Not all exit options are right for your business. A Management By-In or Buy-Out could be an attractive option worth evaluating.

 -Mike Warmington, Platform 1

Many people know about a Management Buy-Out when a person or team within your business becomes your exit option, generally over time.

A Management Buy-In is less understood. This is where an external person comes into your business while you transition out over time.

An internal person or team can be a great option, after all they are a known quantity and are loyal trusted employees.

However in many cases if your business does not have experienced senior leadership, it may be difficult to do. It’s not enough for you to just like them.

Why is This ?

We often hear a business owner say that “John” my Operations Manager will be my successor whilst the owner has never had a serious conversation about it with John.

If John, while knowing the owner is nearing retirement has never brought it up either, then he may not be entrepreneurial.

Not all people are entrepreneurial or leaders or have capital available. Someone taking over from you needs to have :

Capability

Capital

Compatibility

This person or team needs to tick all of the 3 C’s. The success of your business and your legacy depends on this.

So What is a Management Buy-In and How Can it Work ?

There are people actively in the market looking for a way to get into business ownership through working with an existing owner.

The fact that they can leverage off the owners experience and knowledge is attractive to them. They won’t cost you any more than a salaried GM but will come with significantly more horsepower to grow your wealth. Because they will gradually buy into your business they won’t leave for a “better offer”.

“Offering equity tips the playing field in your favour to gain talent for your business”

 An external person with capability,compatability and capital can be a great option:

• They will work like an owner, not an employee
• They will have come from a larger more complex role or have had previous business ownership experience and be skilled and enticed by “skin in the game”
• You will have the confidence to take a break from the business at times and improve your lifestyle
• It will allow you to work on the parts of the business you enjoy and are good at
• It will form part of your succession plan
• They will bring skills and fresh thinking to grow your business
• They will know how to harness technology to grow your business
• You can increase your wealth as you keep getting dividends as well as capital payments from any further tranches of equity

Finding a Business Partner and setting up a structure can be a challenging and complex process. It’s all about finding the right person through a competitive process and setting up a documented and independently guided process.

What Does This Person Typically Look Like?

– Actively looking for “skin in the game”

-Had a successful career but tired of “working for the man”. They may also have previously had a business

-A Growth Mindset – Believes in their capability to apply the skills they have acquired to grow a business

-Generally 40 – 55 years old  (does not need to be of course, but they are our current statistics)

-Have built up some capital and prepared to apply it to a business

-Understands and relishes being  hands on without the corporate trimmings !

These people are out there; however, you need to know where to find them and manage a process that ensures it is a success.

 Platform 1 specialises in using executive search techniques to find Business Partners with capability and capital  for business owners wanting to partially or fully transition over time.