If I had to give my five top tips on how to avert disaster when handing over the reins of your business they would be:
- Groom someone from within the business to be your successor and work with them for several years, slowly giving them more and more authority until eventually they are doing your job.
- If you must recruit from the outside, ensure that your new MD has to make a substantial investment in the business, so that if it doesn’t work out, the appointment will hurt them as much as it hurts you – avoid ‘upside-only’ packages with long notice periods and share option packages.
- Ensure that you have a rock-solid finance director whom you can trust to control expenditure.
- Make sure that you are receiving thorough and accurate management information throughout the entire process.
- Better still, do the handover as part of a refinancing deal where you sell part of your stake to a third party (eg a venture capitalist) so that you have a chunk of cash ready in case it all goes badly wrong, but a share in the business should everything come up roses.
2) Business nightmare may be resulted from misplaced trust, allowing third parties to control part of the business’s money. Whoever holds the money also holds the power to destroy a business, should they decide not to release it back to you, whether that is an overseas distributor, or even a fellow director who has signing authority to the company’s money, or, our bank, whose credit card bond forced the company into administration, despite the business having million cash at the bank.
So, whatever else you may decide to delegate, keep your cash close and under your direct control, for it is always cash (or rather, lack of it) that will force you out of business every time.
Six insights on keeping control of the cash:
- Ensure that you have counter-signing authority on all payments out of the business. Signing authority is the last thing you should delegate.
- Watch purchase-order authority levels and don’t allow anyone other than yourself to sign major contracts or even commit the business to anything, whether verbally or in writing.
- In any joint venture, ensure that the cash flows into your account, not your partner’s.
- Don’t offer credit, or advances of money or stock, to anyone if you can help it. Even blue-chip companies can hold you to ransom in this way.
- If you find yourself having problems with your bank or if your credit card provider is ‘bonding’ your cash, either change banks or route payments via an overseas subsidiary.
- In business, ‘cash is king’. Make sure you know on a daily basis exactly how much money there is in the bank – and how long it will last you. This is one area of the business that you cannot and must not delegate.
3) So, if you experience yourself going through a crisis, whether in business or in life, have faith that something very amazing will ultimately come out of it – even if it’s difficult to see it at the time.
My personal insights if you are facing a business or financial meltdown:
- Stop fighting the adversity and go with the flow – one chapter in life has to end before another can begin. Learn to let go.
- Say ‘yes’ to new opportunities and offers, even if you can’t immediately see how they might be of help. The magic can’t happen unless you open the door when someone starts knocking.
- Seek fresh inspiration through books, films and new experiences – the future is a blank canvas that you can paint it any way you want.
- Cut loose from any negative influences from your past that are bringing you down and seek the company of new, positive people. Your crisis will show you who your real friends are.
- No matter how black the current outlook is, hold on to your dream of how you would like life to be when you come out of the tunnel. Stay positive and you will attract exactly the people and opportunities you need to get you out of your current situation.