By Rayanne Buchianico, ABC Solutions, LLC
This is the fourth of a multi-part series on exit strategies authored by Rayanne. Click here for part one, click here for part two, click here for part three, and click here for part five.
There may be a number of reasons a person will want to leave the business but still own it. I can think of a few reasons — see if any of these resonate with you:
- You have tried selling but found no viable buyers in your area or were unable to obtain the selling price you are hoping for.
- You want to focus your life on new interests, but still need the regular income from your MSP.
- You believe a child or employee may want to purchase the business in the future, but neither is prepared now.
It is quite possible all of the above scenarios apply to you. When it is time to leave your business because your heart is simply no longer in it, here are some tips to help you transition to an absentee owner.
Escape … Err Exit
As always, give yourself some time to prepare. It is not possible to start planning today for an exit in six months unless you already had the pieces in place before today. Here is a partial list of situations to consider.
- Who will run the business? Do you have a service manager, office manager, or general manager that can run the business in your absence? If not hire them or promote them from within.
- Prepare Your Customers. There is no better time than now to get your customers used to dealing with your staff and not you. Assign an account manager to each customer and introduce them. Let them build a rapport. Customers are fine as long as they know who to call when they have a question.
- Service and Office Procedures. Be sure to have all procedures documented so when you are not available, the company continues to operate your way. Start on this part now. Documenting what you do and how you do it takes much longer than people realize.
- Financial controls. Begin delegating financial duties, taking extreme care to not provide one person with too much control no matter how much you trust them. When preparing your company for absentee ownership there should be at least three people overseeing the financial operations. Lean on your CPA for assistance in this area. They are independent, trustworthy, and thorough.
- Staffing Considerations. Review your staff. If anyone is a weak link in the fence, replace them. You need a solid team of professionals to rely on while you are away. Meet with each person individually. Evaluate their work, appearance, future goals, and determine if they are working in your company for a job or if they see this job as their career. There will always be staffing issues. Who will make hiring decisions in the future?
Building The Plan
Start small. Once you have addressed all the items above and feel confident you have a solid plan in place begin by taking long weekends — or even a week if you are really confident. Let the company run itself while you take the family for a getaway. The first few times you will feel compelled to carry a phone and a laptop, but that will diminish after a while.
When you return spot check every area of your business, starting with the financials. Run your metrics on service board and profitability, and review purchasing and procedures in all areas. Make notes of shortcomings. Improve processes as needed for the next month and try again. Perhaps one time you will go camping with no access to phone or email for a few days. Sounds scary, right? It’s going to be okay.
Start taking longer trips, or “work” from home more often. Begin using video conferencing with your staff to check in.
The next step toward absentee ownership is to slowly and systematically replace yourself. Move away from technical work, delegate marketing and sales, and focus on the business finances and management decisions. Consider building a small team of advisors to share in the management decision discussions. These may be employees, trusted colleagues, or even customers in an advisory board role. As you remove yourself from day-to-day operations, you begin to find you only need to check in monthly to review the financial reports and keep the company focused on goals.
You should have a set of procedures on how to close the accounting books each month. Make a list and prepare procedures:
- reconcile bank and credit card accounts
- review purchases for customer invoices
- reconcile customer deposits and deferred revenue
- prepare financial statements and cash flow reports
- review profitability metrics against benchmarks
It will not take long before this become a monotonous routine. Before long, you can pass even this procedure to an outsourced accounting firm and your only job becomes reviewing the reports and collecting the profits.
Once you reach this point, your monthly visits to the office should be just long enough to handle a few odd items, pull financial reports, and have a little face time with your staff. At first, everyone will be on their best behavior on your scheduled day and on the edge of their seat in hopes that everything is covered. In about six months, you will become something akin to Grandpa coming for a visit. They are looking forward to seeing you, but life will continue on as usual, just as it is supposed to.
About The Author
Rayanne Buchianico owns and operates ABC Solutions, LLC, an accounting, tax, and business systems consulting firm serving all industries and specializing in IT firms throughout the United States. She is also a partner in Sell My MSP, a listing service connecting interested buyers with motivated sellers of IT firms. Rayanne is passionate about nurturing the transformation in owners of small businesses who become more comfortable and savvier with the financial aspects of their business.