The Challenge of Succession Planning
One of the toughest topics to discuss with any small business owner is the idea of succession planning and having a well thought-out exit strategy. This is completely understandable, since most have put their hearts and souls into their businesses for many years and can’t imagine life without it. But in today’s rapidly changing world of AV integration, is that the right attitude to have?
There have been a number of articles written in the past about succession planning that primarily focus on putting a strategy in place to deal with some catastrophic events (death, serious health problems, partnership divorce, etc.) While these issues are certainly serious and need to be considered, why not look at succession planning as a positive thing for the business?
In 2016 AV integration firms are experiencing unprecedented challenges in dealing with issues such as supplier consolidation, margin erosion, and creating a recurring revenue base. It’s a whole new ballgame these days, and there are no easy answers. But it also begs the question: Who is best suited to deal with all of these changes? Is it the 50- to 60-year-old business owner who has a lot of industry experience but long ago stopped being on the leading edge of technology? Is it the guy who refuses to change for even the best of reasons? Or should a new leader with new ideas be developed, maybe bring in new blood and shake things up?
At the end of the day, the big question is what is best for the business. It may very well be the hardest question an owner will ever have to answer. And that answer may or may not be the same answer as what is best for the owner.
Succession planning and exit strategies take time to develop, which makes it imperative for owners to start the discussion sooner rather than later. In those discussions, the decision needs to be made about what the future of the business will look like once a strategy is in place. Are you building the business for the future, or is selling it an option? With many valuations of AV integration companies coming in much lower than expected, a potential sale may not be the owner’s best move. And as Michael Gerber stated in his book The E Myth: Why Most Businesses Don’t Work and What to Do About It, if you don’t sell your business, then you bought it.
Assuming an owner decides to “buy” his business, then what? Business as usual, or identify new leadership that can breathe some life into the business and grow it? And what does that leadership need to look like? In today’s turbulent AV marketplace, it makes sense to identify and nurture energetic millennials who can embrace change and move the business forward. Back in 2007, this very strategy was implemented when I replaced 80 percent of the company’s sales team with millennials. They may not have had any experience, but those young people helped us double business during the worst economy in 80 years, between 2007-2011. Hiring millennials was one of the best moves I ever made, and was well worth the risk and investment.
Why not use the same strategy to develop new leadership for your business? No matter if your goal is to sell the business in the future or not, it’s important for owners of AV integration firms to bring new personnel with new ideas into the business. Although the AV industry has historically struggled to recruit young people, there are talented ones out there who are looking for an opportunity.
There’s a practical side of this issue as well. How else can you keep a business going for five, 10, 20 years? If you’re like me, do you really think that you want to run your business day-to-day when you’re 70 or 80 years old? Does that make sense, particularly if customers are getting younger? Our viewpoint is that the business can/will benefit from a fresh set of eyes on old problems and look at new, better ways to grow the company.
It’s risky, of course, but what part of the AV business isn’t these days? The bigger risk is doing nothing. Because doing the same thing over and over again, looking for different results—well, that’s the definition of insanity.
We’re in the process of grooming my successor over the next few years, who we believe will help grow the company profitably in the future. And a profitable, growing AV integration company will likely be worth a lot more tomorrow than it is today. Exciting stuff! Stay tuned to see how it all goes.
Exit Strategy 101
Succession planning takes time to plan and execute, so it’s best to start earlier rather than later. That means at least two to four years out from the actual transition.
AV integration is a complicated business with a lot of moving parts (operational support, competition, margin erosion, etc.) so make sure new leadership is given the time to understand the entire business, not just one part.
Communicate to company employees early and often about the leadership transition. It is imperative they understand why it’s happening and what it means to them. If employees aren’t sold on the transition, it will ultimately fail.
Set specific goals with timelines that the new leadership needs to attain, and that they’ll be held accountable for. Examples may be increasing company top line revenue five percent year-over-year or increasing bottom line profits two percent, etc.
It’s very hard for an owner/entrepreneur to simply walk away from the business, so don’t even try. Establish a different title/role for the owner, who can serve in an advisory capacity.
Jay Myers is the founder/CEO of Interactive Solutions, Inc. (ISI), a Memphis-based firm that specializes in videoconferencing, distance learning, telemedicine, and audiovisual sales and support. He is the author of Keep Swinging: An Entrepreneurs Story of Overcoming Adversity and Achieving Small Business Success and Hitting the Curveballs: How Crisis Can Strengthen and Grow Your Business.