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Should I Sell My Business or Hire a CEO?

Over the years, we’ve engaged with hundreds of entrepreneurs each wrestling with a pivotal decision: how to scale back their involvement without stepping away from the legacy they’ve built. This crossroads is no small choice: wanting greater freedom yet tied to the responsibility of their life’s work.

Many people find themselves deciding between two of the more visible paths here: either transitioning leadership through hiring a CEO, or opting for a complete exit by selling the business.

This choice is never an easy one, since the cost-benefit considerations are not just financial, but emotional, and will shape the lifestyle you have afterwards. That’s why today we’re going to boil down the decision into some of it’s main considerations, so you have a better sense of what your path forward might look like.

QUESTIONS TO ASK YOURSELF BEFORE SELLING YOUR COMPANY OR HIRING A CEO

Exiting your business is a lot more nuanced than starting one, and the path you take will of course depend on what your goals are. There are plenty of reasons why you might want to sell your company, but first consider where you stand on questions like these:

  • What’s your timeline? When do you want to sell? If not right now, you will need to have an open conversation with the new CEO about your plan.
  • How much is enough? Get a valuation to know where you stand. What would a reasonable buyer pay now? Should you keep going to get it higher?
  • How much passion do you have left? Are you still excited about the business? Do you believe in its future?
  • What is your risk appetite? Are you willing to take the risk of selling now, or would you rather wait and see how the business develops? Remember, doing nothing has its own risks.
  • Are you having fun? Are you still enjoying the work? Is it worth the stress and effort?
  • Do you want to double down or reinvest? Do you have other ideas or businesses that you’re interested in pursuing? Would you rather sell and take the money, or reinvest in the business?

Once you have a clear idea of these answers, consider both paths to see if there are any obvious dealbreakers.

COMPARISON: SELLING YOUR BUSINESS VS. HIRING A CEO

THINGS TO CONSIDER IF YOU’RE THINKING OF SELLING YOUR BUSINESS:

  • Financial gain: Selling your business can provide a significant lump sum of money, which can be used to fund new ventures or retirement.
  • Emotional considerations: Selling your business can be an emotional process, as it involves relinquishing control and leaving a legacy.
  • Preparation: Preparing your business for sale can be a time-consuming and complex process, but it is important to do so in order to maximize its value.
  • Market timing: The optimal time to sell your business will depend on market conditions, so it is important to seek expert advice.
  • Freedom and responsibility: Selling your business can provide you with freedom from the day-to-day responsibilities of running a business, but it is important to carefully plan for your financial and lifestyle changes after the sale.

THINGS TO CONSIDER IF YOU WANT TO HIRE A CEO:

  • Operational continuity: Hiring a CEO can provide your business with fresh perspectives and new ideas, while also ensuring operational continuity.
  • Role transition: Hiring a CEO can shift your role from daily management to strategic oversight.
  • Finding the right fit: Finding the right CEO is a challenge, as it is important to find someone who is aligned with your company’s culture and vision.
  • Cost vs. benefit: Hiring a CEO can be a significant financial investment, but it can also lead to business growth and personal freedom.
  • Strategic transition planning: Defining clear roles and responsibilities for yourself and the CEO is important to ensure a smooth transition and maintain business stability.

THE PROS AND CONS OF HIRING A CEO VS. SELLING THE BUSINESS

Let’s take a look at some of the main differences here:

Factor
Selling Your Business
Hiring a CEO

Financial gain

Significant lump sum

Potential for increased business growth

Emotional considerations

Can be an emotional process, giving up something you built

Can be a challenge to find the right fit; still need to hand over the reins

Preparation

Time-consuming and complex

Can be time-consuming, but less complex

Market timing

Important to consider market conditions

Less important, but still a factor to consider

Freedom and responsibility

Provides freedom from day-to-day responsibilities

Shifts role to strategic oversight, more flexibility than staying in charge

 

However, let’s not get stuck in a false duality here: your options are by no means limited to these two paths.

YOU HAVE MORE OPTIONS THAN JUST SELLING THE BUSINESS OR HIRING SOMEONE

In your entrepreneurial journey, sometimes you’re better served being an investor, rather than a founder or operator. You really need to exercise all your options if you want to be a good steward of the company, but too often people don’t realize they have more options than the four or five options they initially considered.

You have a lot more choices now than you did 10 or 20 years ago. Many clients come to us without knowing that the options for selling or transitioning your business have grown a lot in recent years. For instance, private equity investments into private companies open doors that weren’t there before, giving owners more flexibility around how they move on.

In other words, in today’s market you’ll have an easier time finding a path that suits your specific needs and goals, whether that’s securing a financial future, ensuring your business’s legacy, or both. The market may influence the financial aspects of your exit, and while you can’t predict the timing of life’s changes, the manner of your exit is largely within your control.

Consider just a few of the different options you have, each offering a different approach to achieving your exit goals:

  • Strategic sale: Selling to a competitor or a business looking to enter your market.
  • Management buyout (MBO): Transitioning ownership to your company’s management team.
  • Employee stock ownership plan (ESOP): Allowing employees to become partial owners, ensuring the legacy of the business.
  • Merger with another company: Combining forces to enhance value and expand market reach.
  • Passing to a family member: Keeping the business within the family to continue the legacy.
  • Initial public offering (IPO): Going public can be a way to exit while potentially retaining some level of involvement.
  • Liquidation: When other options are not viable or desired, liquidating assets is a last resort.

Each of these options carries its set of advantages, but you’ll want to explore the full breadth of your options, so talk with investment bankers, CPAs, and legal advisors early on. This can help you navigate the decision and end up with the result that benefits you most.

This is more than just about getting the best price; it’s about creating a smooth transition that respects your hard work and vision for the business’s future.

By Craig Dickens

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