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Netflix turned heads when the media giant announced that Reed Hastings would no longer be CEO. Instead, he became co-CEO, sharing the title with former Chief Content Officer Ted Sarandos. Netflix isn’t the first company to try the atypical arrangement, but it’s easy to imagine why it might be tough to have two leaders at the top.
Whether they’re running a small business on Main Street or an S&P 500 heavy hitter, business owners and CEOs often have a hard time ceding control. Part of that sense of ownership stems from being the visionary, but the other half is that business leaders also think of themselves as quality control.
Many businesses have two general camps: the promise makers and the promise keepers. Making a promise is a big deal for leaders with integrity, and they want to hold up their end of the bargain. As a result, they spend a significant amount of time making sure that the promise makers (i.e., their operations team) deliver on the business’s promise to the leader’s exacting specification.
This sentiment of wanting the final say comes from the right place. But it can also have unintended consequences.
White-knuckling the reins
It’s tough to scale any business when there’s a bottleneck on output, yet business owners often mandate that they sign off before anything goes to market. That’s a manageable arrangement for a small shop with fewer “promise keepers” in operations, but the need to review, revise and oversee everything production-related means business owners can’t focus on the execution of a long-term vision.
Besides the day-to-day inefficiencies of a micromanaging leader, an indispensable owner also complicates the business exit strategy. After all, who wants to buy a business that couldn’t operate without its founder or CEO?
Leaders who want to weigh their own exit strategy outlook simply need to imagine taking a month-long vacation. If the business would fall apart, it’s going to be difficult to find a buyer at the price tag an owner had in mind.
Get out the door gracefully
What’s the best exit strategy for small businesses? Having a plan in the first place. Many small business owners start a company because they love what they do, including tackling the various challenges of running a small business. For that very reason, they fail to imagine a time when they won’t be there to steer the ship.
Sometimes, the best advice for business owners is to imagine a time when the business needs to be put on autopilot, whether it’s for a week or a month or indefinitely. Undoubtedly, they’ll need to think of a few ways to improve business operations before this feat is close to achievable, but starting that transition is what small business exit strategy planning is all about.
Putting together a business exit strategy also means learning how to improve business operations, and both processes can begin with these steps.
1. Lead with your best — but stack work equally.
Business owners need trusted leadership to execute the vision. That means everyone on the team should be subject matter experts in their area of the business: They should be able to grow and manage their department, team or business unit, and they should have the autonomy to achieve their goals.
As Steve Jobs famously said, “It doesn’t make sense to hire smart people and tell them what to do; we hire smart people so they can tell us what to do.” A great leader is adept at spotting top talent, recruiting these high-performers and then getting out of their way. Jobs’s statement is priceless advice for small business owners who feel like they need to have a say in everything. If someone with the genius (and ego) of Jobs could quit sweating the small stuff, anyone can — and everyone should.
However, don’t let this principle of autonomy run wild: Owners can still find themselves in the weeds because they’re doing things they should really hand off to others. Examine the to-do list constantly and ask, “Who else can do this?” As an owner, the goal is to actualize the vision of the organization. That means constantly planting seeds to grow the business instead of plucking weeds.
Just because the business leader is most adept at a certain task doesn’t mean he or she has to do it. Many CEOs adhere to the 70 Percent Rule, which dictates that a task should be delegated if someone can perform it 70 percent as well as the business leader. That might sound like a sacrilegious way to improve business operations, but it allows the leader to devote valuable time elsewhere.
2. See your service for what it is.
One practical way for owners to slowly move out of the role of an overbearing parent is to think of the business as a product. If the business is in the e-commerce space, the product is connecting consumers to goods they want to purchase. The thought exercise gets more complicated in a service-based business, but companies in this category can “productize” their services by delivering them in a systematic, repeatable way.
By removing customized services for individual customers, business leaders can begin to optimize the operation by hiring the right team and assessing the time necessary to deliver the product. Once the process has been automated, a process referred to as the “franchise prototype” in the book The E-Myth, the owner can step back from the process and put new people in place to execute a vision.
Some founders or owners might avoid planning an exit strategy for their small business because they view this as somehow treasonous — as if they’re planning to abandon a loved one or put their baby up for adoption. The reality is that no matter how attached a leader is to the company, it’s critical to be ready for a future where he or she can cash out and retire or pursue another venture.
3. Craft a playbook for legacy’s sake.
Most successful organizations have a playbook — a documented set of processes that dictates how work gets done effectively in the organization. We’re used to hearing about playbooks when we watch sports, and anyone who’s watched a football game has seen coaches calling plays out of their playbook based on field position, game clock and score (what we’d refer to as the marketplace in the business world).
An organizational playbook works in a similar way, as it informs how your organization gets work done, how you drive accountability and how you go to market in an ever-shifting environment. On the surface, a business playbook should provide a clear line of sight regarding company goals and metrics. On a deeper level, it must also guide behavior and clarify expectations. All in all, you’ll get a bird’s-eye view of how your business can achieve its objectives.
Owners who follow a solid playbook can shift from working in the business to working on the business. (A Harvard Business Review study revealed that CEOs currently spend only 21 percent of their time on strategy.) And this is the formula for a company that can operate without its owner, making it more attractive for potential investors or buyers.
If you don’t have a playbook, you’ll need to take a few steps to build a scalable one that’s ready for future growth. You’ll begin by looking at your people. Far too often, we guide our future direction based on our current talent, but we have to resist this temptation. We want to define the work and then identify the people who can do the work. In this way, people will understand what’s expected of them in their roles, and you’ll have a way to hold them accountable for results. In practical terms, make sure everyone has a job description and that they understand their potential growth path in your organization.
Later, you’ll map out your approach by developing a documented process that helps your people measure performance against intended goals and communicate progress. Using a scorecard is also integral to this process, and it should involve a collection of numbers that tell you how well your business is doing.
The right numbers signal when to start or stop an activity (or rather, when to speed up or slow down). These variables should also give you immediate feedback about how you’re progressing toward your goals. Remember: What you measure sends a strong signal to your team about what really matters to your organization. This is the stuff everyone is paying attention to, as it often ties to bonuses and incentives.
Fortunately, a large part of a business exit strategy simply involves finding ways to improve business operations and help the company run on its own. Even if a leader plans to remain in place for decades, time spent on operational improvements is never wasted.