Our second-in-command has the GWC to run the company, but they have expressed zero interest in taking on the entrepreneurial risk or debt of buying the business. How do we structure a transition plan that keeps them motivated to run operations for an external buyer?

Question

Tyler Smith · Accepted Answer

It is a common dilemma: your second-in-command has the GWC to run the operations, but they have no interest in taking on the debt or risk of ownership. This does not mean your internal succession plan is dead. In fact, keeping an operationally excellent leader in place who does not want to be the owner can be highly attractive to an external buyer. Private equity firms and strategic acquirers look for strong management teams that want to stay on and run the business post-sale. To align your successor, you must decouple operational leadership from equity ownership. Start by having an open, transparent conversation with them about their long-term career goals. If they want stability and leadership without the financial stress of ownership, structure their compensation to reflect that. Implement a shadow equity plan, phantom stock, or a transaction bonus pool that triggers upon a successful sale. This aligns their financial interests with your exit valuation without requiring them to sign personal guarantees or buy shares. By securing their commitment to stay with the business through the transition, you preserve your operational continuity. When you go to market, you can present a complete, motivated leadership team to buyers, commanding a higher premium because the business runs independently of you.