Owner Conversations: How Hard Can It Be To Replace The President?!
Business Owner (Mark): I’ve been thinking a lot about the future of the company. Right now, everything runs through me—customers, vendors, decisions. That’s not sustainable, especially if I want to position the business for a sale. Executive Recruiter (Dana): That’s a common inflection point. You’re looking to bring in a president who can step into those relationships and shift the company away from being owner-centric. Mark: Exactly. I need someone who can take over day-to-day leadership and become the face of the business. But they also have to fit our culture—we’ve built this company on trust and long-term relationships. Dana: Culture fit is usually the hardest part. Finding someone with the right experience is one thing, but aligning with your values and leadership style—that takes time. Realistically, you’re looking at 6 to 12 months just to find the right candidate. Mark: That long, huh? Dana: For the right person, yes. And even then, hiring is just the first step. Once they’re in the role, it typically takes another 12 to 24 months to truly know if they’re the right fit—whether they can build those relationships and lead effectively. Mark: So, this is more like a two- to three-year transition, not a quick fix. Dana: That’s the right way to think about it. It’s a process—search, onboarding, relationship transfer, and then proving performance. But if done well, it significantly increases the company’s value and makes a future sale much smoother. Mark: I’d rather take the time and get it right than rush it and regret it. Dana: That mindset will serve you well here. Fade out The Overlooked Thought to Leadership One of the largest reasons I attribute to why 75% of business owners regret selling their company is the prior lack of understanding of all the selling process complexities and the time needed to make adjustments to their business, personal, emotional, and financial aspects prior to selling. One of these obstacles is that the value of the business increases as the owner-centric dynamic decreases. For a new owner, one of their toughest challenges is quickly transitioning relationships that were likely built on years of trust between the original owner and key employees. This transition has to happen in a matter of months to ease concerns and prevent negative discussions that could drive customers or employees away. Of course, if those relationships are already secured with a new president or key manager, the risk of losing customers and employees is greatly reduced. These are key assets on which the company’s value is based. I often hear from owners the phrase, “I’ll just leave that up to the new owner.” However, comments like that often quickly scare off the majority of buyers, if not at all. If a buyer has to go through the trouble of securing a key manager or president with a new contract, it’ll often cost more than if the seller had handled it themselves. And where do you imagine the new buyer will place the extra cost? They simply reduce the purchase price in the negotiations. Another important point, unless the buyer wants to be the president, the risk of buying a company and finding a president to run the company that they do not fully understand can be a huge risk. If, say, a private equity firm does go through with the purchase because the company is large and worth the risk, they will likely offer a significant discount to account for that uncertainty. Not many private equity firms have CEOs with the industry-specific experience needed to step in immediately. Think of it like selling a home. If you have to replace the old water heater, it may cost you anywhere from $600 to $2,500, depending if you or someone else installs it. But imagine the buyer learning the house needs a new water heater, well, they just reduce their offer by 5-7k. Why? Because the inconvenience of replacing it after the closing comes with a price tag. Now consider the conversation above. It’s not so easy to find a leader replacement who has experience but also fits the company culture. Also, the owner may need to go through two or three candidates before finding the right fit. This process is similar to a Navy SEALs Hell Week; all new potentials have qualifications, but only real world experience in your company will reveal the right fit. This is not an issue to be left up to business brokers or investment bankers, unless you wish to ask the broker or banker to just negotiate a large discount in the price of your company. Their role is not to fix your company, but rather assess its value, clean up what they can, and present the business in the best possible light to find a buyer who will stomach both the price and existing flaws. The regret often shows up once you realize that you could have earned significantly more (in some cases millions) had you taken the time to understand the complexities of the selling process, assess your business and personal (emotional, financial, taxes, etc.) situation prior. Instead, you realize that maybe you rushed through the sale because of business burnout, pressure from attorneys, bankers, and buyers to close, or the desire to achieve a certain sale price to prove your success. That’s not to say those are all the reasons, because they’re not, which is exactly why I write these newsletters. Thank you for reading. If you have a moment, I’d appreciate it if you could, like, subscribe, and leave a comment. Austec Pre-Diligence Risk Exposure System