This week, when Cisco Systems announced CEO John Chambers, a living legend on the job for 20 years, would be handing the torch to 17-year sales employee Chuck Robbins, the company completed a process that ticked most of the boxes on any succession checklist

Plan the transition years in advance? Check. Gradually delegate top-dog duties to trusted lieutenants? Check. Behave with transparency about the whole shebang? Check. Look no further than the company's blog about the transition for some superb, seldom self-reported details about the Chambers succession. 

While successions at public companies grab the headlines, those titans actually have it easy, compared with small business owners and entrepreneurs. That's one of many takeaways from "The Owner's Journey," a just-released white paper by Columbia Business School's Barbara Roberts and Murray Low, funded by U.S Trust, Bank of America's private wealth management arm. Roberts is entrepreneur-in-residence at Columbia Business School. Low is director of entrepreneurship education.

The paper culls lessons from eight entrepreneurs who grew their businesses and then dealt with the myriad challenges of exiting or succession. For Roberts, an entrepreneur who has also authored a superb paper on the emotional toll of entrepreneurial transitions, the work reinforced what she'd learned in previous research: "There is this culture shock to an entrepreneur when finance people look at their companies for the first time," she says. "Even healthy, $100-million companies are often not run by the rigid financial dashboards and ratios that buyers and bankers look for."

I asked her why this was so often the case; after all, it's hardly news in 2015 that mergers-and-acquisitions professionals are drilling down for unassailable measurables, rather than earthy intangibles. "I don't think people understand that entrepreneurs do not start companies to become rich," she says. "They start them out of passion, vision, the desire to solve a problem."

In other words, the culture shock of founder-meets-banker does not stem from the founder's surprise about the banker's priorities; it stems from the founder's artistic-like emotion of having her childlike creation, years in gestation, reduced to icy numerals on a page. 

In "The Owner's Journey," the tale of Scott Belsky, co-founder of the Behance design site, epitomizes this entrepreneur-as-artist mentality:

From 2006 to 2012, he had no more than a few hundred thousand dollars of "friends and family" money come into the company. During this time, [Belsky] was so passionate about his mission and building the company that he had little thought for anything else. He never pondered the endgame. Even when he made his first employee a partner, they did not discuss the exit plan for another five years. 

Adobe acquired Behance for $150 million at the end of 2012. By all counts, including Belsky's, life after the buyout has been smooth. Still, the prospect of selling initially unsettled him. "It was a very lonely time, and he used graphics to help him sort out his thinking," writes Roberts. "He did not use any paid advisors, as he felt they would be void of emotion. He stresses that only a real entrepreneur who has gone through this ordeal can really give sound advice at this time." 

All of which is merely the emotional piece of selling your figurative baby. Once the crying is over, you need to get serious about getting your metrics in order. There are two metrics, in particular, that founders often fail to grasp with the command that their acquirers expect. The first is accounts receivable. It's rudimentary, but founders can be surprisingly slow on collecting money due. The second is detailed customer knowledge: The cost of customer acquisition and the average customer life cycle, in particular.

Again, you may wonder: How does a founder not know these things? But for a buyer or banker, it's not a matter of the founder's knowing it. It's a matter of documentation. "These are things that are in your brain, you intuitively know it," says Roberts. "But you need to have the financial data to back it up."

Ultimately, all a founder can do is follow the age-old advice around exits and successions: Prepare as many as three years in advance. Or, if exiting is off the table, consider seeking a potential valuation from a bank or leveraged-buyout firm. The point is both to learn your value--as outsiders perceive it--and to make sure your accounting systems and dashboards are providing the right readouts. You want to be in command of your company's value long before a sale is on the table. "The transition stage is the worst time to discover that you didn't consider all of the possible options before you sold your business," writes Bo Burlingham in Finish Big, his 2014 book on entrepreneurial exits. "It's the one stage of the business exit process that almost never allows for do-overs."

The other thing: Prepare to mourn a loss after you sell, even if your buyer pays you every penny you're seeking. David Karangu came to the U.S. from Kenya at age 17. By age 40, he'd sold his two Chevy dealerships for a large sum. But he found he was blue: 

In selling, he was giving up his company, his employees, and in a way, his identity. The Monday after the closing, he got up and put on his suit and realized that he had nowhere to go. His entire adult life had been built around the auto dealership world. Within a week, he realized that all of his friends, all of the people he played golf with were all linked to his car business. He had all the money in the world but he was "extremely" unhappy.

Sellers like Karangu tend to get zero sympathy. The typical reaction is, "Why are you sad, you just got a large check for selling your business?" Yet entrepreneurs can go through years of depression after exiting. "Basically anyone who leaves a job goes through some disorientation," explains Roberts. "Your work usually satisfies three important things. It gives you a community of people, it structures time in your life, and it gives you a purpose for getting out of bed. If you happen to love the job--which most founders do--all those things are to an extreme."

The good news is, many founders have faced down their postpartum blues. The key is finding a new way to give yourself a community, structure, and purpose. After selling his first company, Concord Holding Corp., in 1996, serial entrepreneur Rick Stierwalt began traveling weekly to Indianapolis to train as a race car driver. He was 40 at the time and realized that it was now-or-never to pursue an ambition he'd first hatched as an eight-year-old. "It was as hard a job as actually working," he recalls. "Thursday you practice, Friday you qualify, and you race Saturday and Sunday. Plus you really need to stay in shape. I raced at some tracks where I almost got killed going well over 100 miles per hour."

The point is, you need to throw yourself into something else--it doesn't necessarily have to be a new business. "Ask yourself, what are key things you'd like to do after the sale," says Roberts. "Do work on what your purpose is." As for the community, she suggests joining a peer group, such as Tiger 21.

You may find that the best solution is to get back into the business you just exited--barring a non-compete clause. That's what serial entrepreneur George Jacobs did. In 1998, at age 50, he sold American Limousine for $20 million. "Someone handed me a check that set me for life--and I was miserable," he told me last year. 

Eventually, he realized he'd be most fulfilled if he were once again running his own limo company. In 2006, he cofounded Windy City Limousine and Bus. Today, Windy City is an $18-million company. Its customers include the Chicago Bulls, Harpo Studios, and the Make a Wish Foundation. "This is what I know and love," he said. "And I'm good at it."

Published on: May 7, 2015