LEADERSHIP

Business Value May Start Here, But It Can’t Stay Here

Tom Garrity

October 24, 2018

Business value is all about business transferability. That value initially started with you, your hard work, and the relationships you built. Y-O-U. But the value can’t stay with you. Why? Because the more transferable your business is, the more value it has.  And that comes down to one question: “Can your business run without you?”

One of the most important components of business transferability is the ability for the business to run without you, the owner. Otherwise, you’ll end up like the business owner who ran a “hub and spoke” operation, describing his business as “I’m the hub. Everyone comes through me for decisions, like spokes on a wheel, and I give direction. We’re very efficient.” The owner was very proud of this system he had created.

Here’s the problem – this system is not scalable, nor transferable, and despite what he thinks, it’s far from efficient. Ever flown through an airline hub such as Chicago or Atlanta when the weather took a turn? It’s a mess!  The same thing will happen to your business.  At some point, there will be a breakdown at the hub (be it capacity, a 5D event, supplier issue, etc…), and the business grinds to a halt.

Remember, buyers are buying the future. That means they want a business that CAN run without you because you’re not coming with it. Building a business that CAN run without you starts with these 2 items:

• Systems Documentation: Begin documenting the company’s procedures in a company operations manual that can become the “go-to” for employees to know how to do something (open/close the business, accounting, etc.). This takes time but is possible with a little bit of process and discipline, and will pay you back in spades.
• Well-built Management/Leadership Team: These are the people who, in addition to you, take responsibility for running the business. Creating this team is a pivot point in the business, moving from a lifestyle business (one that supports and feeds your lifestyle) to an enterprise business (one that can truly run without you). An enterprise business has much more value.

How do you know if your business is transferable? Test it – take time away from the business. Start with a couple of vacation days AND FULLY DISCONNECT from the business. When you come back, find out where things broke down and then fix it and document the updates or new processes in your operations manual. Then, repeat the test, but this time take a longer vacation, and again, come back, find the holes, and then fix them using processes and documentation in your operations manual. Repeat again and again until the business machine begins to run seamlessly without you as the hub.

Remember, the game of business ownership is to create wealth. For most owners, that’s the end goal – create wealth, exit on their terms, and ultimately empower the next generation of ownership. Increasing value is about what you are doing now to drive value, which in turn provides more income today, and wealth and options for tomorrow.

If you need help uncovering ways to create wealth, build your transition plan, or train the next generation, let’s talk.