Building Businesses Buyers Love to Buy – #9 Owner Dependency

Building Businesses Buyers Love to Buy – #9 Owner Dependency

Buyers hate dependency, especially if the business revolves around one person. Of course it’s a risky strategy for the health of the business, whether you ever attempt to sell your business or not.

So how do we dilute the dependency the business has on one person? Well it depends on the reason for the dependency. Here are 5 quick thoughts for you to develop a strategy to attack this huge issue:

  1. Consider who wins the business? What sales process drives sales? Are you teaching the process across the salesforce? If the owner is the main breadwinner, it will be exposed in a due diligence process. We’ve seen it happen in Investment Banking, Headhunting, High-tech groups, Consultancies, Distribution businesses to name but a few. Build a robust diagnostic selling process and build a sales team that really love and understand the products. It’s way more reliable than relying on the owner just because she loves to sell.
  2. Does the owner drive innovation? Is your owner the Steve Jobs of food packaging, of cyber security software, of wealth management? How do new product ideas get developed? How do you understand the market? How do you garner intelligence on your customers and competition? When Brad Smith came to Intuit as the new CEO in 2008, the company was struggling to get new products to markets. Overly complex, the R&D teams hadn’t been reorganized in 27 years. He implemented a highly successful new agile system forming teams as small as two people. Build an innovation system!
  3. Is the owner the only one worrying about the marketplace? Was Microsoft relying on Bill Gates when they missed the bend in the road in the 90s, or the internet as we call it? Consider how Satya Nadella, the current CEO is seeking input from acquired CEOs in a way that previous CEOs didn’t.
  4. Is your engineering department dependent on a key shareholder/owner? Are you building a succession plan around your stars? Do you have an apprenticeship approach to building the next generation of curious minds?
  5. Is the owner the only one who can price a job? Have all sales proposals got to pass by the boss? What about customer relationships? Do you have a multifaceted relationship with your customer with connections and trust being built through the account manager, technical teams, service teams, customer teams and yes the marketing team? Or do all the customers always ask for Mary the owner?

Entrepreneurs need courage, grit and smarts to be successful, but the hardest challenge they will ever face is to make themselves dispensable!

Our Saleability Test captures 15 major drivers that buyers cherish, and #9 relating to owner dependency is a deal breaker if not solved.

Download our complimentary white paper – Valuation Gaps & How To Close Them – An Operator’s Guide –  here.

The Portfolio Partnership offers operational expertise to scale your business organically or by acquisition. We continue to transform visions into remarkable businesses.

Happy New Year to all our readers and thanks for your support.

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