Inadequate Second-Level Management When Selling a Business
In the last issue (#66) we discussed the obstacle created by Inadequate Record keeping / Accounting Systems / Financial Reports. In this issue we’ll discuss another frequently encountered obstacle to a successful business sale: Inadequate Second-Level Management.
“ No institution can possibly survive if it needs geniuses or supermen to manage it. It must be organized in such a way as to be able to get along under a leadership composed of average human beings.” Peter F. Drucker
Inadequate Second-Level Management When Selling a Business
If your answer to the former question is yes and you are only working 45 hours per week, you may be in good shape as it relates to second-level management. If your answer to the two-week vacation question is no or you are working 55 to 65 hours per week, you may have a big obstacle that needs to be addressed to successfully sell your business.
In small business sales, in most instances, negotiations are between a first-time buyer and a first-time seller. The negotiations typically involve the biggest and most important transaction of both parties’ careers. And both parties are usually Type A personalities, further complicating the ability to reach an agreement.
Buyers need to rely on your key people after acquiring the business
If your answer to the former question is yes and you are only working 45 hours per week, you may be in good shape as it relates to second-level management. If your answer to the two-week vacation question is no or you are working 55 to 65 hours per week, you may have a big obstacle that needs to be addressed to successfully sell your business.
Buyers need assurance that customer relationships can continue without the current owner’s involvement. They also want to know that employees have the ability to deal with difficult issues that inevitably arise in the day-to-day running of a business. Buyers usually want the flexibility to take time off and want to have a life outside of their commitment to the business they intend to acquire.
If you don’t have a much of a life outside of your business, it could be a strong indicator that your second-level management is inadequate or non-existent. Granted, good people are hard to find. But small business owners have to persevere and identify talented employees, train them and provide increasing responsibilities. Owners need to delegate and “loosen the reins” and perhaps also “loosen the purse strings” for their best employees.
If all the knowledge about a business resides in the owner’s head and has not been adequately transferred to key employees who are capable of running the business in the owner’s absence, it’s a significant obstacle that might preclude the possibility of a successful sale.
In the long-run, the investment in a few key people will …..
