Secure your company’s future: 4 steps for CEOs to create a successful exit plan

Economists have forecasted the potential of a long, deep and far-reaching global Great Depression starting in 2030. Meanwhile, the baby boomer generation hit “peak 65” in 2024, resulting in an influx of CEO and key leadership retirements.

With this possibility looming on the horizon, it’s no surprise that 23% of CEOs are planning to exit their business, according to Q3 2023 Vistage CEO Confidence Index. Of those, more than half plan to do so within the next five years.

Whether they are one of the CEOs planning their exit or sale, or simply forecasting their next five years of business, organizations should always have a succession plan at the ready.

This is a broad, comprehensive strategy focused on ensuring continuous operations and strategic leadership development. It requires a variety of facets and considerations, including an exit plan — a strategy created to facilitate the transition between the current and incoming CEO. An exit plan becomes particularly critical when an exit is imminent, but it’s always relevant.

When not executed well, a CEO transition can have dire effects for an organization. However, a strategically executed exit plan can create seamless continuity, and ensure the new CEO is positioned to sustain growth and achieve success. It can also increase retention, maintain productivity and eliminate potential vulnerabilities.

To optimize an exit plan, CEOs should consider four factors, in order:

1. Timeline

The further in advance a CEO can begin to plot their transition, the better. What activities are required six months out are much more expedited than when a CEO first considers retiring.

Either way, leaders should have a plan detailing when to identify their successor and how long they will need to offboard. The timeline should factor in whether the new CEO will be an internal promotion, which will require some degree of training and development, or an external hire, which will require a search and onboarding process.

2. Communication strategy

Next, leaders need to begin considering their plan for communicating this news throughout the organization. The changing of leaders can be unsettling; employees may feel anxious about the unknown of “starting over” with a new leader.

How the news is communicated — both in terms of the existing leader leaving and the new leader coming in — is a very delicate matter. It’s critical to have already thought of answers to anticipated employee questions. Each contributor, regardless of level or title, should know how this change will impact them and their role.

3. Knowledge transfer

Once the transition is initiated, there is a lot of work to be done. CEOs are charged with helping their predecessor understand the organization as it stands today — challenges, opportunities, weaknesses and strengths — and assimilate to the organization’s culture.

While the new CEO may ultimately determine they want to make changes, it is the current CEO’s job to help establish some degree of continuity. Some CEOs stay on as a board member or in an advisory role for a while after leaving to help oversee a smooth transition.

4. Personal plan

While CEOs are often very busy planning this transition, they must pause and fine-tune their next steps. Some may find it helpful to build in a time for reflection before making any big decisions post-exit.

As the Baby Boomer generation begins to leave the workplace at historic levels, many may be grappling with whether they are ready to dive into retirement head-first, consult part-time, mentor or join advisory boards.

Either way, CEOS need to contemplate their next move, just as much as they consider the future of their company.

Transitions, when done poorly, can leave an organization without direction, relying on a new leader to establish a sense of culture. They can break down trust and result in a mass exodus.

An exit plan is a mission-critical consideration with the power to ramp the company up for its next chapter and create a lasting legacy. Every leader should remember: A transition isn’t complete at 5:00 p.m. on the CEO’s last day — it’s only final once the organization is smoothly moving in the right direction under new leadership.

This article first appeared in Inc.

Related Resources

I sold my business. What’s next?

Planning your business exit — asset protection for all stages of business sale [Webinar on-demand]

0 views