Owner Dependence: Is your Business all about YOU?

Business Value is harmed if your Business is Owner-Centric

Whether you’re planning to sell your company sometime soon or

Owner dependence is a red flag.

Build value by reducing dependence on owner expertise.

not until far in the future, NOW is the time to ensure that your business isn’t all about you.

From the latest Sellability Score research involving 2,300 companies from around the globe, two key factors are linked to the probability of getting an offer for your business when it is time to sell.

#1: You’re almost twice as likely to get an offer if your business can survive the “hit-by-a-bus” test.

Owner dependence: If you were unable to work for three months, would your business keep running smoothly?

The more your staff and customers need you, the less valuable your company will be to a potential acquirer.

One good way to begin making your business more independent is to spend less time at the office. Start by not working evenings or weekends, and don’t reply if employees call unless there’s a legitimate emergency. Once they get the picture, the best employees will start making more decisions independently.

This is key:

If employees make mistakes, teach them rather than punishing them.

This shift will also expose your weakest employees – the ones that either need training or need to find another job.

As for you, it may come as a shock that your business has become such an essential part of your identity. Come to terms with the reality that if you’re going to sell your business eventually, you need to view it as an inanimate economic engine, not as the main element that defines you.

#2: Companies with a management team (as opposed to a sole manager) get offers at almost twice the rate.

If you don’t have a strong management team, hiring a second-in-command is a good first move to reduce owner dependence. A “2iC” can help you balance the demands of running your company, having a life, and advancing your targeted exit timeline.

Follow this four-step plan for hiring a 2iC, thanks to advice from Silicon-Valley-based Bob Sutton, author of Good Boss, Bad Boss. 

1. Identify someone internally. “The research is clear,” says Sutton. “Unless things are totally screwed up, internal candidates have a strong tendency to outperform external leaders.”

2. Give your 2iC prospect(s) a special project that allows them to demonstrate their leadership skills to you and the rest of your team. If a candidate excels, your team will clearly see why he or she was selected.

3. Communicate your choice. If you choose a 2iC from an internal pool, explain your choice to the rest of your team. At the same time, wrap your arms around those you passed over and make it clear how much you value their contributions.

4. Shift from manager to coach. “The transition from manager to coach is a gradual evolution where the goal is to ask more questions, spend more time listening, and spend less time talking and directing,” says Sutton.

Remember, you are striving to receive the highest value when you sell your business … the successes can’t all be dependent on you!

 

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