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The Importance of Building an Executive Team

By Generational Equity

06/14/2021

Recently Vistage, the world’s largest CEO coaching and peer advisory organization for small and midsize businesses (which we have a strategic alliance with), published an article that reflected on the fact that many CEO’s face the challenge of feeling very isolated in their roles.

Based on a survey by RHR International, it was found that half of CEOs experience feelings of loneliness in their careers, 61 percent of whom believe that this feeling hinders their performance.

The insightful piece by Vistage, entitled “Why Many Leaders Feel Lonely at the Top”, provided a number of ways to reduce this feeling of being isolated and alone. One of the most important, which we have also found has a huge impact on potential buyers of businesses, was:

  • Build a great executive leadership team to work with you

This is also one of the critical steps we have found in building a “buyer ready” business. Another recent Vistage article also summed this up nicely:

Where Marcie Simpson, President & COO of Nycote Laboratories, stated it this way:

  • Delegate, trust, then release!

Both of these excerpts from great articles point to the same issue: Build an executive team, delegate decisions to them, and then get out of the way! And in doing so you will create a viable buyer ready business that will give buyers confidence in the longer-term viability of the organization once you leave.

We stress this concept with our clients as we consult with them in the business building/business prep consulting services we offer. Simply put, if you are the key to your organization’s entire success, your business will most likely demand a “discount” valuation from buyers when they dig into your operations during due diligence.

Conversely, if you have built a solid middle-management team, a group of leaders that can make and implement critical business decisions, your company will likely command a premium in the market.

So why do so many business owners neglect this key area of the business?

For many it comes down to ego: If my team becomes more important than me, what does that reflect about my role? For others, it is simply a matter of not making it a priority, although most will say they would like to develop an executive team. For a few, the reality is they believe that they are just too busy to recruit, hire, and mentor a team.

No matter what the real or perceived reason, failing in this area will not only lead to isolation at the top (as Vistage points out), it could lead to a serious diminution in the value of your business to many buyers.

Here are some questions that you can ask yourself to determine how dependent your company is on you, or how “buyer ready” your company may be:

  • When was the last time you took a true vacation (defined by the National Vacation Association as not checking your iPhone constantly and calling into the office less than three times an hour)?
  • How often do you allow your execs to make decisions (or even fail)?
  • Is your bio the longest on the About Us page on your website?
  • If you became seriously ill and were forced out of the business for an extended period, who would take over? What would happen to the company?
  • Have you spent any time grooming your replacement? Is there even someone on board with the skill-set required to replace you?
  • Is your ego too tied up in the business?
  • Who do your clients call when they have an issue/problem? You or your staff?

The answer to these questions can reveal to you whether your business is in the position to command a premium from buyers or if you have some work to do to get into that position.

Now for some of you, the idea of creating a team, delegating to them, tracking their progress, mentoring and guiding sounds like too much work. And that may be true for you depending on where you are in your life’s journey. If you are ready to move on now, then that is fine as long as you don’t regret it later by “leaving chips on the table”.

The good news is that building a “buyer ready” business is not that daunting and can be done fairly painlessly. Here are some real-life stories from clients that have participated in our Generational Consulting Group strategic and tactical growth programs:

As each of these attests too, even if you think creating a valuable business is going to take way too long or require far too much work, the longer-term payoff is immeasurable and, in some cases, “beyond the imagination” of the business owner.

So if you are ready to take your business to the next level and develop a leadership team that is functional, creative, and laser-focused (allowing you to eventually take a vacation), then you need to contact us and discuss how we can guide you on your exit journey as well. Reach out to us at 972-232-1121 or fill out a contact form and we will be in touch to have a confidential discussion with you about your goals, dreams, current reality and how we can help!

Carl Doerksen is the Director of Corporate Development at Generational Equity.

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