How to Communicate your
'Exit Plan' to Your Management Team
[fname], it is sometimes difficult to know how much information to share
with your management team. From "playing it close to the vest" to "open
book" management, different companies have different cultures to address
On top of deciding how much to share, you also need to decide when to share
information. The feeling is that employees and managers cannot always put
certain information into the proper context – this is particularly true for
an owner's exit from the business. Moreover, the concerns that many owners
have about their employees and managers is that they will see an owner's
exit as the end of their career and will begin looking for employment
As you consider a future exit, here are some thoughts as to how to handle
these delicate conversations with your management team.
Managers Are Thinking About Their Own Future, As Well As Yours
In many cases an owner's management team is younger than that owner –
sometimes by a generation. And someone talented enough to be considered for
a management role is also typically smart enough to consider their own
future. Also, as you well know, your talented managers are commonly being
recruited by your competition. So these managers are thinking about and will
sometimes eventually ask about the long-term plans for you and the company
so that they can think through their own futures. So, when you begin to
think about your exit planning, you have a few choices – you can either make
the managers part of the conversation and process or you can exclude them
from the conversation.
The Consequences of NOT
You have the option to not communicate with your management team about what
you are considering for your future business transition. Let's look at a few
scenarios that may apply to you and your key people.
In the first case, owners may be approached by an outside buyer and the
owner(s) may be thinking that a potential sale could result in a high
valuation. In most cases this could be a positive sign for the company as
well as the management team because buyers typically bring additional
resources to help move a company and the management team to the next level.
The challenge with this scenario is that sometimes owners are in a position
where they have made prior suggestions, or even promises, to the management
team that those managers would have a chance to one day own the business.
But when the outside buyer comes knocking on the door, it is hard for the
owner to refuse the inquiry
owners who are in this position, it is understandable that you would not
want to initially be so open about these conversations. However while you
are keeping the potential sale of your business a secret from your
management team, you'll be taking on a huge responsibility including doing
your job at the company while also needing to gather information and take
initial meetings without your support team behind you – this can be a lot
more difficult than many owners anticipate.
As an owner who is leading this double life, you also know that eventually,
a potential buyer will want to meet the managers and interview them prior to
a sale transaction being completed. At that point in time the managers will
discover how far you've taken a potential transaction without them being in
the know and it will be a hole that you'll need to dig out of.
Some of these owners decide that they are better off preparing for how and
when they communicate a potential sale transaction rather than defaulting to
keeping everything a secret.
Consider Using the 'Future Investor'
One favorable way to introduce the idea of a possible business transition to
your managers is through the language of a 'future investor'. This
communication strategy simply includes letting your managers know that, as
the owner, you are constantly seeking ways to grow and improve the company.
And, you are considering bringing in an investor to assist with the
company's growth. By keeping the idea broad and centered around the
needs of the business (and not your personal desires), and avoiding a
discussion regarding your (potential) departure from the business, managers
can align with the future and growth of the company.
This conversation allows a path forward to introduce ideas such as
'attracting capital', focusing on the balance sheet, improving profit
margins, and tracking and monitoring profitability and trends in the
business. The conversation is not disingenuous. These are things that any
investor in your business – including you - should be interested in knowing
and paying attention to. Buyers are investors, no matter how you slice it.
So using the 'future investor' conversation can be a very helpful bridge to
involve your management team.
As a result, this conversation may help your managers focus on the
importance of current profitability and successful operation of the business
in order to better position the company for such investment. By positioning
the conversation with your managers in this regard, you remove the personal
aspects of the exit planning and communicate the future growth and potential
of the company to your managers. If you want to go another step further, you
can add to this conversation an incentive plan that further aligns the
managers' interests with a growth in the profitability (and value) of the
The Range of Emotions that Managers May
Despite the effectiveness of a 'future investor' conversation, some owners
will still be concerned that managers will see the owner's exit as greedy,
selfish and only looking to 'line their own pockets'. These owners
often-times get caught up in the idea that cashing out of their business is
a selfish act leaving the team on their own while the owner rides off into
the sunset with a large payday. In reality, not preparing for the company's
future is likely a more selfish act. Owners should consider how and where
their employees will benefit in their careers as they contemplate these
Remember that you've worked hard to build your business and hopefully,
you've made good choices when it comes to your management team. Managers who
have good business sense should understand that exiting a successful
business is a goal that can benefit all parties, including themselves. As
long as you can find a balance between personally reaping the rewards of the
sale while still protecting the future of your employees and the company
itself- then typically your managers and employees will be supportive
because they will benefit from the new ownership – certainly more than if
you made no plans and allowed the business to fail. Or, you may have made
the alternative choice of not communicating any of your exit plans to your
Communicating your exit to your employees and your management team will have
to take place at some point; it's unavoidable. By strategically planning how
you will position your future exit plans, who you will involve, and at what
point in the transaction, the process most likely will go much smoother for
you, your management team and your employees. Remember that people and
businesses go through cycles and, once educated on these issues, it is
typically not beyond a manager's ability to understand this and to be
supportive of your decisions, making for a more successful exit for you and
As always if you need some advice, you're
welcome to email me of call me here at the office at 281-993-4530.
Charles Wilson, CPA/CFF, CGMA, CBEC
Charles Wilson, LLC
307 S. Friendswood Dr, Ste B-2
Friendswood, TX 77546
Charles Wilson, CPA/CFF,
CGMA, CBEC is a Certified Business Exit Consultant and is affiliated with
Pinnacle Equity Solutions, Inc., an Exit Strategies Training and Solutions
company. Parts of the content in this email are taken from previous
Pinnacle Equity Solutions, Inc's. newsletter library and website in
accordance with Charles Wilson's certification in Pinnacle's Certification
and Membership Program. All Copyrights are the properties of Pinnacle Equity
Solutions, Inc. and Charles Wilson, LLC and their respective owners.