Not Ready to Transition Your Business? Hiring a President Can Be a Rewarding Alternative

5 Succession Planning Mistakes to Avoid

We’ve talked a lot in previous publications about the various exit strategies available to an owner, including an intergenerational transfer, sale to employees (ESOP), sale to a third party (management, partners, private equity, etc.), and recapitalization. But what if the owner isn’t ready to, or doesn’t want to, sell the business? Perhaps the business is valuable but the owner wants to slow down rather than sell.

A viable option worthy of serious consideration for the right individual and situation is hiring a president to run the company. There are talented individuals with the skill, energy, and determination to take the helm of the business, allowing the business owner to function as chairman or in a similar capacity. In doing so, the owner removes themselves from the day-to-day activities of operating the business, while still available in an advisory role to provide guidance and insights. Additionally, this option allows the owner to reap the benefits of their lifetime work and provides time to explore personal endeavors, while maintaining ownership of the business they built.

For this option to be successful, it requires the proper mindset of the business owner who must accept that the individual hired to run the business has the full authority and commitment of the owner to do so. Compensation arrangements, including equity or phantom equity plans, can be negotiated to protect the company while also providing incentives to the candidate to grow the company.

If you believe that you have the personality and desire to pursue this option, talk to your trusted advisers (such as your accountant, banker, lawyer, etc.) who can help you strategize about the qualifications of the candidate who would be best suited for the role. This typically includes technical skills as well as interpersonal skills to ensure a cultural fit within the organization. Finally, consider engaging a retained search firm that can identify, attract, and retain the best individuals for your organization.

Removing the responsibility and burden of running the business on a day-to-day basis can be a rewarding experience for the owner, while allowing them to retain ownership.

Mark G. Metzler

Mark G. Metzler is a Director with Kreischer Miller and a specialist for the Center for Private Company Excellence. Contact him at Email.  

 

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One thought on “Not Ready to Transition Your Business? Hiring a President Can Be a Rewarding Alternative”

  1. Mike Borinski says:

    Mark, valuable insight in this being a viable option to begin the transition. I’ll add that the president can also be an internal promotion from someone who may ready to run the organization without necessarily being ready to be the owner.

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