Join us as we talk with Beth Miller who is the CEO of Executive Velocity Inc and owns the book Replaceable, An Obsession with Succession. You will learn what is a strategic succession planning process is and how can business owners build a leadership pipeline to prepare for their exit.
Beth Armknecht Miller is CEO of Executive Velocity, a top talent and leadership development advisory firm. Beth is a trusted executive consultant, Vistage Chair Emeritus, and committed volunteer.
She is certified in Myers Briggs, Hogan, and Business DNA. And, she is a Certified Managerial Coach by Kennesaw University. Beth’s insight and expertise have made her a sought-after speaker on hiring, leadership development, and succession planning.
She is a frequent contributor to Entrepreneur Online, About.com, and TalentCulture to name a few. She is a graduate of Babson College and Harvard Business School’s OPM program.
Narrator: Welcome to Cracking the Cash Flow Code where you'll learn what it takes to create enough cash to fill the four buckets of profit. You'll learn what it takes to have enough cash for a great lifestyle, have enough cash for when emergency strikes, fully fund a growth program, and fund your retirement program. When you do this, you will have a sale‑ready company that will allow you to keep or sell your business. This allows you to do what you want with your business, when you want, in the way you want.
In Cracking the Cash Flow Code, we focus on the four areas of business that let you take your successful business and make it economically and personally sustainable. Your host, Josh Patrick, is going to help us through finding great thought leaders as well as providing insights he's learned through his 40 years of owning, running, planning, and thinking about what it takes to make a successful business sustainable and allow you to be free of cash flow worries.
Josh Patrick: Hey, how are you today? This is Josh Patrick. And you're at Cracking the Cash Flow Code.
Today, my guest is Beth Miller. And Beth is the CEO at executive-velocity.com, for those who are not watching us on Facebook or YouTube. And she has a new book she has just written which is called Replaceable: An Obsession with Succession. And we're going to start off the conversation talking about the difference between business exit planning and business succession planning. So, let's bring Beth on we'll start the conversation.
Hey, Beth. How are you today?
Beth Miller: I'm doing fine, Josh. How are you doing?
Josh: I'm doing well. Thank you.
Josh: So, there is the question, what's the difference between those two?
Beth: So, there are a couple of differences. One is succession planning should be part of your strategic plan and business planning. So, it's an ongoing process. It's something that that you should be doing in order to build a leadership pipeline. So, it's really about talent and people.
Whereas, exit planning is something that you start doing to prepare yourself, business owner, to exit. And succession planning could be a subset of exit planning. But exit planning is broader. It takes into account, you know, the financials, the process. It's also around intellectual property. It's kind of buttoning up your business and getting it packaged in order to exit.
Josh: Okay. So, in my experience, blue‑collar business owners, specifically subcontractors, they don't do either.
Beth: Yeah. Yeah, that’s true.
Josh: So, if I wanted to say, “Okay. I am interested--
And on top of that, blue‑collar businesses - really, the exit planning they have to do, at least in the subcontracting world, and who are many of our listeners, if, in that world, there is no third‑party sale because they don't have saleable businesses. There's no recurring revenue.
Beth: Right. Yep.
Josh: So, it's always succession planning. And talk about how, say, a drywall subcontractor-- we’ll get very specific here--
Josh: --could go about the succession process with a company that has 15 or 20 people.
Josh: When should they start it? And what should they be doing?
Beth: So, they should be starting really early? And it really starts with your hiring process. And when you are bringing people on board, understanding what potential looks like in your organization. What are those key criteria, and business skills, and competencies that are required to lead that organization of 15 or 20 people?
So, it starts with looking at you, the business owner, and defining, you know, what has made your organization successful? What have you brought to the table? And then, what maybe needs to change?
So, you've got to be really self‑aware and be able to self‑assess yourself as to what are those things that maybe somebody coming behind you should have that maybe you don't have. And that's really about changes in the marketplace externally. What's happening that you might not have been prepared for?
It could be like, for instance, if you look at-- and I don't know anything about drywalling, okay? I will admit I would hire a drywaller but is there some sort of technology that has helped drive your business that maybe you weren't prepared for, that somebody behind you could be prepared for. So, it's looking externally and not internally.
Josh: So, here's the problem that I see with that is those are pretty sophisticated management things you're talking about. And there's one true thing in the blue‑collar business world across all blue‑collar businesses, especially with businesses less than 25 employees, nobody there is sophisticated.
