5 Reasons Why Your Business Is Too Dependent On You
5 Reasons Why Your Business Is Too Dependent On You
If you were to draw a picture that visually represents your role in your business, what would it look like? Are you at the top of an organizational chart, or stuck in the middle of your business like a hub in a bicycle wheel?
The Hub & Spoke Model shows how dependent your business is on you for survival. The Hub & Spoke Model can only be as strong as the hub. The moment the hub is overwhelmed, the entire system fails. Acquirers generally avoid these types of businesses because they understand the dangers of buying a company too dependent on the owner.
Here is a list of the 5 top warning signs that show your business could be too dependent on you:
1. You are the Only Signing Authority
Most business owners give themselves final authority… All The Time. But what happens if you are away for a couple of days and an important supplier needs to be paid? Consider giving an employee signing authority for an amount you are comfortable with, and then change the mailing address on your bank statements so they are mailed to your home (not the office.) That way, you can review everything coming out of your account and make sure the privilege is not being abused.
2. Your Revenue is Flat when Compared to Last Year
Flat revenue from one year to the next can be a sign you are the hub in a Hub & Spoke Model. Like forcing water through a hose, you have only so much capacity. No matter how efficient you are, every business dependent on its owner reaches capacity at some point. Consider narrowing your product and service line by eliminating technically complex offers that require your personal involvement, and instead focus on selling fewer things to more people.
3. Your Vacations… Do Not Feel Like Vacations
If you spend your vacations dispatching orders from your mobile, it is time to cut the tether. Start by taking one day off and seeing how your company does without you. Build systems for failure points. Work up to a point where you can take a few weeks off without affecting your business.
4. You Know All of Your Customers by First Name
It is good to have the pulse of your market, but knowing every single customer by first name can be a sign that you are relying too heavily on your personal relationships being the glue that holds your business together. Consider replacing yourself as a rain maker by hiring a sales team, and as inefficient as it seems, have a trusted employee shadow you when you meet customers so over time your customers get used to dealing with someone else.
5. You get CC’d on More Than Five E-mails a Day
Employees, customers and suppliers constantly cc’ing you on e-mails can be a sign that they are looking for your tacit approval or that you have not made clear when you want to be involved in their work. Start by asking your employees to stop using the cc line in an e-mail; ask them to add you to the “to” line if you really must be made aware of something – and only if they need a specific action from you.
More on Hub and Spoke
Hub and Spoke is a concept that refers to how dependent your company is on you, the business owner. When a buyer is considering purchasing your business, they will want to know how your company will operate when the business owner leaves. The more dependent your business is on you– the business owner personally the lower you are going to score on the Hub and Spoke driver of your company value within the ValueBuilder System. This often indicates a lower purchase price and tougher time selling your business as well! The Hub and Spoke name is derived from a business owner that described his role in his company in this certain way. He said he was the hub or center in the Hub and Spoke model and that all his employees came to him, the business owner, when they had a question. His customers come to him when they needed a quote, his suppliers come to him when they wanted him to purchase things. This business owner was very proud of this business operating style and believed it made his business efficient. When everything in the business is dependent on the Hub and Spoke or perhaps even a manager there is not much value left in the company. Therefore, the key here is to improve your ValueBuilder System score on Hub and Spoke to make sure your company becomes less dependent on you, the business owner, personally.
How Dependent is Your Business upon You ?
The Hub & Spoke is one of the 8 Drivers of Company Value within the ValueBuilder System. The DBG Advisors Proven Process begins with a ValueBuilder Assessment which we invite business owners to take. It just takes 13 minutes to assess where your business scores among the 8 Drivers of Company Value, important to buyers. You will then receive feedback from DBG Advisors personally on your ValueBuilder Assessment, at no cost.
Receive a Complimentary Book, Written by Dr. Nolan Duck
Dr Duck wrote this book for business owners in Texas who want to scale up and exit their businesses. It contains his experiences in selling companies over the past 15 years. Hopefully, it will help you prepare for your exit.
In this practical book, you’ll discover:
Richardson, Texas 75081
Abilene, TX 79606