EOS And Family Business Transition

By Andrew Williams

Having invested two decades of their lives into growing their manufacturing business, John and his wife Sandy concluded they were finally ready to retire and spend winters in Hilton Head.

However, these first-generation entrepreneurs came to realize that their lives were so intertwined with those of their employee team, selling the business to an outside party was not an option they wanted to pursue.

As they discussed options with their long-time CPA, they realized that the best possible successors for the company they had built were already in the building – their five-person management team, of which one of their children was acting President and one was the Vice President of Sales.

A meeting with the Leadership Team confirmed the Founder’s hopes that they were excited about the prospect of being the next owners of the business.   It also uncovered a larger challenge – the team did not have a significant amount of capital to invest in an acquisition.    A second hurdle was that none of the leaders were willing to sign a personal guarantee on any debt that might be used to fund the transfer.

The company had been doing business with their current bank for over a decade and the commercial lender was excited that the bank was willing to provide three times the Company’s EBITDA in new debt to fund the transition plan.   John bristled at that thought, remembering the early days of the business when the debt from starting the company felt like a millstone around his neck.

EOS can provide entrepreneurial business owners and leadership teams with insight, inspiration, and answers to run better companies and organizations.

Over a series of discussions with their CPA and wealth manager, John and Sandy came to terms with the reality that the cash they would receive upon closing the sale wasn’t enough to fund their retirement plans.   They were going to need to accept a large seller note to fund their full retirement vision.

Handpicked related content: EOS and The ABCs of Employee Performance

John had a high degree of confidence in his Leadership Team.  Over the past few years, he had evolved into more of a board-level position, working only 1-2 days a week to manage long-time customer relationships, and vacationing for 20+ weeks per year.   John felt it was one thing to allow management to lead the company while he was on vacation – but quite another thing to bet his retirement on the continued growth and success of the business.  He was confident that he had the right people taking over the company he had built, but with seven figures of money riding on their success, how could he fully walk away from weekly involvement or check-ins, yet maintain comfort that the company would continue to perform in a manner that would assure him of receiving full payout?

Finding A Solution with EOS

Fortunately, John’s wealth advisor introduced him to an EOS Implementer®.   After meeting with them and gaining an understanding of the Entrepreneurial Operating System®, John scheduled a time for the Implementer to meet with the full management team to outline EOS® and the critical role the system could play in the business transition process.

A few days later, the Implementer, John, Sandy, and the full Leadership Team met for an EOS “90-minute meeting.”  The Implementer explained the six key components of all businesses, and how EOS helps companies work toward “100% strong” in each of them.    In this critical juncture in the company’s journey, they discussed how EOS would require the team to be 100% aligned on the vision for the business– where they were going and how they were going to get there.   EOS requires that the Leadership Team build both an Accountability Chart™ and a great Scorecard; These provide 5 – 15 weekly metrics that provide a clear pulse on the business each week.   As part of building ‘traction’, the leadership team would be required to set quarter ‘rocks’, which are the 3-7 most critical things that each member of the team must complete each quarter.

The Leadership Team understood and was asked to embrace the reality that implementing this system was typically a two-year journey.   There was some time for questions and then the Implementer left the Leadership Team to discuss.

As the meeting wrapped up, John was confident this was exactly what he was looking for.    The Implementer specifically explained three key tools that excited John:  1) the “Vision / Traction Organizer™” would have the entire company 100% aligned on where they were going and how they planned to get there;  2) quarterly “Rocks” would tell him what the Leadership Team was prioritizing as

‘do or die’ objectives for the next 90 days and 3) a weekly “Scorecard” would show trends on 5 to 15 metrics to provide an absolute pulse on the business.  With this in place, John felt he could truly ‘step away’ while also being comfortable that his seller note would ultimately be paid off.

Implementing a Scorecard allows all relevant parties to always be in the know about what’s happening in the business.

Much to John and Sandy’s surprise, the Leadership Team eagerly embraced this operating system!  The team often grew frustrated with John’s numerous “…what’s going on?” phone calls when he was out of the office.   By creating a great scorecard, they not only would have the critical metrics for them to measure as they are running the business, but John wouldn’t need to call in to know exactly what was going on.   They acknowledged that EOS would bring a significantly higher level of accountability to the organization but realized with John and Sandy carrying a seven-figure promissory note, this kept everyone’s interests aligned.

The team called the Implementer back that afternoon to book their initial session – the “Focus Day ™.

Sixty days later, having completed their Focus Day and two Vision Building™ sessions, John called the company’s attorney and initiated the documentation process to move the transfer forward.  It was time to start thinking about a peaceful winter in Hilton Head…

 Next Steps

Interested in learning more?

Andrew Williams

Nexus Business Solutions

Professional EOS Implementer

[email protected]

c 574.370.7376

o 269.373.1500


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