“After four years of attempts, today I finally stopped trying to buy the company. I quit. It was time. I anguished over whether or not it was the right thing to do—for me, for my family, for those I’m leaving behind, for my clients and, yes, for [the founder]. Although I think only he could have prevented this from happening, I’m trying hard not to be angry. It just didn’t work out, that’s all. In that sense I think I left the company just in time—soon I would have gone over the edge into bitterness.”
I wrote those words in my personal journal on Friday, May 25, 1997, the day the acquisition plan of the company where I had become president finally fell apart. Today, a quarter-century later, the firm I subsequently founded is in the midst of a successful (and, so far, smooth) transition plan of its own.
Having learned the hard way how it feels when a succession plan fails, my business partner and I were determined to do it right when our turn came. Looking back, I now realize that began on day one.
“Day one” is a common phrase that became more notable in business circles when Amazon CEO Jeff Bezos opined on it in his 1997 shareholder letter. “This is Day 1 for the Internet and, if we execute well, for Amazon.com,” he wrote. The idea was that if the company would always maintain an obsessive focus on customers (as any company does in the beginning), Amazon would thrive.
Clearly there was something to that, and it has become somewhat of a mantra both within Amazon and beyond.
But “day one” is more than a mantra or even a helpful metaphor. If you’re an entrepreneur, it’s the day your succession plan begins.
That may sound strange. After all, when you launch a company you’re thinking about survival, not succession. You’re trying to do a dozen jobs at once and are more concerned about keeping the lights on than cashing out or perpetuating your legacy.
You not only have to provide whatever your core competency is to your customers, you have to raise capital, lease your space, answer the phone, do the books, finance the equipment, manage your marketing, lead the sales efforts and probably even take out the trash
Yet slowly but surely, as you grow, you let go of one job, then another, until you become an operating enterprise with a real organization chart. Depending on how big and how quickly your company develops, it may be a while before you’re down to having a single job.
But whether you realize it or not, you’ve already begun the succession process based on the responsibilities you’ve chosen to give up and the type of people you’ve placed in key positions.
That effort will culminate when you let go of the last job you have — ideally one that the company is benefitting from but no longer dependent upon. It’s on you to create a framework and timetable to get there, or risk letting circumstances unfold haphazardly.
Even if you’re not the original founder, the principle still applies.
The approach you should take depends in part on the length of runway you have, and the longer the better. Still have plenty of vision and stamina? You have the luxury of long-term planning. Nearing the end of your energy or interest? You may have to triage a sale.
Beginning formal planning seven or more years in advance of your anticipated exit is ideal, because it provides the most flexibility and opportunity to ensure that your succession plan — and the company itself — fires on all cylinders at the correct time. But any lead time is better than none.
Too many entrepreneurs neglect succession planning, thinking they’ll one day simply sell the company to an outside concern and walk away. Other founders blissfully keep their heads in the sand as if they can run things forever. But an external buyer isn’t going to be interested in acquiring a house that’s not in order — at least not at anything more than a fire-sale price — and it’s unreasonable to expect your internal team to step up before the company is ready to thrive without you.
Whether your successor comes from outside or within, the more you can effect a smooth transition and the more secure the organization’s future will be. (Not to mention your own, if you have an earnout or are financing the sale in any way.)
Whether it’s day one, day 1,000 or (as in my case) nearing day 10,000, operating without a succession plan is like skydiving without a will. You can do it, but there’s some peril for those you might leave behind. The younger you are, the more likely you are to get away with it, but sooner or later the inevitable will come to pass. The earlier you begin planning a graceful exit, the better able you’ll be to make it happen — and make it your crowning achievement.