Helping Founders Pass the Torch to Partners, Safely

Every exit is an act of faith. Founders step into an uncertain future when they take the plunge. For many, this will be the largest financial event of their lives. They’ll rely heavily on exit planners to get the numbers right – valuation, deal structure, taxes, financing, timing – but underneath those numbers is a related question: Who will carry the business forward, and if there will be co-owners, how will they work together once the founder is gone?

When people ask me why I implemented EOS in my own companies and now with other leadership teams, I don’t start my response with tools or terminology. I start with outcomes.

EOS works because it addresses the real problems business owners face every day: lack of clarity, inconsistent execution, reactive leadership, and misaligned teams. Over time, I’ve found that its value consistently shows up in four core areas. These are the drivers that really matter to me.

Every sale of a business requires negotiation.  The buyer is purchasing the future potential of the company and is aware that they can only learn so much in a due diligence process.  The seller’s strong management team, documented procedures, and portfolio of recurring revenue clients, and other value drivers will move a buyer forward. And, if a seller wants to further strengthen their story at the negotiation table they will be prepared with a documented strategic plan for future growth.

Helping business owners clarify and establish their post-exit bucket list, financial, values-based and legacy goals, and choosing an exit route that provides them with the greatest opportunity to realize their goals, is what we most enjoy about the work we do. 

Establishing clear goals is essential and foundational for a successful exit plan.  For example, if an owner's passions now fall mostly outside of the business, selling to a third-party or an ESOP might afford them the most time and money, sooner rather than later, to pursue those non-business related interests.  Or, perhaps a sale-to-insiders or children could make the most sense if an owner has strong desires to transfer the business to those who helped build it, or to keep the business in the family. 

A business book that I read the book when it was first published, and find helpful to revisit regularly, is Execution: The Discipline of Getting Things Done by Larry Bossidy and Ram Charan. The authors’ definition of “execution” is particularly insightful and helpful when considering how an owner should build a business that is transferable, and in planning their eventual exit from the business

“Fundamentally, execution is the discipline of systematically exposing reality and acting on it.”

If you’re a business owner with a desire and vision for selling to key employees who have helped you build the business, the following is a short list of important issues to seriously consider prior to moving forward. And, the sooner you begin the greater chance of a successful transition.

An ESOP, or an Employee Stock Ownership Plan, can be an attractive exit route for business owners.  It can provide a path to “take chips off the table”, sustain the business culture, motivate employees, and ensure that employees have a future with the business.  Selling owners can also have more control over the timing of their departure from the business, with the most enticing aspect often being the favorable tax consequences of a transaction.

Up until a successor takes over as an owner, they have typically only ever been an employee.  Therefore, it is critical to help them begin adopting an Owner’s Mindset prior to handing over the keys.

Owners and employees generally think differently.  I remember when I first became the owner of a company.  I co-owned a restaurant development company, where developed our own restaurant chain and also developed a territory for a national franchise.

In some cases, employees are capable of successfully operating a business, but lack the capital to acquire it. This may become the last resort for a seller, who takes a note rather than close the doors. This approach leaves the seller in the role of silent partner, hoping that the employees can maintain the business well enough to pay the debt.

In business succession planning, preparing for an owner’s death is standard, with buy-sell agreements outlining the steps to take. However, a partner’s permanent disability—a more likely scenario—is often overlooked, leaving businesses exposed to financial, legal, and operational risks.

Without a clear plan, a disability can disrupt ownership, strain cash flow, or lead to disputes. Disability Buy-Out (DBO) insurance addresses this gap by funding a buy-sell agreement when an owner becomes permanently disabled.

If you're a business owner planning to exit, one thing you must master to ensure a smooth transition and maximize your business’s value is delegation.

Too many management teams, and the businesses they run, are overly dependent on their owners. This type of dependency can deter potential buyers or significantly reduce valuation. 

Delegation isn’t just about offloading tasks; It’s about building a self-sustaining organization. Below are the top three areas to focus on as you prepare to exit.

Often business owners are exhorted to build their business with "the end", or their eventual exit in mind.  This can be a good idea in that it lends toward building your business to have "transferable value", or value that someone else will want to buy and own when you're ready to leave.  Value apart from you the owner.

With the help of her Exit Planning Advisor, Betty has decided that a sale to a third-party buyer would best accomplish all of her goals (financial; values-based; legacy).

The process of quantifying her business and personal resources, with a financial gap analysis, has been helpful to Betty in determining her departure date in six years. She now knows the current fair market value of her business, and how much it will need to increase in value for the attainment of her financial objectives at sale in six years.

A small business owner named Simon understands how the cash flow of the business drives his current income, and as well how it would eventually impact the valuation and sale price. However, Simon lacked awareness of elements of potential exit routes that demand cash flow.

Training your Business Successor is crucial in ensuring a smooth transition of ownership and leadership. The following are critical elements to consider when preparing your Business Successor…

There is much to do to realize a successful business exit. BUT!!! The most challenging aspects of an owner’s exit tend to be emotional. If not faced and handled well, they can result in owner procrastination, inaction, and regret. Following are common emotional hurdles that many business owners encounter.

John was excited as “today is the day!” Twenty-five years ago this month he had started his home remodeling business with a truck and a tool belt, and today at 3pm he was going to the deal table to sell his business to a much larger remodeling company. It would be a strategic purchase for the buyer who was willing to pay a premium with a goal of expansion in the region. With the check received today, John knew he could now do everything he and Kim had thought about doing for years — travel, more time with the family and for hobby’s and other interests they both enjoyed.

The end of each year is an ideal time for a sole business owner to review and update their Business Continuity Instructions. An owner’s death or permanent incapacity often leads to the failure of a business, resulting in very difficult consequences for the family, employees, and customers. Written and distributed Business Continuity Instructions will provide those left behind with essential short-term and long-term instructions regarding the continuance of the business.

As a business owner, your company is more than just a livelihood—it becomes an extension of your identity, a vessel for your dreams, and often the center of your world. For nearly two decades, Solly’s Bagelry was my life. Co-founding and growing it into a cherished Vancouver institution brought immeasurable pride and purpose. But when I exited the business, I faced a challenge I hadn’t fully anticipated: finding my footing in a world where I was no longer "Joe from Solly’s."

As a business owner, your future exit is a significant event. That's why we publish the "Exitreadiness® Checklist" annually to assist you in planning.