Josh: They get up in the morning. They get in their pickup truck. They drive out to a job site. And they will either get a crew started or they'll pick up a hammer and start banging nails themselves.
Beth: Right. Yeah.
Josh: So, with somebody like that, I mean, they could build a nice business where, essentially, the business is always them. Without them, there is no business. And they probably have a bunch of helpers around them. But none of the helpers are going to be sophisticated business either. They're going to be trades people.
Beth: Yeah. That's true at that size.
Now, for instance, I'm working with a company up in in Chicago. It's not dry walling but it's a blue‑collar environment. They're a little larger. They're probably 50 to 60 employees. There's a management level there, a supervisory level there. That business owner has to evaluate and determine, “Okay. Is there somebody that has the potential, in the next three to five years when I want to exit, to be developed for that position?” And doing that analysis up early on will help you determine whether or not you've got anybody internally. And in this case, this guy really doesn't. So, he's got to go out externally and find somebody which is driving his exit date, farther out, because he didn't start the process earlier.
Josh: Well, here's what's going to happen with him, if you're successful. He's going to hire somebody. He’s going to find somebody who he can bring in. He's going to go through a two‑ or three‑year process where he's going to learn how to delegate because he, obviously, is not great at delegating if he doesn't have somebody already. And, essentially, what he has is a bunch of helpers right now, likely. And he's going to end up changing his relationship to the business. And--
Beth: Right. He has to. Yeah.
Josh: Well, he doesn't have to, but he likely will if you work with him.
Beth: Well, if he doesn't, then he's going to get in the way of that successor that he's identified.
Josh: Well, he’s not likely going to find a successor. He's likely going to close this place down because if you don't have somebody who's, you know, able to be your successor, the challenge that they're going to have, at least in my experience, is that there's nobody there. At the end of the day, they're going to panic and say, “You're going to be the person” and that person is not ready to step in, and the whole thing implodes and you just close the business down.
Beth: For those small companies, that's a lot of what happens, you're right, because there is no sophistication in the business.
Beth: And there's no-- there's no--
For instance, the guy in Chicago. He does have people that he's delegated to. The problem is he hasn't delegated enough. And so, there are gaps there that he's kind of enabled people. Yeah.
Josh: You know, the thing that we have often found is that, if we're successful - and that's always a big if with these folks, to get them to become really good at delegating and get out of the day‑to‑day operations of the business is that they make start saying, “I want to do this because I want to sell my business.” What I find is that after we do it, they don't want to sell their business.
Beth: Because they haven't prepared themselves for what's on the other side. Their business is kind of who they are. And one of the things I talk about in my book is that the business owner can be the biggest roadblock to succession planning. If he/she isn't prepared and understands what life looks like on the other side, they're going to continue to go back into the business and mess things up for the person that has been designated to take it forward.
Josh: Yeah. I'm not sure that's necessarily true. I think what I find is that they're no longer stuck doing the stuff they don't like doing and, as a result, their business becomes much more successful. They start making more money. They have more time to do other stuff besides run their business. And, at 60, 62, 65 years old, if they're in good health, they’re saying, “Why am I going to sell?”
Beth: You know, actually, my experience is the opposite that, if they've got a plan and they're clear, that there's something better on the other side, then they're a lot more willing to give it up.
And, in fact, in my book, I start with a tale of two companies. And these are real stories of one individual who really understood the importance of succession planning and started early. And he understood what he wanted on the other side.
The other guy couldn't get out of it. He loved what he was doing. He didn't have a plan for what life looked like afterwards. And, you know, he loved working with the clients. Well, unfortunately, he ends up dying of a heart attack and the business does implode because he had all the relationships with the clients. And the people around him, you know, weren't prepared to take it forward. So, you know, in 18 months, the place shuttered.
Josh: So, when you say they found a better thing on the other side, what might some of those better things be?
Beth: Family, grandkids, volunteer work, a hobby. It’s something that they've wanted to do but they haven't had the time to do. And all of a sudden, now, as they were transitioning - for instance, this individual, he started, you know, working 60 hours a week. And over three years, he had worked it down to one day a week, where he was actually coming in into the office. And so, he was gradually moving away and filling his time with, you know, getting a better golf score. And, for him, it was being more involved in his church and with his family. Yeah.
Josh: So, I assume you have steps that people go through to be successful at succession planning.
Beth: Yeah. There are six phases to succession.
Josh: So why don't we go through the six phases quickly?
