Could your business run without you?
If you can answer yes, you are in the minority.
It is maybe the most common issue for business owners. If there’s no way for another person to smoothly take over and run your business, it isn’t worth anything to anyone else.
This can and should be fixed.
I’ll use the example of a client who owned a specialty services business. I have changed names and some of the details to maintain privacy but the story is real.
Concerns Started With Taxes
Jim came to me at his CPA’s suggestion and he needed help. We talked about how he got started and what challenges he was working through. Concerns over taxes came up as they often do but it seemed like something else was bothering him.
His Company Achieved Extraordinary Success
His videography company, Video Concepts, had ridden out some pretty lean times and had managed to become very successful.
Jim was still young enough to enjoy running his business at age 56. He had 17 employees and well over $6,000,000 in revenue.
Videographers tend to be either freelance or small organizations focused on weddings and smaller engagements.
Video Concepts found a niche serving business customers in music, publishing, and entertainment.
Video Concepts Found a Niche
The company developed a style that worked well within the industry for frequent events that required a highly polished but stylized look. No weddings. Instead, big engagements and corporate customers with deep pockets. All new business came in the door through word of mouth and Video Concepts did not do any advertising. The company website was nice but that was the extent of the marketing.
By all accounts, things were going pretty well.
Tension Was Building
Below the surface, frustration was building. Jim was getting pulled in too many directions. He had assembled teams to work on-site at customer projects.
The process that the company developed was repeatable and, Jim felt, could deliver the high quality his company was known for.
But customers, most of them, expected Jim to personally visit during each project engagement and he was getting stretched way too thin.
I questioned Jim whether or not it was necessary for him to make these personal appearances on each and every project.
He was adamant that his customers would not work with Video Concepts if he was not involved. He felt that there was no way to transition away from direct face to face interactions with customers.
And if he could not make this transition, he knew he was at about the ceiling of his capacity and could not grow.
Burnout Was Around The Corner
Jim was getting burned out. Income was good and he had no debt. But retirement was feeling uncomfortably close and Jim knew that he didn’t have enough in his retirement accounts to live on for more than a year.
Like many business owners, Jim had used the growth in his profits to reinvest in the business. If cash flow got lumpy, he still needed to make payroll so he would do without.
Over the years, funding the retirement accounts just never made it high enough on his priority list.
Jim Would Need to Harvest the Value of His Business to Retire
If Jim was going to ever be able to retire, he was going to need to be able to harvest the value from his business.
And the bad news, I told him, is that if you don’t find a way to make yourself obsolete, you will have a hard time selling this business for the money you will need to retire.
What I mean is that a new owner or manager could run Video Concepts and that the business would not miss a beat.
This new goal necessitated some profound changes in Jim’s thinking and actions.
And it took time. We chose no more than three milestones every quarter for a couple of years centered around this new goal.
People and Processes
Jim got all of his processes out of his head and on paper.
He intentionally developed staff into management. He incentivized the right people through equity shares over time. He moved people into different roles.
He let go of underperformers.
He invested in more training and empowered his people to innovate.
There were new ideas and Video Concepts developed recurring streams of revenue to go along with the core project-oriented work.
Strategic Work Reinvigorated Jim
As this transformation was happening within Video Concepts, there was also a transformation happening within Jim.
He was not only not burned out anymore but actually reinvigorated with running his business.
He could step away and things could function without him.
Running Video Concepts was fun again and by having more time away, retirement didn’t seem so pressing.
The Business Must Be Ready for Transition Before The Owner
Video Concepts is still majority-owned by Jim and is poised for growth.
By making himself obsolete, Jim can transition his business in any number of ways going forward.
He can now sell to his management team, a third-party buyer, or even family.
Options = Freedom
Having options gives him enormous freedom despite the fact that he doesn’t want to sell right now.
And Video Concepts is a better company for developing its people.
This article is for informational and entertainment purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any significant financial decisions.