Whether a company is in duress or not comes down to decisions about ownership, leadership, and governance.
These are the three key areas that buyers want to see in place.
Ownership—the person or partners or family who own the business.
Leadership—who is leading the company. As we discussed in chapter 2, if the owner created a job for himself, not a business that can run with or without him, that company won’t sell.
Governance—who is overseeing the leadership? Is it a Board of Directors? If your company isn’t large enough to have a Board of Directors, then you should consider having a Board of Advisors who know what to do in case something happens to the leadership.
Oftentimes, there is a lack of governance in privately held com- panies. This can present a problem to buyers because of the lack of oversight. If a good governing body had been in place, the owner would not have had to come out of retirement. That board would have pulled the guy who was hired to run the company. His mis- takes would not have been hidden. There would have been checks and balances in place. The board would have fired that employee and hired a competent leader. The board would have been in touch with the owner to apprise him of the situation and the solutions theboard was implementing. That business would have continued to be a success. In that scenario, the owner would not have been forced to come out of retirement.
How can you plan for the very long list of what can happen: natural disasters, economic recessions, lawsuits, and pandemics? First of all, you create an awareness of the unpredictable. You need to create contingency plans with solid leadership and a governing body in place to manage the unexpected. This can go a long way to help your business overcome what can appear on the horizon.
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