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SME Ownership Transition – Governance is Key

  • Feb 05, 2018

There is a multitude of factors to consider when running a business, let alone making a transition to a new owner. There are customers, team members, marketing, finance, HR, systems and the list goes on.  But an absolutely key part of ensuring a smooth-running business, especially when making a transition is governance.  To ensure a successful ownership transition, an Advisory Board is a must.

 

An Advisory Board is more flexible than a full Board of Directors and members do not have the same legal and fiduciary responsibilities as a full board. They provide non-binding strategic advice and can bring a much needed third-party point of view into the business.  In ownership transition situations Advisory Boards are usually composed of both the outgoing and incoming owner and an experienced independent Advisor.  The outgoing owner brings detailed knowledge about the business; the incoming owner brings energy, enthusiasm and management experience; and the independent Advisor brings a very broad range of business leadership skills and contacts. 

 

An Advisory Board has many advantages.  If set up well, and all parties are respected, the number one advantage is the combined depth of experience and ideas that can be brought back into the business.  New ideas can be implemented that would otherwise not even be thought of.  Likewise, the number of contacts and potential contacts is expanded which will also assist the company. And a final key advantage is a decision-making forum where respectful debate can occur and clear decisions can be made.  Invariably members of an Advisory Board will have differing opinions and will likely engage in debate.  It is this respectful debate that will lead to better decisions. The Board can listen to differing opinions and make the best decision for the business which ultimately benefits all parties.

 

Your exit strategy is often one of the most important business decisions that you make. Maximise a successful outcome with strong governance through an Advisory Board.

 

Paul Naske is a Partner at Platform 1 NZ Ltd who specialise in using executive search techniques to find people with capability and equity for SME business owners wanting to transition.  

www.platform1.co.nz

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