With summer fast approaching, now is the perfect time to start working towards increasing your business valuation.
The most valuable business model is one that not only survives without the owner running the day to day operations, but thrives.
A company which runs on autopilot is highly sought after by buyers, and they are willing to pay a premium to find one. But, a company which requires hands-on involvement from its owner is likely to result in a heavily discounted offer.
This upcoming summer, consider the possibility of giving yourself a lengthy break. See how your business runs while you’re not around.
It’s highly likely there will be things that go wrong. But by identifying areas which need improvement, you can put steps in place to take your business one step closer to operating independently - while making it more valuable.
By taking action now, you still have plenty of time to smooth over anything which may potentially go wrong, before you start your holidays.
Here is an Eight Step plan towards Owner Independence for your business
Spoil yourself and book your holiday (add an extra week this time), but let your staff know at the last minute that you will be returning one day later. Doing so will allow you to have an entire day without disruptions to identify and understand exactly what went wrong while you were away.
After you’ve returned from your holiday and are feeling refreshed, it’s time to make a summary of every single thing which went wrong. Group the mistakes into one of three categories:
- Errors: these are clear errors which occurred when the wrong answer was given
- Blockages: projects which weren’t able to progress because they need your input or feedback
- Projects On Hold: these are projects which came to a standstill because you are the person driving them
Once you have identified the mistakes, it’s the perfect time to consult with the team. Ask for their feedback on what they think went wrong, and how they could go about correcting the mistakes.
It’s important to take a step back, and not try to jump in and solve any problems you discover. Instead, ask the staff for suggestions on what approach they will take. This will help to develop their problem-solving skills. It also teaches them to become independent.
Here is your opportunity to:
Bottlenecks are most likely going to occur anytime you are not around, particularly if staff need to ask for your input or require approval on most things.
A way to avoid this is to thoroughly brief your staff on which projects you need to have input and which ones you don’t.
Quite often employees have the impression that you need to approve every decision. Let them know when they can make decisions, and when you still wish to have input.
Once you’ve done that, give them the opportunity to step up without poking your head in constantly to see how they are doing.
Trying to create an independent business as an owner can be difficult. The most challenging part is trying to find a way to deal with any projects which get put on hold when you are not around.
The first thing to do is ask if you are the right person to lead a project, to begin with!
While it may seem counter intuitive, projects often get assigned to you by default as the business owner. Not because you are the right person to take responsibility for them.
Take a look at all your projects on hold, and divide them into two different groups.
- Strategic Projects
- Non-Strategic Projects
For the strategic projects, you are the best one to lead them.
But, for the non-strategic projects, did they just get assigned to you by default? Can you instead delegate them to someone else in your team, who has the skill set to take ownership of them?
If you don’t feel confident that a staff member can take over, think about outsourcing elements to a specialist. Then have that person train a member of your team.
What are the most common questions your customers ask you? Are you responding to the same queries over and over? Do you receive some left-field questions about your business? What objections do people have for your product or service?
Think of 30 questions, and write them down. (If you can’t think of 30, start with 20 or 10). Get your staff to help with this.
Then create FAQs or a knowledge base for your website or your internal intranet.
Also, be sure to think of the key objections people have and create scripts for your staff to respond to these. Create responses to key objections people have.
Doing this provides staff with a wealth of knowledge. It also reduces reliance on yourself as an owner, or any other staff member too. But just as powerful, it can help you streamline processes that will save you time and money.
Let’s take the example of the online retail giant Amazon. They would repeatedly receive the same enquiry over and over “Where’s my parcel?”
Staff were spending the majority of their day answering this simple question.
Then Amazon added an extra step to their process. After a customer placed an order, they would receive an email which included the tracking number of the order.
The customer was given the phone number of the courier to call if they had any queries.
Changing this process dramatically reduced the number of calls they received about the status of orders.
Business owners often feel overwhelmed by the idea of creating systems and processes for their business.
But if you simply start with your Top 30, you’ll be surprised at how quickly this will morph into a ‘living breathing knowledge base’ that will become the stepping stone for a business that can thrive without you.
It’s time for a flashback to the days when you were a kid. Do you remember playing with Lego?
With Lego, children can take hundreds of generic pieces and end up building a complex masterpiece.
Do you think they knew how? No.
They had a detailed instruction booklet included in the Lego box.
Then they followed the instructions step-by-step and brick-by-brick.
Likewise, imagine if your employees had similar Lego-style instructions.
STOP. I know what you’re thinking.
Before you get too overwhelmed with the idea that you have to write step-by-step Lego style manuals for every activity in the business...let’s see how far we’ve come already.
