skip to Main Content
The 5-year Business Itch That Seldom Gets Scratched | Lift Insight & Capital Partners

The 5-year Business Itch That Seldom Gets Scratched

By Paulo Teixeira

When asking a business owner or operator about planning to transition out of their business they often answer “5 years.” And, if you ask again a year or two later, the answer will still be “5 years.” Let’s talk about why that might be.

Planning a succession strategy

An exit or succession strategy requires detailed planning that is revisited at least yearly. What areas or departments in my company are in good shape for a transition? What needs work? For those areas that need work, where is your company along in the journey? Be it an internal or external succession plan, the value of your business, or the actual multiple of EBITDA, will be determined not only by the potential for growth but also by what needs “fixing.” The latter will play out as “demerits” that will chisel that multiple down.

Most owner and operator CEOs, especially of small and mid-size businesses, fail to embrace the planning above. The result is invariably kicking the can of time down the road to an endless 5-year answer that gets repeated until either luck or a crisis occurs that changes things. Luck and crisis are not good strategies.

Self-reflections of the owner

This aspect of an exit or succession strategy is perhaps even more difficult than business planning. Besides working on the areas of the business that need improvement (as in business planning), owners often neglect to work on themselves. Having spent countless hours building the business to a position of success, can they see themselves transitioning and stepping away? Are they going to like the person in the mirror when their societal value is no longer defined by their title and position? Do they have enough real friends, interests, and a fulfilling life outside of work that will occupy their time and provide belonging? Sounds simple, but my experience tells me that this is, more often than not, the real crux of the 5-year wheel.

The only thing more difficult than giving birth and raising a child—a business—is to let it go when it is time. If parents—business owners—don’t prepare methodically by critically helping develop areas of weaknesses into strengths and prepare themselves for that inevitable step, both the “child” and the “parent” will suffer a lot of unnecessary and damaging stress. And many times the 5-year endless cycle then results in a sub-optimal outcome. A business coach or board of advisors can bring healthy accountability to this process.

Interested in learning more? Contact us here.

Back To Top