People are the key to your business success, part 1
The following column was published in The News Star on Saturday, Februrary 22, 2014.
Question: I own a successful small business. One day I hope to sell it, but it is rather specialized and the market for a business like mine is pretty small. None of my employees are capable of running the business. What would you suggest?
Answer: I suggest your business may not be as successful as you think it is.
There are a lot of metrics one may use to judge the success (or lack thereof) of a small business: total revenues, net profits, number of employees, years in business or any combination of these things. Each of these factors is important (perhaps irreplaceably so).
But I want to suggest that your small business will not be as successful as you want it to be until it is ready to be sold. And to be sold, (a) your small business must be able to survive without you, and (b) you must have a willing buyer with sufficient resources to affect the transaction.
Most of the time, both of these things can be done only by sufficiently developing the people under you. Let me say it another way: until you have developed your successor, your small business is not truly successful. In fact, it is highly vulnerable.
Owning a small business often means you simply own your own job. Nothing wrong with that, but if that is the case, you have nothing to sell. The only way to create sufficient value in a business so that you have something to sell is to organize the business so that it can thrive apart from you.
Additionally, very few individuals who would naturally be inclined to purchase a small business have the financial resources (yet) to do so. Therefore, most small businesses are sold based on inter-family financing (buyer borrows money from mom and dad) or owner financing (buyer pays owner for business over time; owner holds a note during the payment period).
You say none of your employees are capable of running the business. Why is that?
I find many small business owners can do it all: sales, operations, logistics, personnel, accounting, negotiating…the list goes on. In fact, let’s admit it, there is a huge ego stroke when you are told over and over how important you are to the running of your business.
The truth is that most small business owners can do everything but reproduce themselves. Yet that may be your most important task when it comes to maximizing the value of the business.
John Maxwell says, “The more people you develop, the greater the extent of your dreams.” I would add, the greater your freedom.
Next week, I’ll walk you through the four steps necessary to develop your people and ultimately to find and develop your own successor. It isn’t an easy, automatic or guaranteed process (what is?). But it’s one you can hardly afford to put off any longer.
Failure to reproduce yourself now is failure to be free later.
Byron R. Moore, CFP® is Managing Director / Planning Group of Argent Advisors, Inc. Email him at firstname.lastname@example.org. Write to him at 500 East Reynolds Drive, Ruston, LA 71270 or call him at (318) 251-5858. The opinions of any single advisor do not necessarily reflect the opinions of Argent Advisors, Inc. No forecasts can be guaranteed. Argent Advisors, Inc. does not offer tax, insurance or legal advice. The information contained in this column should not be construed as a substitute for personalized investment, tax, insurance or legal advice.