Stephen McGee argues that most business owners don't plan for selling or handing over their company, even though it funds their next chapter and lets them choose the right successor. Owners usually react to unsolicited offers rather than initiating a structured exit, often losing significant value without skilled M&A advisors. McGee calls picking your successor the crowning achievement of your career.
Hi, I'm Stephen McGee with Bigelow. Here's a question for you: do most successful entrepreneur owner-managers proactively plan for the day when they will get to select the next majority owner of their business? The answer is no, but in our experience, the best The best ones do, and they do so for two principal reasons. One, because they have a very well-defined next chapter in mind that they are enthusiastically ready to begin, and a capital gain event often provides them the freedom and financial resources to do so. Or two, because they come to realize that they are holding back the company they spent so much of their lives building. As they age and become more risk-averse, they become less willing to keep reinvesting investing in the company, to keep betting the farm every day, even if the company may be craving that investment to grow and reach its full potential. I often hear clients say, "If only I were 20 years younger, I'd be adding capacity or expanding overseas or making that acquisition." They realize they are no longer the right owner for the company, given the opportunities that lie ahead. Logically then, A proactive plan to seek out a capital gain event is a no-brainer, right? It's the responsible thing to do for all constituents. So why then do so many entrepreneur-owner-managers not do this? Think of it this way: if somebody knocked on the door of your home and expressed interest in buying it, would you invite them in and show them around and then ask them to make an offer? Probably not. But that's essentially what thousands of business owners do every year with their companies. There are as many as 10,000 M&A transactions in the US every year, and in the vast majority, the owner is not represented by a skilled M&A advisor. Why do these successful business owners go through what is likely the largest financial transaction in their lifetimes without any help? As a successful owner-manager, your personal life is often totally woven together with your business, and your personal identity may very much be tied to the company. Because of this, you may not have a mental image of what the company could look like without you at the helm. You may also have no idea what you would do personally if you were no longer involved in the business. Not having a next chapter in mind can be debilitating. This may explain why the owners of private companies tend to be very reactive when it comes to an exit. It's as if proactively seeking an exit could somehow be viewed as a failure. So you can see how some business owners can be tempted to react to that knock on the door. I wasn't looking to sell, but somebody approached me. Does that in some way make for a better narrative? Is it responsible? You wouldn't do it with your home, why do it with your company? And logically, it may also explain why so many transactions do not involve an M&A advisor. I can only imagine the millions of dollars that are being left on the table in these one-off negotiations. Wouldn't you rather create a market for your company? If not to maximize the value, at least to allow you to pick the next owner of your company, rather than have them pick you. There's a superabundance of capital right now on the balance sheets of public companies and in the investment funds of private equity groups. And most successful private companies are receiving multiple approaches every week from investors seemingly interested in acquiring them. But are they real, and how can you know? And are they the right next owner for your company? It can be incredibly confusing. And my message to you is, it doesn't have to be this way. If you're willing to be proactive about an exit, you can actually take steps well in advance to prepare. By doing so, handpicking the next owner of your company can become the crowning achievement of your career, and not something you feel ashamed of. In our experience, the entrepreneur-owner-managers who achieve the best outcomes are those that months or even years in advance of seeking an exit prepare themselves and their company for a someday capital gain event. I'm not going to get into the detail of what those steps are. We have extensive IP that addresses this topic on our website, www.bigelowllc.com, in the EOM resource library. The one thing I do want you to take away from this video is that you're not alone. It's okay to think about a future capital gain event for your company. It's okay to be proactive and prepare. It doesn't mean you're putting a for sale sign out in front of the company. It just means you're getting ready for the inevitable personal transition. Our experience shows us that owner-managers build super successful businesses and care deeply about all their constituents. My question for you is, are you going to take the utmost care to proactively seek out the best next owner of your business at the right time and for the right reasons?
