There are several criteria that impact the value of a privately held business. The state of the market economy, the industry, the size of the business or customer/product concentration are all significant factors. However, the one thing that may have the most impact on the transaction value of a privately held business is its dependency on the owner.
Simply put, your business is worth more without you in it.
This is easy to understand if you think about the buyer’s perspective. They face far less risk when they buy a business that runs well without the regular involvement of an owner who will be gone after the deal closes. So, the goal of any owner should be to get to the point where he or she can take a month off and not worry about the business.
Most people are nodding along with me at this point … and right about now comes the terrifying OMG moment when many owners’ minds start racing. “I literally have to bet the farm on somebody else. How do I go find someone to replace me? How do I know that person is the right one?” Well, first recognize that hiring your replacement is one way to fix this issue, but there is another, less risky way.
You need to identify which responsibilities are keeping you from taking a month off, then determine what is keeping you from delegating them to someone else. Keep in mind, they don’t all have to be delegated to the same individual, nor do they have to be delegated right away. It may take a couple years for you to teach a few people to take on these tasks and do them the way you want them done. You may need to hire people with additional skillsets or invest in developing your current team.
I have shared this with countless business owners over the years and virtually every single one can agree with the validity of the concept. But few can execute the strategy.
What I’ve come to realize is that business owners who have started and built successful companies often really like being The Man, The Woman, The Boss. They’ve been Han Solo, actively leading the charge on the front lines, in the center of the action. They like the status and perks that come with that position, though few will actually admit it. And then there is a fear of discovering someone else does a better job than they did. It’s hard to set one’s ego aside, especially when we don’t even recognize the existence of that ego.
Furthermore, owners know how to run their company and to do what they do, but often have less confidence in their ability to train someone else to do it. You may be a 10 and you may never be able to train someone else to be quite as good, but if you can train five people to become even an 8, that’s still four times better than you alone.
If you really want to maximize the value of your business, you need to be willing to relinquish the spotlight. You need to be willing to shift from being Han Solo to Yoda. And while Yoda may not be in the spotlight, it was his mentoring that empowered the rebels to save the galaxy.
So, who are you and who do you want to be? If you want help making the transition, I know a few Yodas who can help.
About the Author
John Kaminski, partner and managing director at OneAccord, has over 25 years experience in sales and marketing. He began his sales career with Xerox and went on to work in the medical device industry prior to starting his own business. John has been recognized as a top performer at every company with which he has worked.
Click here to learn more about John and how to connect with him directly.