Design and Build an Owner-Independent Business Asset
Profits are critical to some business owners, while sales goals are important to others. What if your primary goal was to build your business so that it thrives and grows without you?
The ultimate asset is a business that doesn't rely on its owner to survive. Ideally, it gives you complete control over your time, so you choose the projects you work on and the vacations you take.
Businesses that are independent of their owners are worth more than those that are owner-dependent. Here are five strategies for setting up your business so that it can succeed without you.
1. Give Them a Stake in The Outcome
Jack Stack, the author of The Great Game of Business and A Stake in The Outcome wrote the book on creating an ownership culture inside your company: you are transparent about your financial results, and you allow employees to participate in your financial success. This results in employees who act like owners when you’re not around.
2. Get Them to Walk in Your Shoes
If you’re not quite comfortable opening the books to your employees, consider a simple management technique where you respond to every question your staff brings you with the same answer, “If you owned the company, what would you do?”
Making your employees walk in your shoes teaches them to think about their problems as you would, and it builds a habit of thinking like a business owner. Before you know it, your employees are solving problems on their own.
3. Vet Your Offerings
Identify the products and services which require your personal involvement in either making, delivering, or selling them. Make a list of everything you sell and score each on a scale of 0 to 10 on how easy they are to teach an employee to handle. Assign a 10 to offerings that are easy to teach employees and give a lower score to anything that requires your personal attention. Commit to stopping to sell the lowest scoring product or service on your list. Repeat this exercise every quarter.
4. Create Automatic Customers
Are you the company’s best salesperson? If so, you’ll need to fire yourself as your company’s rainmaker in order to get it to run without you.
One way to do this is to create a recurring revenue business model where customers buy from you automatically. Consider creating a service contract with your customers that offers to fulfill one of their ongoing needs on a regular basis.
5. Write an Instruction Manual for Your Business
Finally, make sure your company comes with instructions included. Write an employee manual or what MBA types call Standard Operating Procedures (SOPs). These are a set of rules employees can follow for repetitive tasks in your company. This will ensure employees have a rulebook they can follow when you’re not around, and, when an employee leaves, you can quickly swap them out with a replacement to take on duties of the job.
You-proofing your business has enormous benefits. It will allow you to create a valuable company and have a life. Your business will be free to scale up because it is no longer dependent on you, it's bottleneck. Best of all, it will be worth a lot more to a buyer whenever you are ready to sell.
Do you want to improve the value of your business?
Schedule a time with us to discuss how we can help you and your business get ready for a successful exit.
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