The other day I was meeting with an IT services company. The Owner/CEO was very interested in my experience and skills considering that I had contributed to the dramatic growth of several companies in the past.
After chatting for quite some time, I asked him how sales had been. “Sales were a bit down in 2010….but we are now developing a new software product that will be a blockbuster in the coming year,” he replied.
“How profitable were you?” “Not very profitable right now,” he said. “We managed to break even last year, but we had to work really hard in the second half of the year as we lost one of our most important customers as they brought all outsourced work in house and cut their reliance on our supply and support resources.”
Twenty or 30 minutes into the conversation about how company was positioned to improve sales and performance, we got to the real stuff. The Owner/CEO told me he was looking for a new CEO because he had cancer. He missed six months of work in 2010 for surgery and recovery after he was diagnosed. Given this situation, he had decided to leave the company. He hoped that his employees would buy him out, but was uncertain as to who would succeed him as CEO.
The new CEO would be responsible for ensuring the payments from the buyout were made to him and that the company got back into the black. I asked how this new CEO would be compensated. He said the new CEO would have be charged out to customers to earn his way on various IT projects, because there was just not enough revenue for him to draw a salary. However, there would be some options on the table, or the company could be bought for cash right now, if I was interested. I wondered how I was going to pay myself, or the departing owner. There would have to be a quick and dramatic performance improvement at the time when a significant customer was lost and no proof that the new product would attract additional ones.
When I left that meeting, I wondered how many owner-managed companies are out there with no back up plans or back up CEOs. Would they face a similar circumstance of loss of business, loss of revenues and profitability in a similar situation? It’s too late to find an interim or replacement CEO when the chips are down. Would you not want to make sure that you can keep your business running well and capable of paying your people and yourself?
We at Keystep provide consulting services, sit on company boards and provide interim executive services for when you need them. But please call us a long time beforehand so that we can both be ready. No one can predict with any certainty when such services will be needed. If you wait till you need them, it will be too late.
We at Keystep can help.
Peter Kallai, MBA, PMP