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As a bank founded on the entrepreneurial spirit, women business owners are a group that City National Bank is especially passionate about supporting. Breaking down the barriers that limit women's ability to prosper as independent business owners is critical to our collective economic future. That's why we undertook a research initiative to better understand the experiences of women entrepreneurs.
This article is adapted from a portion of that report. Download the complete report or read more articles based on it here.
Most women business owners find that their company becomes much more than a job. It's an essential part of their identity. They don't like to think about retiring, selling the company or passing the torch to the next generation.
In fact, most women business owners interviewed for our report expressed feeling overwhelmed and stressed when it came to their succession strategy.
Planning for an eventual exit, however, is an essential part of the business journey. It can ensure that business owners have the resources for the next stage of their lives and can provide a legacy for their families. It will enable their companies to continue successfully even after they no longer play an active role.
Many women entrepreneurs have poured so much of themselves into their businesses, emotionally, financially, personally and professionally, that it's hard to imagine stopping. However, most acknowledge that someday they would like to step back and spend more time on themselves and their families.
Some business owners feel they are leaving a legacy behind for their children and hope their children will continue with the business. Others may have a trusted employee whom they feel is ready to take over. Others may want to simply sell the business and move on. Regardless of whom they plan to hand the reins to, the succession stage requires a lot of planning.
“A business is yours. You can pass it down," commented Jamila, the owner of a furniture restoration company we interviewed. "My goal was to build a legacy instead of putting my life's energy into somebody else's dream."
Know When to Pass the Torch
Regina, who founded a wholesale jewelry business in New York more than 30 years ago, has formed long-standing personal and professional relationships. She also refers to herself as a collector of people, each of them a part of her professional family.
When she retires, she knows it will be difficult to part with these people. But she is also concerned about her ability to keep up with a rapidly changing industry.
“The dinosaurs are dying off in my industry, and younger people are coming in. I'm in the middle, which is a good thing," she explained. “I'm not super tech-y, and I don't want to learn a whole new technology to run my company. I'm 52, and I hope in my 60's I'm on a beach somewhere."
Practical Steps for Planning Succession
1. Identify a Successor
The first step toward any successful transition may seem obvious, but it's often quite difficult. Business owners have to identify someone who is able and willing to run the business. This can be an adult child or a longtime employee. It may even be a competitor who is willing to buy the business out. Getting past this first step often becomes one of the hardest parts of succession planning.
Business owners should make a list of the skills and personal qualities that they see as essential to running their company. Then they can begin talking to their preferred candidates and helping them understand the leadership role.
Ideally, there should be a transition period in which the new leader learns alongside the founder. This allows the new leader time to get familiar with the company, staff and business model. After this transition period, some women founders stay on in an advisory capacity. Others exit completely.
2. Start Planning Immediately
In a perfect world, succession planning should start on Day One, but generally, five to seven years out is a realistic time frame to ensure that everything is in order when it is time to say goodbye.
If the entrepreneur is selling a company, they'll need to get an independent appraisal of its value. The new owner may require financing to purchase the company. A business broker who is managing the sale can present a variety of financing options.
3. Have Post-Business Goals
Business owners should also think carefully about what they'll want to do after they've exited their companies. Some may want to retire, travel more or spend time with loved ones. Others may want to start another company and become serial entrepreneurs.
For many women business owners, this succession phase is as exciting and nerve-wracking as when they first started their company – and it requires just as much planning. It's normal to struggle with doubt and fear about such a big change. But remember, just like when launching a business, the journey from here is up to the entrepreneur.
Download the full report, From Inception to Succession: The Six Stages of Women's Business Ownership, here.
The Stages of Business Growth
This article is for general information and education only. It is provided as a courtesy to the clients and friends of City National Bank (City National). City National does not warrant that it is accurate or complete. Opinions expressed and estimates or projections given are those of the authors or persons quoted as of the date of the article with no obligation to update or notify of inaccuracy or change. This article may not be reproduced, distributed or further published by any person without the written consent of City National. Please cite source when quoting.
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