Rowan CEO Paul Waite on Looking to the Future
Most founders reach a point where it’s time to step back from the business they’ve built from the ground up. How should they approach planning their own exit?
Like many business founders, I take the time to think about what comes next as part of my annual planning process. Making the time to take stock and consider long-term plans, away from the day-to-day pressures of running a business is a non-negotiable for me. As a founder, that could mean reevaluating your personal goals and your future as a leader.
Planning your own exit isn’t easy, requiring founders to balance personal and professional goals, while mentally and emotionally preparing to hand over the reins. I have founders coming to me all the time saying that they can’t see a way out, and they remain the single point of failure, which is a huge pressure on one individual. But, if your personal ambitions or circumstances no longer match those of the business, it’s time to explore the ‘art of the possible’ in terms of your own future.
Gaining clarity about your future isn’t only vital for yourself but also for your wider team, and employees, and sets the tone for the whole business plan. If you are thinking of an exit then you will need to reassure investors that life goes on without you and that you can transition to the new management team. If you’re struggling with the founder succession challenge, here are some key questions and considerations to consider.
What are your personal objectives and motivations?
There are a host of factors that influence your role as a founder, and it’s essential to focus on what is most important to you personally. Do you see the business as a lifetime project, or do you have other ambitions and goals you want to pursue? Are there other factors, such as health or family that you need to consider? Or is the business at a point where it is scaling beyond your skills and capabilities? All these factors influence your timeline and route for stepping back.
Bear in mind that it’s natural for founders to want to move on at a certain point in a business’s growth, and it is invariably best for the business too. Successfully leading a £2m EBITDA business requires a totally different skillset to running one with £20m EBITDA, with corporate structure and more defined departments. While not impossible, it is rare for an entrepreneurially minded founder to have the skillset and the desire to do both.
Should I stay or should I go?
Once you’re clear on your intentions, you need to decide whether you want to stay involved in the business in some capacity or have a clean break. If you do want to stay, think about what role you want to play going forward. Do you want to take on a part-time chairperson or NED role? Or perhaps lead a particular area of the business, which best matches your competencies and area of interest? For example, it may be that you want to keep running the sales and commercial sides while handing over the finance and operational aspects to functional specialists – in which case, factor that into your plans. But whatever you decide, ensure that it enables the new leader and team to thrive in your absence. Remember the stress of being a single point of failure.
Finally, your financial objectives are inextricably intertwined with the personal and professional sides of your decision. I often find that where all the founder’s wealth is sat in the business, it has a clear impact on considerations around risk and opportunity. Derisking yourself from the business frees you from personal decision-making, while frequently also having a positive impact on the team, achieving greater alignment between your own and the business goals, and acting as a powerful tool for scaling.
Mapping out your succession journey.
There isn’t a one-size-fits-all solution to founder succession planning; how you approach it will depend on your personal goals, the value creation plan, your own leadership profile, and the team you already have around you. However, the following key steps will help to ensure a smooth and successful transition.
- Modelling your future team: Analyse the current leadership team and where gaps will be as you step back or leave completely. If you still have significant responsibility across numerous areas of the business, making you a ‘single point of failure’, then your first job is to build a team to start taking some of that weight off your shoulders. Start by handing over the areas where you are weakest or which you enjoy the least. This will free up your time and headspace to focus on where your strengths lie while finding the right successor.
- Peer analysis: Look at companies that have been through the same journey that you’re on, where a founder has stepped back or exited completely. To give a football analogy, if you were a championship team moving up to the premiership, you would be looking to emulate premiership teams in how they organise and prepare themselves, and the manager they have at the helm. It’s the same in business. Our Leadership Dynamics platform enables you to identify successful businesses and analyse the leadership journey that they’ve been through, to give you a starting point for your own plan.
- Model a ‘founder 2.0’: Once you have the right support around you, you can start to model a future CEO. If your forte is sales, then you will need a leader who can fill that functional gap, while also bringing a similar behavioral profile and style to yourself. But avoid hiring in your exact image, instead aiming to find a ‘founder 2.0’, who has similar DNA but with the situational experience to scale the business to the next level. With the Leadership Dynamics Leadership Bridge tool, you can model a future CEO and team, and create a roadmap for change to ensure the minimum disruption.
- Allow time to incubate: Too often we see new CEOs introduced a few weeks before a business seeks investment, and this comes with huge risk, which is likely to impact the valuation, and chance of success. Instead, allow around a year to incubate a new CEO before courting investors. This allows for a gradual handover, for the new leader to gain the trust of the business and start to make an impact, while you remain in place to provide support. Agree expectations, milestones and enable them to take leadership on key projects. If they are a natural leader then people will automatically start to follow.
Research shows that poor succession planning has a high cost; a study found that the longer it takes a company to choose a new CEO, the worse it subsequently performs against its peers. With founder-led businesses, the challenge takes on a whole new dimension, where one individual is so integral to the culture, funding, and success of the business, and has sacrificed so much along the way. Founder succession mustn’t be rushed, requiring a considered, data-led and patient approach. But get it right and it will mean a new era for the company – and for you.
Does this resonate with you? Get in touch with Paul Waite today and carry on the conversation.