Can Your Business Survive Without You?
When Apple CEO Steve Jobs announced that he would be taking indefinite leave for health reasons the market reacted, share prices dipped and experts wondered if Apple could continue to go from strength to strength without the charismatic Steve Jobs at the helm.
If a business, which has been voted the most admired and innovative company of the last decade, with as many employees as Apple can suffer the wobbles without its CEO then it is a worthy exercise for all business owners to take the time to think about how their business would survive if they were to take extended leave or exit their business.
In my 25+ years as a Business Advisor and CPA Accountant, I have heard the common tales of business owners preparing to sell up and move on, only to discover that they are the business and without them they have nothing left to sell. In fact, the vast majority of businesses advertised in the classifieds don’t sell.
Too many business owners hang on to the everyday intricacies of running their businesses, working 80 hours a week and spending days off fielding calls from staff not able to make a decision without them.
Many business owners are essentially paying their staff to watch them work.
In my view there are four key things that business owners need to get in place so that their business can function without them.
A good handle of the numbers is essential, specifically where the business earns its money and spends its money. You need to know where your money is coming from and why, you need to know where it is going and why and you need to break it down to revenue per customer, per job, identifying fixed and variable costs and knowing what your gross profit margins are.
Most importantly you need to know which are the key metrics that lead to a more profitable business, whether that is revenue per transaction, wastage percentage, sales to rent, conversion rates, or labour costs to revenue.
Until you can understand your numbers, you will have little hope of improving your profits and creating a business that is sellable.
Cash flow is the key to growth
Cash flow management is the key to any successful business regardless of its size; however, it is vital for a small business that wants to grow. Growth needs cash. You can borrow it, you can sell equity in your business (get more partners) but the cheapest cash you can get is by running an efficient business.
Sadly, too many business owners keep moaning to me about ‘how tight their cash flow is’, and yet when I ask them if their invoicing is up to date they look me in the eye and tell me how busy they are! Cash flow management is about having good systems to manage your stock, your jobs, your debtors and your assets. The better the systems – the better the cash flow, and the more valuable the business will be.
Does your team know – ‘what a good job looks like’?
Your team needs to know what their roles involve and what is expected of them. Most importantly – your team needs to know what they will be held accountable for.
You need to understand your numbers and the impact of how a well run job affects your profit and cash flow, when you understand your numbers, you can share your knowledge with your staff and help get them focused on what’s important.
Your team generally wants to do a good job; if you invest the right amount of time in educating and training your team then I can guarantee that your efforts will come back to you many times over.
Once you have clearly described to your team what is expected of them and what they are accountable for; and you have provided training to ensure they can perform their roles and make them responsible for it, you can start to step away from the day to day operations of the business, and eventually from the business.
On another note, if you’re not happy with your team then the question I would ask you is: ‘Who put them there’? Maybe you need to review your recruitment systems and procedures.
Planning and Strategy
The key to a successful sale of a business is to answer the key question – ‘What will your business look like when it is done’? Unfortunately, the vast majority of small businesses just close or sell for a fraction of what owners thought they would get. Why? Because they just don’t spend any time planning where they want to take their business. It is vital to have an annual Profit Plan and budgets. My best clients all have a minimum of a 5 year strategic plan.
I once had the privilege of meeting Michael Hill (the jeweler) at a conference who had started his business when he was 40. When I met him as a 72 year old, he has developed a business with a $500 million turnover and a net worth of nearly $250 million.
Sir Michael was advocating that we should all have 30 year goals of what we want to do with our lives and businesses. I always used to advocate 10 year goals but now, after listening to Michael, I have expanded my thinking and understood on a deeper level, the importance of having a vision of your business being bigger than you.
Every great business success story that I have ever met, read about or advised as clients had the answer to what their business looked like when it was done and had a plan on how to get there.
Lastly, once you know your numbers, are managing your cash flow, have described to your team what a good job looks like and have developed an appropriate strategic and annual plan for your business: you must then be consistent and disciplined to focus everyone on delivering the numbers in your plans.
It will take discipline for you to take that step back, but your business needs to be able to function without you, it needs you to concentrate on the development and marketing of your business – you need to be looking for the next opportunities and focus on working on the business, to make it better today than it was yesterday.