A recent blog by Built to Sell author John Warrillow revealed the outcome of a recent survey of the attitudes of owners of business of various sizes.
One key difference between the owners of larger ($1million+) businesses and smaller ones emerged from the survey. That difference is in the approach to hiring a management team – that vital second tier of people in key roles who can run the business without the owner. 90% of the larger businesses had these people in place, but only 36% of smaller businesses.
As John points out, this could be a chicken and egg situation: larger businesses have more employees and therefore more need for managers. However, if you want to grow a business to sell it, you need the senior people around as early as possible.
Taking on a management team may seem a formidable step up from where you are now, but like all big tasks you can take it a stage at a time. Here are some ideas how.
Start with a Second-In-Command
This is someone you can groom as a successor, who can run the day-to-day aspects of the business for the people who buy the business from you.
Then find a salesperson to replace you
Most founders are, and have to be, good at sales and marketing, but this makes the business too dependent on you, and also means that you get sucked into solving customer problems.
Finally, appoint an operations director
This is someone to lead the production of your product or service. It’s the area you should give up last, but once you’re a year or two away from selling, it’s time to wean yourself slowly from being your product/service quality guru.
Missing from the above list is the finance person – an unexpected omission for an accountant!
John Warrillow explains that a senior finance person is unlikely to be needed by a large acquirer. He recommends relying on a great internal bookkeeper/part-time accountant/virtual CFO (e.g. your accountants?) for as long as you can, to make sure your books are kept at the high standard needed.
If million-dollar businesses have one thing in common, it is a belief in getting things done through others , i.e. by using delegation and empowerment, and tying them in using carefully selected incentives with shares, options, long-term incentive plans etc. This is always a key part of the Income and Share Ownership Planning (ISOP) that we have done for K&H clients.
Please post a comment with your thoughts on how, and when, to bring in senior people and incentive schemes.