Beth: Okay. Well, first of all, it's kind of preparation. It's putting your team together. And it's about assessing your company to determine whether or not you're ready for succession planning because there are a lot of things that are required in succession planning that a lot of smaller companies don't even have like performance management system. That's a great example.
Then, it's a matter of determining things like, what is a key position versus a key person. And I've got, you know, a step‑by‑step process on figuring out what key positions there are. And this is more for, you know, company of 50 employees‑plus versus 10 or 12 because, you know, it's pretty easy to figure out with a company of 10 to 12. It's about understanding what core competencies are required in the organization for leaders to be successful. It's about hiring. If you have to go externally, what is a really effective hiring process? Because you're going to be going out and filling key positions. And with a smaller company, those are so critical. And if you make a mistake, it's going to set you back in your succession planning timeline.
Then, it's developing your future leaders by assessing what gaps they have that fit that key position that you've identified you want them to rise to. And then, it's about rewarding and recognizing those individuals that have succeeded. So, those are the steps. And then, there's sub‑steps within that but that's the high‑level phases.
Josh: Let’s take a step back and go to hiring. So, how do you go about hiring the right person?
Beth: So, there are three things. One is to include some sort of validated hiring assessment tool in the process to help take some of that bias out of your decision‑making process. And it needs to be validated. So, the way you find that out is, if you're using an assessment, to call the company and ask them because there's no website out there to go to and say, “Okay. Here are the validated assessments.” The second--
Josh: So, when you say validated assessment, what do you mean?
Beth: What it means is that that the assessment has a high level of predictability that the job that you are interviewing for can show future success. So, that's the validated part of it.
Josh: Now, do they validate based on technical skills on activities that people are willing to do, or values, or a combination of the three?
Beth: Yeah. Well, the assessment I use is specifically around behaviors and not skill sets.
Beth: But there are other assessments that will measure your technical knowledge. You know, whether it be Word, or Excel, or, you know, dry walling, whatever. Whatever it is.
And then, the other really key item in hiring is to be able to have a hiring process that's repeatable and can successfully filter candidates using a behavioral interview system. And a behavioral interview system is one in which you are asking questions of the individual about their experiences in the past that relate to the position that you're hiring for. So, it's not asking them a theoretical question. It's saying, you know, “Tell me about a time where you had to deal with a difficult employee.” And, you know, “What did you do? What were the results? And, you know, what did you learn from it?” or whatever. So, those--
Josh: Yeah. I love that question, by the way. It's a great question.
Beth: What did you learn from it?
Josh: No, no, no. Tell me about a time.
Josh: I love the “tell me about a time” questions. Because they're open ended, they're going to tell me a story. In my world, our hiring process really focuses on values - company values.
Beth: Mm-hmm. Yep, values are important.
Josh: And that tell‑me‑a‑time question is the sort of open‑ended question that lets me figure out whether they’re a values fit or they're not a values fit. It's also good for behavioral stuff which we call will do.
Josh: It doesn't do anything for technical skills but, frankly, technical skills are teachable.
Beth: Right. Exactly. One of the things that I always said, when I had a consulting company, years ago, I always said hire for attitude because you can't teach attitude.
Josh: Once in a blue moon, you can. I've been successful twice.
Josh: You know, I've had several hundred people working--
Beth: I didn’t have the energy to do yet, so.
Josh: Well, I was lucky on both sides.
And I've had a couple of hundred people working for me over the years. So, it's like, you know, finding a blue whale, or a blue cow, or something like a purple cow.
Beth: Right, yeah.
But the values - that is really important, Josh, because one of the things that I work with companies, when it comes to hiring, is identifying those behaviors that support your values.
Beth: You know, what are those behaviors? And those are the questions that you'll be asking a candidate are those questions that will uncover their values and determine whether or not they're going to fit with your culture.
Josh: Beth, a lot of what you're talking about is what I call systemization of a business. And, in my world, the reason I want to systemize a business is it gives me predictable behavior.
Beth: Exactly. Yep, yep.
And that's what my book does. It's very systemized. And it steps the reader through the process of developing a succession plan, and then implementing the plan, and revisiting the plan on an annual basis to refresh, just like you do with a business plan.
Josh: Yeah, I think that makes-- I think it makes a lot of sense. And the truth is, in my experience, unless a privately held business most of the time gets to a certain size, they always ignore the succession planning part. And when the owner gets to be somewhere between 50 and 75 years old, it bites him in the rear end because they're not prepared for what's coming down the road.