If you’ve followed the previous steps, you’ve:
With this formula under your belt, you’ve done most of the hard work already!
Now, in bite-sized chunks, you can pick some additional tasks and break them down into step-by-step procedures. Remember to draw on your experience from the previous steps (1-5) and get your staff involved again. They will be familiar with the experience already.
Once you have some procedures completed, hand over recurring tasks to your employees. Soon they won't need your input at all.
Two Tree International was a design and manufacturing company that started in 2008 with a $50,000 loan. The company grew to sales of over $4 million and scaled their staff to 15 employees when they were acquired in 2015.
Co-founder Ian Schoen believes the business sold for a premium because of the standard operating procedures they created. These procedures allowed anyone to step into any role in the company, and be able to complete the tasks.
Tip! There is no point in developing procedures and manuals that just end up sitting on a shelf and never get used. The type of systems and processes you use in your business should reflect the behaviour and preferences of your team. There are many different formats that can be used.
Ritz-Carlton Hotels value their customer relationships and have a reputation for gold class customer service. In fact, they live and breathe this by entrusting every member of their staff to spend up to $2000 on a guest to solve any customer problems. They can do this without asking for a manager’s approval, and this is based per incident, not per year!
Giving employees the power to make decisions, makes them feel valued. It also gives them confidence that management supports their decisions.
For Ritz-Carlton, this sends a strong message to staff to find a way to make the customer happy. It encourages taking action right away. Turning a sour experience into a delightful one for the guest.
You may think it’s a lot of money to trust your staff with, particularly junior members but Ritz-Carlton understands the importance of a customer’s lifetime value. At $250,000 this far exceeds the $2000 to fix a problem.
Likewise, as a business owner, giving your staff a higher level of authority and autonomy will allow them to resolve any issues when they occur. It also empowers your team to make decisions and do the right thing when you are not there.
It’s a good idea to understand your own customer’s lifetime value proposition. Then make thresholds of your own, which are defined for employees to follow when using their decision-making skills.
Another opportunity is to give your staff more time in the limelight.
Picture this, the phone rings, it’s a local reporter. They want to do a feature story on your company for a publication.
While it can be tempting to do the interview yourself, instead consider inviting an employee to answer the questions. Or, consider putting staff forward for industry awards or local media opportunities, and have them attend networking events.
It’s also an excellent opportunity to get them to work on their personal branding on LinkedIn, and Twitter to raise their online profile.
Give staff members accolades via email newsletters, at regular awards ceremonies, mention their achievements on your website or even plaques in your office. This will give your clients confidence in them. Also, communicate these accolades to your business networks.
Stephen Spencer founded a startup in 1995 focusing on Search Engine Optimisation. When he first tried to sell his company in the late 90s, his attempts failed. Potential acquirers saw that the operations were too dependent on Spencer.
He then took action to reduce the company’s reliance on himself. To do so, he positioned his employees as SEO experts themselves. He achieved this by encouraging staff, executives and top consultants to speak at events and write articles, and then he started introducing them to editors he already knew.
With a capable and reputable team behind him, he grew the company into a multinational and successfully sold it in 2010.
These eight steps will help your business become less dependent on you, and provide many benefits such as:
- Enabling you to scale your business faster (because you are no longer a bottleneck)
- Allowing you to enjoy more time outside of your business with your loved ones
- Making your business a more valuable option to an acquirer because it is less dependent on you
At times it may seem like the only way to have your company succeed is by making every decision yourself. However, you shouldn’t lose sight of the goal to have your company running without you and achieving owner independence. Then it can be scaled into something in hot demand from an acquirer.
Is your business too dependent on you to run successfully? Are you looking to take a step back and “you-proof” your business?
At Exit Advisory Group we help entrepreneurs develop growth and exit strategies to maximise their wealth and provide options.
We do this by giving business owners the tools and strategies to design more profitable, efficient and enjoyable businesses to own - that are also less dependent on them. When they choose to exit, they are in the best position to unlock the wealth in their business and be rewarded for their hard work.
interested to know what drives the value of your business?
We invite you to take the Value Builder Score.
This is a powerful bench-marking tool that rates your business against the 8 key drivers of business value. Over 40,000 business owners worldwide have now taken this assessment.
The Value Builder Score shows you what your business looks like through the eyes of an acquirer. You’ll discover what’s silently dragging down the value of your business, or whether you have untapped hidden assets with the potential to increase value.
The great thing is, there’s no cost to take your score and it only takes about 10 minutes to complete.
If you would like to know more about how we help business owners like you, feel free to get in touch:
1300 133 540
Exit Planning | Maximising Company Value | Business Sales
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