Guest Author Series: 4 Steps to Breaking the Cycle of Owner Dependence
This month, we are continuing our series of informational blogs authored by guest writers doing business in our community. Our goal is to equip our readers with varied and quality information, promote careers in Hiawatha, and spotlight our guest writers and their local business. Our February blog has been guest-authored by Lesley Vossenkemper. Lesley is the Founder of Scale-Up Strategies, a practice focused on assisting owners of small and mid-sized businesses. She specializes in delivering pragmatic strategies and solutions to tackle challenges and capitalize on opportunities linked to growth, scaling, and preparation for succession or exit. Lesley can be reached via email at lesley@scale-upstrategies.com or by phone at 319-361-5399.
The dream for many business owners is to build a successful enterprise that can operate smoothly even in their absence, and perhaps to sell their business down the road to fund their retirement. However, many owners feel they are handcuffed to their business, working hard to keep up with daily demands, leaving little time or energy to figure out how to break the cycle. This can go on for years and even decades with unknown implications to their long-term goals:
- Limited Market Appeal: Businesses heavily reliant on the owner may struggle to attract potential buyers who are cautious about investing in a venture that depends heavily on a single individual.
- Lower Valuation: Excessive owner dependence can lead to a diminished business valuation. Prospective buyers may perceive higher risk and instability, resulting in a lower valuation for the business.
- Increased Transition Risk: The transition period post-sale can be a source of concern for buyers, especially if the business relies significantly on the owner’s relationships, knowledge, or skills. This can pose a risk to the business’s continuity after acquisition.
- Limited Exit Options: High owner dependence can limit the options available to business owners looking to exit. Finding suitable buyers becomes more challenging.
If owner dependence is something you or someone you know is experiencing, don’t be discouraged. Here are the 4 key steps that can be taken to break the cycle, reduce stress, increase time to work on the business, and ultimately run a more profitable and efficient operation.
Step 1: Document and Standardize Processes: Owners often hold valuable knowledge and skills that are not documented, making it difficult for others to step in seamlessly. Start by documenting key processes, creating standard operating procedures, and ensuring that employees are trained to follow the guidelines. This step not only reduces dependence on the owner but also improves operational efficiency.
Step 2: Delegate Responsibilities: Identify key tasks that can be delegated to capable team members. Establish clear lines of communication, provide necessary training, and foster a culture of accountability to ensure that responsibilities are handled proficiently by the team. Team members will be excited by the opportunity to learn and grow.
Step 3: Build a Strong Leadership Team: Cultivate and promote internal talent, invest in experienced professionals, and empower managers to take on strategic roles. A robust leadership team not only distributes responsibilities but also brings diverse skills and perspectives to the table, strengthening the overall management of the business.
Step 4: Develop a Scalable Business Model: A scalable business model is one that can grow without a direct linear increase in resources or input from the owner. Scalability not only increases the value of the business but also makes it more attractive to potential buyers.
Reducing owner dependence is a strategic imperative that is good for the owner, the team, and the business overall. Start now by embracing these steps to strengthen the business today and set the stage for long-term success and sustainability.
For information on the other 8 value drivers of a business, contact Lesley Vossenkemper at Scale-Up Strategies at lesley@scale-upstrategies.com.