Exit Strategy... Part One

If you are a privately held home builder chances are you have been thinking a lot about your future lately. How long do I want to continue doing this? If I step out, who will run my company? Should I consider selling? Is my company poised for sale? What can I do that will make my company more valuable?

First, take a hard look at your company. Is it a sustainable organization ... one that can function effectively without your daily involvement? This requires more than efficient systems, strong land positions and sound profitability. It requires a solid management team with clear vision, responsibility and most importantly, authority. The more empowered and capable your team leaders are today, the more likely you are a person who can let go tomorrow.

Or, do you utilize a basic command and control structure where you drive the vision, policies, procedures, etc. and your staff is responsible for implementation? If your managers require your advice or blessing on most decisions, it might indicate you thrive too much on daily operations and would have difficulty letting go. The structure works (usually at lower volume levels), but it is too reliant on one individual. To put it simply: how self-reliant have you conditioned your team to be? If you get run-over by the proverbial beer truck... well, you know the rest. My vote is for a sustainable organization. It offers more flexibility, fosters growth of the management team and can handle change better.

So, why not sell and just move on? You could, but why not expand your options? Companies in an acquisition mode tend to look more favorably at builders with strong management teams who can continue running things once a buyout is complete. These companies usually lack the bench strength to staff it themselves. So it is of direct benefit to everyone involved if your incumbent management team is first rate, including a strong successor poised and in place. Further, you have a more efficient, capable and sustainable organization.

Finding a Successor...
If none is in place now, you'll need to find one, internally or externally. During the last several years, we have worked on several heir apparent assignments. They are the most challenging searches of all. The match goes way beyond skill sets, experience and accomplishments. It becomes personal... really personal. Such searches are akin to a parent handing over their toddler to new guardians. You should approach the process with the same concern, compassion and caution as one does when selecting a spouse. Otherwise, the end result will be disappointing.

On the other side of the equation is your potential successor. Recognize that top shelf candidates will not hook their wagon to your dream unless they are convinced you can (and will) let go. They have heard the stories of similar scenarios gone awry: the owner who micro managed, the authority that never materialized, the staff who did an end-run around the new president, etc. Financial constraints aside, these qualified and driven candidates (in their own right) would face less risk by opening their own business rather than taking over yours. Therefore, expect the really good candidates to investigate your opportunity thoroughly... with a cautious, even skeptical eye. Anything less should be a cause for concern.