The COVID pandemic has heightened Specialty Home Improvement business owners’ anxiety in keeping and growing their business. It is more acute when owners continue to have difficulty finding qualified candidates to fill important positions. Business owners in this industry sector who have operated their businesses for a long time may also be looking at exiting their business, given the challenges brought by long hours, supply chain issues, staffing shortages, production and service delivery, and the resultant stress to meet customer needs effectively.
Options for Exit
There are several options available to service industry owners, yet the primary options appear to include investor acquisition and hiring a CEO to manage the owner’s company for a a set time.
Often, owners who have run their business for a long time may not want to sell their business at first, but investors may approach them with an opportunity to sell, but when the business valuation is performed, the owners may hesitate; the sale will not provide them the financial security they will need to retire comfortably. When owners realize this, their options become limited. A merger, acquisition, sale to a competitor, and even sale through an ESOP may not be financially beneficial.
Hiring a CEO
In this instance, the opportunity to hire a CEO to manage their company can address owner concerns on legacy, growth, and, most importantly, increasing the company’s financial value. This option presents the owner with the opportunity to continue business ownership for a set period with the objective of increasing financial value, moves the owner from the drivers seat to ride shotgun alongside the CEO, continues to provide the owner ongoing compensation, and provides the CEO a partner to develop actionable plans that will achieve key performance metrics for business performance.
A Succession-based Plan
When owners in the specialty home improvement sector use an executive search to hire a CEO where there is no apparent successor in the business it becomes important to develop a succession, or growth plan for the CEO to implement. When the succession and growth plan is developed prior to starting the search for a CEO, all functions of the business are evaluated to determine where there are opportunities for improvement.
For instance, the marketing and sales functions may need revision, financial procedures may need to be changed to both address industry reporting standards and leverage technology improvements, and the staffing structure would need to adjust to the absence of available talent, thus contributing to an adjustment in the service focus. The plan then provides the owner with a road map to follow over a set time with a primary focus on improving the company’s financial value.
The Executive Search Process
The plan further informs the owner and the executive search consultant with the information to develop an executive search profile for the CEO. This process considers the type and kind of talents, behaviors, and motivators the CEO will need, as well as the industry expertise to assist in the implementation of the succession plan. A talent assessment system is used to inform the consultant of the necessary steps to use in conducting the search. This system incorporates a benchmarking process for the assessments used, the situational, behavioral, and competency-based interview questions presented to candidates, comprehensive reference background interviews, as well as goal-setting situations that candidates will be expected to resolve.
The Owner’s Personal Transition
Often overlooked and rarely discussed in depth is the owner’s personal plans after exiting the business. Failure to address this aspect of the executive search process impacts the decisions the owner makes as s/he navigates the succession planning and the executive search process. While financial advisors do address this aspect nominally from a financial resources perspective, there may not be a thorough vetting of future life activities, so it is important that this aspect is addressed during the initial planning sessions with the owner(s). (You can only play so many rounds of golf!)
Summary
The Specialty Home Improvements industry is highly attractive to investors, and their approach to business owners will, of necessity, consider investment considerations over an owner’s legacy interests (community, customers, employees, vendors). Depending on the owner’s perspective it may be more advantageous to work with investors even when the financial offer is less than what the owner will desire. A viable and realistic alternative is to engage in a succession based executive search as described.