The Value of Your Business

Why is Letting Go a Challenge?

You built your business from scratch or at least you were there in the early days of its birth. And that brings a bond that many employees just don’t understand.

Starting a business is hard, selling it is harder

The hardest part of setting up your own business is actually “starting”. You had the original idea, that morphed into something else and finally took shape as a “possibility”! Then you did what so many fail to do, you took the first tentative step towards just doing it.

You overcame the FEAR. You overcame perceived barriers to success, and you were willing to take the risks required to get the life you want. But anyone who is going into business for themselves heeds the wise words of those who have boldly gone before them – and I’m not talking about “Beam me up, Scottie!”

Business ownership is hard work, requiring commitment and resilience. It’s not for the faint hearted – but you don’t need to be superman or wonder woman. You need to define your own idea of success and make your own goals, not someone else’s. You make mistakes along the way and learn from them rather than be afraid of making them.

Most of all you need to take control of the biggest barrier – the 7 inches between your ears.

Success is largely about mind-set. So is letting go!

Starting the business is the first commitment and it sets in motion a bond between you and your business that over time generally becomes stronger and stronger. The longer you are in your business the harder it becomes to see your business with the detachment required to sell it. In fact, the very characteristics that got you started in business are the characteristics that hold you back at the other end of your business journey.

“Time is one of my most valuable assets.”
Bill Anderson

Getting mentally detached from the day to day of your business is the first step to letting go, and it’s the hardest part but well worth it because the more you work IN your business the less it’s worth.

Just to illustrate how difficult letting go is, I want to share a conversation I had just this morning with a client. The 2 business owners had built the business from scratch and over 10 years had been on the roller coaster of entrepreneurship. Both worked in and on the business, more in than on.

Over a couple of years, we’d had several conversations about recruiting staff and how to make sure they got the right people. Yet every time they would recruit as cheaply as possible and then complain about the quality of the person they hired until that person left. In their mind it justified their thinking. One year they hired a digital marketing specialist at, to their mind, a very high daily rate. The daily rate was significantly lower than his normal corporate rate, so he negotiated a bonus on any upside he generated for them. Performance related pay at its most basic.

At first their reaction was “OMG we’ll be paying him thousands” without considering that the benefit to them would be significant increases in their dividends. Eventually they figured out a deal that worked for both. He effected incoming marketing that doubled their turnover in one year. They considered ending the contract because he was too expensive when they looked at how much he ended up earning. They didn’t consider the fact that their personal income had more than doubled, they focused on how much he earned compared to them as business owners.

When discussing preparation for sale and reducing owner reliance, it was a well-worn conversation that the business couldn’t operate without them and everyone they got in was rubbish and let them down.

In the same conversation they also said, “We’re hiring an apprentice, I’m sure that an apprentice can do most of what we do”. It was such a contradiction in one conversation. It illustrates the Jekyll and Hyde aspects of being a business owner who has a “job” in the business.

The idea of letting go of the control completely scared them yet they didn’t see how investing in hiring the right skills would add value. Whilst at the same time seeing that part of what they did as a day job was skilled and needed someone with experience to take over. The more they worked in their business the more they thought it was worth. The exact opposite is true. Their challenge is separating the 3 roles they have in their business.

If you make most of the decisions in the business, then the buyer doesn’t see you as ready for sale. To mitigate the risks a new buyer often wants some contingencies covered in the deal. This may involve an earn out. Having a management team that is empowered to make decisions reduces the perception of risk. It may remove the requirement for you to remain with the business after the sale.

When you produce detailed forecasts for future growth that buyers rely on in their price calculations these form the basis for earn-out clauses in the sale contract. If the forecasts become reality earn-outs reward buyers and sellers.

Ownership Mindset and Ownership Thinking

Business owners act and think very differently to employees. For a business owner, their company is usually more than just a job, it’s part of their identity.

The key difference is having skin in the game, which business owners have in spades. They are all in. Working to align the interests of the owners and the employees is a great way to develop an ownership mindset in the employee team.

The challenge is that most business owners do not communicate with their employees in a way that fosters an ownership mindset. They keep details and information to themselves. This is “ownership thinking” – looking after what’s theirs to the exclusion of everyone else. Yet by sharing part of the ownership, even if only through share options, means the employees are dialled into the value of the company.

Management consulting firm Oliver Wyman Delta, in a white paper on Building Ownership Culture stated: “A true ‘ownership culture’ is one where employees feel a substantial, personal stake in the company’s performance. It creates a situation in which behaviour is guided more by values than by rules; even when ‘nobody is watching,’ people treat each spending decision as if they were, in fact, the owner.”

Of course, to do this employees need to understand the business, it’s performance and how that performance is measured. This isn’t something that is easy for business owners to implement without having a shift in their own mindset from ownership thinking. When employees are given the chance to understand the business, they get the opportunity to make a positive impact for the business, and for themselves.

“Having a bad boss is not your fault, staying with one is.”

Nora Denzel

When employees are empowered to ask the right questions and make decisions based on what is best for the business and everyone in it, they perform at a higher level. Your business spends less on recruitment because the team builds and supports itself, weeding out any poor attitudes along the way. The team polices itself and steps up to the highest level of performance rather than sinking to the lowest common denominator.

“Having a bad boss is not your fault, staying with one is.”
Nora Denzel

Are you stuck in the day-to-day of your business with no time to plan for the future? A Professional Business Mentor is just the leverage you need to get out of the rut and flying. Discover how you can make your business worth more AND avoid leaving money on the table when you finally leave your business. Click here to contact Christine by email alternatively you can book a call with the Business Mentor of the Year 2020, author and speaker. Who helps business founders get their businesses exit ready so they can enjoy a happier, richer future. She saves them THOUSANDS and increases the value of their businesses by MILLIONS.