So you’ve found the next perfect venture. How do you bow out of one business without harming it, and move on to the next?
Here is some advice from serial entrepreneur Reza Satchu and Ron Close, executive entrepreneur-in-residence at the Richard Ivey School of Business at the University of Western Ontario:
Do it slowly
“The first rule is no surprises, people don't like surprises,” Mr. Satchu says.
Make sure your transition happens deliberately over a long period of time, maybe six months to a year, Mr. Close says.
“Explain that this is nothing but goodness for the existing employees, everybody's getting a promotion. I'm taking out a level at the top here and trusting that you guys know what you're doing to drive this business. And I'll continue to worry and care and love and feed, whatever is necessary, but it's in really good hands.”
Give your new team added incentive
In order to give your replacement (or replacements) an added incentive to keep the business humming along, cut them in on an upside, says Mr. Close.
“Give them part of the equity, or give them some attractive enough bonus plan that keeps your interests in alignment. Entrepreneurs are sometimes reticent to share that,” he says.
Mr. Satchu agrees. “Every business I've started, I've been willing to make the trade of giving someone a piece of the equity in return for them not getting as much cash. It serves two purposes: it aligns our interest and it makes them hungry.”
Get customers and other stakeholders onside
“In most businesses, the customer is the most important thing, so if you're the entrepreneur that has all the relationships with customers, you've got to start transitioning those well before you make the announcement that you're going to leave,” Mr. Satchu says.
Otherwise, “that will really hurt your business because your customers will feel a sense of betrayal.
“If you're staying on as a shareholder, it's helpful in the business so that people don't think you're just leaving and selling out immediately. I think the key thing is you have a management team in place that people believe can do a job as well or better than you.”
Special to The Globe and Mail
A correction has been made from an earlier version.