About eight years ago, during the global financial crisis, my husband was made redundant, and he did what any self-assured thirty-something would do with a meaty severance package – he launched his own firm. Admiration from suitably impressed friends rolled in. Then, he got a phone call from his step-dad, a seasoned businessman.
“I hear you’ve started your own business, boy?” he said, and my husband waited for the usual praise, but instead he got a question.
“What’s your exit strategy?”
Well, what is your exit strategy?
To say my husband felt silly to not have any real answer is an understatement, but the truth is, many people run head-long into launching, buying a business or becoming part of a franchise without any real idea where it’s ultimately going. That’s understandable – your early focus is on building the business and revenue, but it’s a truism that has many professionals who advise SMEs banging their heads against the wall.
“Too often business owners are so busy working in the business that they don't have the time to work on the business,” says Katrina Hammon, associate at Duncan Cotterill. She and her team of solicitors spend a lot of time advising clients around succession planning as part of a wider business strategy.
“Lack of succession planning is common,” Hammon says. “A good lawyer will remind their clients of the need to prioritise succession planning. [It] should be an ongoing agenda item for business owners, not left until the year you want to exit or when illness or another unexpected event occurs.”
Succession planning is about playing the long game, and it’s key to your business success. Imagine, for example, a game of chess where the king represents your business, the owner or director is the queen, and the other various pieces are the employees, suppliers, infrastructure and market challenges. Your game is based around clear strategy, and although that strategy may adjust to the game as it is played, your ultimate goal is to keep the business – the king – from harm. This may mean moving your bishop (your HR officer) into a more strategic role, or it may involve sending a knight (your business development manager) out on to the board. Ultimately it may also mean that you, the queen, has to step aside and allow the other supporting pieces to take lead roles protecting the king.
Now imagine that chess board again, except on your side of the board, there is just you and the king. If you run a business where you are the HR officer, the business development manager, the accountant, sales and logistics coordinator and the tea boy, then your position is weak. If you are struck out, who is there to step in and protect the business?