Loyd Rawls

Keys to Developing Your Exit Strategy Time Line
May 1, 2008

With an understanding of the 10 Steps to the Development and Implementation of an Exit Strategy, we can address the interdependency of time to the development and implementation of an exit plan.

The Most Responsible Time Line

An assumption that anyone has the security of a long-term hold on leadership and control creates instant vulnerability. Therefore, the most responsible time line for establishing an exit strategy is to assume that there is no time available. Now is the time to confirm a contingency exit strategy that identifies who should be or could be a successor. Irrespective of age or time on the job, every business leader has a stewardship responsibility to address the contingencies of his or her death or disability. Contingency planning could establish the platform for the development of a comprehensive exit strategy.

The Ideal Time Line

For a mid-velocity and complex business, the ideal time line is ten years. In age-related terminology, prior to reaching 55, the CEO/owner/Board should have a general idea of to whom and how the business could transition to the next generation of owners and managers. If a newly appointed leader is over 55, there should be immediate discussion of management and leadership succession.

The ideal time line provides time to identify and narrow the field of successor candidates in a relaxed environment that will support the probabilities of a good decision. Furthermore, this environment avoids a horse race that can be the catalyst of petty competition that could distort effective comparisons and lead to unnecessary frustration.

The evaluation process should begin through the development of a Successor Development Curriculum. This curriculum identifies a time line for various forms of training and experience that the “Succession Team,” strategic vendors or franchisers believe each candidate needs for preparation. Often, just the comparison of the curriculums is helpful in the confirmation of the lead successor candidate. When less than the ideal time is available, the comparisons of the curriculum time line will confirm which if any candidate can realistically be prepared to assume leadership within the time line established by the owner/CEO.

The Minimum Time Line

The minimum time line would be approximately two years. This short period borders on an ordination versus an exit strategy meaning that those focusing on the welfare of the business may take exception to what is transpiring. You can assume that there would be no relaxed environment to confidentially observe candidates, narrow the field and initiate substantive development that meets the needs of shareholders, family members, strategic vendors or franchisers. Reciprocally, you could assume that there could be some periods of stress as opinions were expressed about the wisdom of the successor selection.

Fundamentally, strategic vendors and franchisers are much better partners in profitability when they feel like they are being included in strategic decisions. Notably, there would be little if any opportunity for a transition that provided the withdrawing owner/CEO an opportunity to coach and encourage the successor.

Posted by Loyd Rawls on May 1, 2008 | Comments (0)