I have been going through a few ways of improving the value of your business. This time I want to talk about your value as an owner to the business. If you look at my business, it is about me and my expertise. That is what you get when you hire me. The problem is that this means that I cannot sell my business to someone else.
Why is that? Well, my customers bought my service because of me. There are no two ways around it. If someone bought my business, they would be missing the thing that they bought. It just comes with my type of business and I am comfortable with that.
Suppose I wanted to change my practice to something that was saleable? What would I do to make this happen? I think you understand from the title of this post. I need to make myself unimportant to the business. That is not to say that I would not have or deliver value to the customer. I simply need to make the customer buy something other than me. Let me use an example from another Professional Service – Accounting. When you go to a large CPA firm, you know that the person that you chose will not be doing the bulk of the work. There is a staff that will handle most of the work. The firm may assign a CPA to your account different than the one that you originally bought from. Why does this work? There are two elements of the sale that make this possible. First, the company has a number of systems that ensure the quality of the work and the effectiveness of the employees. This means that you can depend on the quality of the work independent from the person performing the work. Second, the skill of the firm is additive. This means that a number of specialists are available to everyone on a fractional basis. So a person working on your tax return can get an expert opinion from a specialist without you having to pay specialist rates for the entire return.
As with a smaller firm, this highlights 2 of the 3 ways that firms can become more valuable as the owner becomes less important. These 2 are systems and people. By using systems, your customers can be assured that the quality of the products and services that they buy are not dependent on you. This is extended by the use of other people to execute these systems to help scale the business. To be clear, these systems are not only those that are customer facing but internal ones as well. I work with a Property Manager that is working on systemizing his Work Orders for maintaining properties. This includes not only working with tenants and owners but vendors and internal processes as well. This effort is a focus to reduce the number of Work Orders and the length of time that they are open to improving customer satisfaction. This involved changes and standardization of several sub-processes. The work is still in progress but already there are about 2/3rds fewer open Work Orders.
Finally, the third leg of this stool is outsourcing. There are many parts of a business that are important but the owner’s participation is not. Think of this as an exercise with a Covey matrix. Getting rid of processes that do not require the owner’s time is a great way of building value in two ways. First, it means that a buyer can maintain the existing systems without any transition. This simplifies their job in taking over all the work that goes on. Second, this will force the owner to do more valuable work in and on the business. By doing this, the owner will improve revenue and profits over time.
So, it is important to be unimportant. Have a great day!
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