Many people start a business with the aim of spending more time with family or more time on hobbies or self-development, only to find that the business needs them there 24/7. Hobbies and family time go out the window, and the business owner finds themselves with even less freedom than they had when working in the corporate world.
However, it doesn’t have to be that way. By following a clear plan towards sustainable success, business owners can step away from the day-to-day business operations and use their time to build a stronger family life, pursue hobbies, or even reinvest in accelerating the business’s expansion and success.
The first step is to prepare the business to let the business owner go. This doesn’t mean the business owner has to step away from the business entirely but it does mean the business needs to be able to operate without the business owner present at all times. This gives the business owner the choice to be more or less involved according to their own preferences as opposed to the demands of the business.
For a business to be ready for the owner to step back, it must already be generating steady revenue with a strong business plan that can be executed ongoing. For a business owner to start the process of stepping back from the business, six key elements must be in place:
1. Accountabilities and responsibilities are clearly allocated and documented.
2. Processes are clearly codified so everyone knows what to do and how to do it.
3. The culture is strong and clearly evident in every person’s behaviour at all times.
4. Appropriate financial controls are in place with disciplined measures to manage cash flow.
5. A business dashboard that gives the owner objective facts about business performance at a glance.
6. Meetings and communications occur as part of a rhythm that gives everyone the right information at the right time.
Once these elements are in place, it’s essential to find a person to run the business in place of the owner. The day a business owner hands over the reins to this person is the day they get their life back and can start focusing on their family and building their own ideal life.
Choosing a person to run the business can be a complex proposition and depends largely on the type of role they’ll be expected to play. Some business owners want a manager who can effectively replace them in running all aspects of the business, while others just want someone to take on part of the management duties, freeing the owner up to play an active role in strategy and sales, for example. Understanding the nature of the role is crucial to finding the right person for it.
Once the role is clearly defined, the next step is to get a picture of the type of person that would be ideal in the role. If the role is focused on managing the daily operations and financial performance of the business, then it’s important to find someone with a proven track record in those areas. If the owner wants their replacement to be entrepreneurial, again, it’s important to choose someone with those characteristics.
After recruiting the ideal person, it’s important to onboard them properly, fully inducting them into the business and giving them all the tools and information they need to succeed. This doesn’t happen by accident; it’s essential to have a detailed, comprehensive plan for onboarding the person so that they can hit the ground running.
Once the business can operate without the owner in a day-to-day role, it’s time for the owner to decide what kind of role they want to play in the future. The business, now a saleable asset with value, can continue to operate without the owner’s involvement, so the owner can now decide how they want to move forward.
This can include selling the business and moving into an entirely new phase. More usually, it means the owner moves into the twin positions of chairperson and shareholder, which still retain some responsibility in the business. It’s essential to fulfil these roles properly or risk the stability and sustainability of the business.
The chairperson’s role is distinct from a CEO role and involves some regulatory responsibility, especially in the case of listed companies but even if the company isn’t listed. The chairperson needs to take a broad governance role, oversee longer term strategy and planning and manage the board of directors and external shareholders. They may decide to continue in an active role within the business, such as acting as a figurehead in the most important sales pitches. However, this isn’t mandatory.
There are five key accountabilities that the chairperson must adhere to:
1. Appointing an appropriate general manager or CEO and holding them accountable.
2. Working with the GM/CEO to position them for success.
3. Defining and monitoring the execution and strategy of the long-term plan.
4. Monitoring the state of the balance sheet and the value of the company.
5. Chairing the board.
As a shareholder, the business owner also has a role to play, which is to fund the business and measure its performance to decide whether to continue funding it.
Statistically, it’s rare for business owners to successfully step out of a business. The transition should not be trivialised because it can only happen when the owner takes all the required steps and can find the right people to run the business, then empower them for success. This is easier said than done and requires a concentrated and focused approach.
Especially in the early days, it will also require the business owner to work closely with their replacement to ensure they’re sufficiently embedded in the business. Over time, the GM/CEO will become more autonomous, letting the business owner spend less time with the business and more time doing the other things they really love to do.
Andrew Laurie is an entrepreneur, CEO, and elite business coach.