer and a highly structured deal with a reduced amount being paid up front and the residue being paid against performance targets.

Too often business owners simply can’t visualise how their companies could run without their daily involvement. It can be hard to accept that you may not have all the skills the business needs going forward, but the most successful entrepreneurs are able to recognize and accept this.

Taking the time to create and motivate a strong management team generates great opportunities for growth and, when the time comes to sell the business, creates a significantly more attractive acquisition target that will command a premium price.

If you would like to know more about Growth to Exit planning call us on 0118 959 8224 or email kbinns@evolutioncbs.co.uk

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