In baseball, there is something called a “rally killer.” This is when you have a rally going and something happens that “kills” that rally. I have learned there is also a prevalent rally killer in business succession planning.
Perhaps you are grooming someone to take over your job someday. You have been running your business through the ups and downs all these years. You know you don’t want to die at your desk. You are starting to feel the burnout growing. In the quiet moments, when you are honest with yourself, you know who the one that is slated for this job. You have invested many years in this individual and think they have the capability to do the job someday. You are not sure when, but you are hanging your “retirement” hat on them, whether they know it or not.
Then… they quit and go start their own company. Yikes!
Unfortunately, this is all too common. Your great successor leaves you breathless and kills the rally you had going. You don’t even know why. Make sure it is not because of this…
Whatever you do, avoid pilfering the proverbial “coffer” whenever you want.
Granted, this is completely legal and the owner’s right. However, that does not mean it won’t make your best successor leave you high and dry at this critical time. So why is it that this drives employees away?
I have a good friend and she was the best restaurant manager in Louisiana, if you ask me. But, finally, she quit and left the restaurant owner to start her own restaurant. Why? The only time the business owner would show up would be to clean out the cash drawer. The perception was that she worked her fanny off, day in and day out, just so he could come in a clean out the earnings the next day. This single practice led my friend to quit and venture out on her own.
Make sure this is not you.
No one questions your right to do so as the business owner, but your executive-in-training, may think that the occasional or frequent grabs for the cash are crippling their efforts to run the company. Perhaps you have had arguments or heated discussions along these lines already? Perhaps they are trying to use the cash to alleviate debt or invest to build a stronger product, brand, or following. You do not want to send the message that instead of helping build the company that builds their future, you are pulling the rug out from under them.
Wait a minute, does that mean you shouldn’t take distributions? Of course not! Somehow you must be compensated for the risk and sleepless nights that you shoulder. The solution is agreed upon, regular distributions. I know it sounds quite simple; however, this is a very powerful solution. If an amount or percentage for regular distribution to owners is previously agreed upon, future owners stay engaged knowing the rules of the game and you, as the business owner, get the distributions you desire. If someday you do want to step aside on your own terms and let them run the company, this is a critical mainstay. This simple solution makes it clear how much cash is available for business operations and expansion and you can have access to the funds you need without killing the rally.