Beth: Right, exactly. Yeah.
Josh: So, that makes sense. What do you think is the most important thing somebody should do to get prepared to have a successful succession in their business?
Beth: Oh, wow. That's a really good question.
I think it starts with the owner and having him/her get really clear about what, as I said, life looks like on the other side. And because the more that they get excited about that, the more energy they're going to have in developing a plan and in driving the plan. If they're not fully committed to it, it's not going to happen. I mean, it doesn't matter whether it's 12 employees or a hundred employees. If that owner is not fully committed, it's not going to happen.
Josh: Yeah, the thing that-- you know, several years ago, I used to think I could help people avoid seller’s remorse. The best you can do is help them manage it, in my opinion. The thing that I find, when people start looking on the other side, and the M&A people tell me this all the time, is that an owner will get to an LOI. And they look on the other side. They don't like what they see. And they stop the process dead.
Josh: And I've seen this happen several times myself, over the years.
Now, the truth is, if you're going to prepare somebody well, you have to prepare them for the negative things that happen as well. So, positive things are going to happen--
Beth: It’s true.
Josh: --which is you're going to lose all your business contacts the day you sell your business and walk out the door. I've experienced this myself so I know how it feels like.
Josh: I did it.
And it's kind of a bad feeling. So, I think that looking out over the ledge of what's next is a really important thing. And experience it-- and it can't be golf because you only can play golf so many days or--
Beth: Right. In fact--
Josh: --ski so many days, or ride your bicycle so many days.
Josh: You really need to find something that's going to make your heart sing and keep you very much involved, and it’s a process.
Beth: Yep, exactly.
Josh: You see, what I liked hearing with your story is you took your guy from working 60 hours a week down to one day a week. That was a process.
Josh: That didn't happen overnight.
Beth: No, it didn't. No. Yeah.
Josh: And he had a chance to check out and test all sorts of things that will be next in their life which - there was a book just written, I can't think of the title of it. There was a great metaphor which is the second mountain.
Beth: Oh, okay. Uh‑huh. Yeah.
Josh: And you could climb the first mountain which is your business. And your second mountain is a passion project.
Beth: Yeah, exactly. Yeah.
Josh: And if we could help--
Beth: And for this gentleman, he had a couple of ‘em. One was his church and his grandkids. And those things made his heart sing.
Josh: So, passion projects are really important when it comes to what I call the second mountain. Oh, I can't remember the author, but it was a fun book.
So, it sounds like you have a good system. And I would encourage people to read your book. And, Beth, we are unfortunately out of time. So, where would they find the book? And any--?
Beth: Yeah, the book, you can go to my website, executive‑philosophy.com, or on Amazon, Replaceable: An Obsession with Succession. It was just released a couple of weeks ago.
Josh: I see that.
So, I thank you so much, Beth, for spending some time with us.
And I have two things I'd like you to do. And the first, if you spend some time listening to this podcast, you know what's coming, please go to where you're listening to this podcast and give us an honest rating and review. It’s really important. If you love us, you can give us five stars. If you hate us, you can give us one star. I really hope you don't hate me. But that's okay, if you do.
And the second thing is, like Beth, I have recently released my second book. It’s called The Sale Ready Company. It's a continuation of our Aardvark family fable. And our leader, John Aardvark, is now getting ready to do the transition out of his business. And he has all sorts of things he has to deal with along the way. I mean, he did create a sustainable business which was great for running it. But now there's a next step to take. And we go through all the steps and all the family things that go along with that.
If you're in a family business or you're not in a family business, it’s a really fun read. I've even had people who are not in business say, “When's the third book coming out? We need to know what happens.”
So, anyway, to find it it's really easy, just go to www.salereadycompany.com. I happen to be selling the book there for half price and I have a bunch of bonuses that go along with it. So, I hope you go there and buy the book and let me know what you think.
So, this is Josh Patrick. We're with Beth Miller. You're at Cracking the Cash Flow Code. Thanks a lot for stopping by. I hope to see you back here really soon.
Narrator: You've been listening to Cracking the Cash Flow Code where we ask the question, “What would it take for your business to still be around a hundred years from now?”
If you've liked what you've heard and want more information, please contact Josh Patrick at 802-846-1264 extension 102, or visit us on our website at www.sustainablebusiness.co, or you can send Josh an email at email@example.com.
Thanks for listening and we hope to see you at Cracking the Cash Flow Code in the near future.