M&A Blog Petr D.

How can I determine when it is the right time to exit?

Transferring the company to your successors is a long-term process – begin early, prepare both the successor and the company, and ensure that everything is well planned.

Are you planning to pass on your company to your descendants but unsure how to determine the right moment? Timing in the transfer process plays a crucial role, so we provide you with a few tips to help you assess the right time to exit the company. With these insights, you can effectively time the entire process.

 

Think Ahead

Transferring a company is a long-term process that can take several years. It involves training your successors, gradually transferring responsibilities, and integrating them into the company's operations. This process may culminate in a trial period for the new management under your supervision. By considering these steps, you will ensure that you, your successor, and the company are prepared for your definitive exit from the business.

The entire process typically takes around five years, so it is not advisable to postpone this decision indefinitely – it is important to think ahead – there may come a time when managing the company exceeds your capabilities, and then there will be no opportunity to react in time. Therefore, it is essential to estimate your remaining strength in advance so that it lasts for the duration required to transfer the company.

Prepare Your Successor

In addition to your own strengths, it is essential to consider the readiness of your successors who will replace you. It is not sufficient for your successor to simply reach a certain age. The successor must be adequately prepared to acquire the necessary knowledge and skills to ultimately lead the entire company independently.

This may require appropriate education or qualification courses, as well as practical experience gained either directly in your company or in another organization.

When selecting courses and practical experiences, focus on ensuring that your successor acquires the following:

·      Theoretical Knowledge – through appropriate education or qualification courses (for example, knowledge of law, economics, business management, etc.),

·      Practical Skills and Habits – acquired through experience from the daily operations of the company,

·      Overview of Internal Processes – if the practice takes place directly in your company,

·      New Perspectives and Inspiration – if the successor gains experience in another company, they can bring new methods or ideas,

·      Ability to Make Independent Decisions and Take Responsibility – which is crucial for the future leadership of the company.

Furthermore, you should not underestimate the relationship of your successor to the company – if you immediately involve them in a leadership position without them having built any relationship with the company (for example, through gradual career growth), there is a risk that they will not perform their role with the necessary diligence and responsibility. However, gradual growth will allow them not only to understand the daily realities of operations but also to gain the respect of employees and a higher degree of empathy towards their work. Through natural involvement, they will also become acquainted with informal ties and the behind-the-scenes workings of the company, which are often irreplaceable experiences for future leadership.

The sooner you start involving your successor in the company's operations, the greater their chances of acquiring the necessary skills, understanding the corporate culture, and establishing a relationship with the company. It is not necessary to appoint them to a leadership position immediately – there will always be room for natural career growth. The advantage of early involvement is that you can spread the transfer process over several years, during which you will have the opportunity to gradually guide the successor, pass on your experiences, and oversee their development while still “under your own roof”.

Preparing the Company

You should also allocate time to make the necessary changes in the company – from organizational changes such as transferring shares or changing the statutory body to personnel changes in management positions.

Keep in mind that your successors may not have the same work standards as you, so the company's operations need to be tailored to ensure it can continue to function effectively as a whole. This may manifest in several areas, such as:

·      Leadership Style– while you may prefer an authoritative management style, your successor may be more team-oriented or informal. Therefore, it will be necessary to adjust, for example, the way tasks are assigned, performance evaluations, or communication methods across the company.

·      Decision-Making Process – the new successor may rely more on data and analysis, or on team decisions, while you may be accustomed to acting more quickly and intuitively.

·      Business Priorities – while you emphasized stability and relationships, your successor may focus more on growth, innovation, or digitalization. This may require adjustments to strategy or changes in investment priorities.

·      Technological Tools and Processes – the successor may introduce new ways of working (e.g., digitizing processes, online communication, new software), which will require changes in work organization and employee training.

·      Corporate Culture – a change in approach can affect the atmosphere in the company, which needs to be managed consciously to ensure that employees do not lose motivation or loyalty.

At the same time, it is necessary to prepare employees for the upcoming changes – in the case of sudden unexpected changes, you risk that employees may not want to stay with the company out of fear, so it is advisable to prepare the company for the upcoming changes as soon as possible.

In general, the earlier you start preparing for the transfer, the better.