Can Your Business Thrive Without You?
Can your business thrive without you?
There are several reasons a person owns a business. Building equity, earning a comfortable living, filling a need in the community, building a job around a hobby or passion, or being able to "do it my way" are all motivations for owning a business. No matter how you define what it means to realize value through your business, there comes a time when every owner will exit their business. It will be by choice, or it will not be by choice. Only time will tell if you exit your business because your exit strategy is being implemented, or due to something outside your control, such as a health issue, unforeseen family dynamic, economic downturn, or numerous other uncontrollable life events. Whenever it happens, tomorrow or in 20 years, will you as the business owner get the most value out of your business?An owner usually has a dollar amount in mind for when they exit their business. Usually the amount they want will cover their need to fund retirement, pay off bills, and provide them a return based on the hard work, sweat and diligence they put into their business. However, when it comes to placing a dollar value on a business, it isn't the business owner that gets to decide, it is the condition of the business market and the business's buyer who determines the market value. Let's state that again - It is the market and the buyer that will determine the value and price for a business. Therefore, at the time of sale, the market value of a business is determined by influences outside of the owner's control. Or is it? The value of a business may be determined by market; however, the owner does have control over what they do today in the business to increase its value and ensure they realize maximum value when it's time to sell. The actions a business owner takes today will impact the future value of their business. Therefore, the owner does have the ability to control the market value of their business. The sooner they exert that control the better prepared they will be to sell, either when they must, due to unforeseen events, or when they implement their exit strategy.
The best-selling book Built to Sell written by John Warrillow introduces business owners to the point of view that they have the ability to control more than they realize. Control over designing a business to be sellable, owning a business that will grow with or without them, and control over their business selling for maximum value when they need to sell it. John points out there are actions you can take now; for example, making the business sustainable, which is designing the business to function without the owner. That's right, without the owner. As John says in his book,
"...create a business that can thrive without you. Once your business can run without you, you'll have a valuable - sellable asset."
John tells the story of Alex, a business owner with cash flow issues struggling to grow his company. Among the key points of the book are that a sellable business is designed to be Teachable by enabling it to get results without the owner, Valuable by specializing in doing one thing better than competitors, and Repeatable through engineering products that customers are compelled to repurchase. The strategies John describes include:
John's story and perspective is a great read for any business owner and why Built to Sell is one of our favorite books.
Our challenge to you this week is to read Built to Sell. Even if you have no intention of selling your business, we want to challenge you to begin thinking of your business as your most valuable product and to make it a product that is not dependent on you.
We invite you to apply John's insights to your business and find out how sellable your business is by taking John's assessment. You will receive a complimentary Value Builder Score, scoring your business in 8 Key Value Builder Drivers. After taking the assessment, you receive your score immediately and see how your business compares to others in your industry. You can discover your Value Builder Score through our website: here.