I Just Want Out!
Recently I’ve had a number of conversations with Business Owners with some common themes.
The conversations were along the following lines:
“There’s a number of opportunities that I could pursue, but I just don’t have the motivation……”
“I’m sick of handling 'ABC issue' all the time………..”
“My staff are being paid more than me and I’m the one that’s carrying all the risk….”
“I cannot get away from the business, it takes all my time and energy”
Or at the extreme end “I just want to get out….”
Unfortunately, I’ve had a few of the “I just want to get out” conversations and in each case, the business was simply not ready to be sold. There are a number of pre-requisites for a successful business sale however I won’t go into them here, because it’s a separate topic. Suffice to say, in each of these examples the owner has no choice but to stay in the business and work through the issues that are making them want to ‘give it all away’.
When I look at each of the businesses, there are a number of similarities between them:
In all of the cases, the business is (or at least has recently been) a thriving, successful enterprise.
The success was achieved because the owner was passionate about their product or service and they invested time/ effort and resources into the business.
Over time, each of these businesses grew until they reached a plateau.
In each case, the business was allowed to stay on the plateau, meaning they stopped growing.
There is a saying that goes along the lines of “If you are not moving forward, sooner or later, you will go backwards”. This is true in business for a number of reasons:
Typically businesses that are allowed to plateau don’t receive significant new investment and often money is taken out of the business and invested elsewhere. This is often justified along the lines of “I’ve never taken any money out of the business and it’s time that I rewarded myself with that house/ boat/ car/holiday (insert as appropriate)”
Employees recognise the investment reduction and the subtle shift from ‘growth to maintenance’ and they react accordingly. Some slightly reduce their effort – they stop striving to beat targets, instead they accept that meeting target (or getting close) is adequate. Perhaps more serious is the effect on high performing employees that thrive in growth environments. If the environment is not sufficiently dynamic they often leave for jobs at competitors.
The lack of investment and reduced employee motivation then affects customers. Customers are drawn to businesses for a variety of reasons. On the surface it is because the business has something that the customer needs however there are always deeper reasons (because it is rare for businesses to have a monopoly in their product or market).
When businesses are allowed to plateau, they lose their competitive advantage over time. The lack of reinvestment could translate to products or services becoming stale.
Alternately, even if the only differentiator is cheaper prices, the lack of investment in technology and innovation means that competitors who are investing in efficiency can reduce costs faster and the competitive advantage is lost.
Potential staff changes mean that customers lose some of their contact points within the business. These customers are easily tempted to follow ex-staff who are working elsewhere.
These are only some of the reasons why not growing will result in going backwards and each of the businesses that I am dealing with has experienced all or some of these issues.
Related note: Given these issues exist with businesses that are simply not growing, extreme care needs to be taken with “cutting for growth’. All of these issues will be magnified, therefore any significant cuts need to be very carefully managed.
So what is the solution?
Obviously there’s not a one-sized fits all solution. Some of the things that need to be done within the businesses are:
Proper customer segmentation:
This involves analysis of the customers, the revenue earned and properly defining the service level for each of the client segments. In some cases, the ‘owners fatigue’ is coming from trying to be all things to all people. A quick analysis of their customers show that they could significantly change the way they deal with some of their clients and not lose any revenue (or even earn more). This change would leave more time/ energy to invest into growing and protecting profitable business
Proper employee accountability:
Issues that keep occurring and keep landing on the owners desk are almost always due to lack of employee accountability. This lack of accountability can stem from a variety of reasons. Employees might not have a proper role description specifying what they are accountable for. They might have made previous decisions, only to find that their decisions were not supported (potentially due to a lack of training or poor definition of their scope of authority). Or there could be an underlying poor process that is causing the issue to re-occur – and no-one has thought to change the poor process. Ultimately the issue can be fixed if you get to the root cause of the problem.
Similarly the issues with staff being paid more than the owner can be resolved with proper accountabilities. One business had employed a General Manager however, no role description had been formulated. When I separately quizzed the owner and the “GM” on their roles, they both said almost exactly the same thing – meaning that significant overlap existed. This allowed the GM to claim the credit for the things that were working and to shrug responsibility for things that weren’t.
Regain a focus on why they are in business
Some of the business owners had lost the focus of why they are in business (very few businesses are formed simply to ‘make money’). When the businesses were first formed they all had lofty aspirations and a strong cause. In some cases, the businesses had morphed into something different from the original vision hence the passion was lost. In other cases, the business owner found themselves taken away from the things that they are passionate about because they are too busy ‘running the business’. Paradoxically their success has created misery. Regaining the focus on why they are in business will allow the owner to make the proper changes to rediscover the passion.
Finally, for those businesses where the owner simply wants to ‘get out’, unless the owner wants to simply close the doors and walk away there’s work to be done. The good news is that the “Investor Ready” program will significantly improve the business and many of the current frustrations will naturally go away. The real benefit is that the improvements will create significant increases to the business value so the owners will actually reap the benefit of their many years of business ownership - and I think creation of value is a pretty good reason to be in business in itself!