Business Value Drivers | Hub & Spoke
What is Hub and Spoke?
The concept of Hub and Spoke refers to how dependent your company is on you, the business owner, personally. When a potential buyer is looking to purchase your business, they are going to want to know how your company is going to operate when you, the business owner, leaves. The more dependent your business is on your personally the lower you are going to score on the Hub and Spoke driver of your company value within the ValueBuilder System. The name comes from a business owner that described his role in his company. He said he was the hub in the Hub and Spoke model and that all his employees came to him, the business owner, when they had a question, my customers come to me when they need a quote, my suppliers come to me when they want me to buy something.
This business owner was very proud of this business operating style and believed it made his business efficient. Well, perhaps it is efficient, yet if you have flown through Chicago O’Hare when there is a snowstorm and the hub has a break down and gets locked up it is a disaster! The same thing is true of the Hub and Spoke business owner. When everything in the business is dependent on the Hub and Spoke or that hub 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. One of the quick ways you can do that is to start documenting your processes.
MBA business types refer to these as SOPs or Standard Operating Procedures. If you have ways of doing things get them down on paper or within digital archives to make sure your employees are aware of things such as the 7-steps to close up at night or the 3-ways we change our brand and the other things that are important to your business operations and values. Make certain these things are not just in your own head but expressed in written form so employees can read it, digest it, and operate when you, the business owner, are not present at your business.
One of the fun ways you can measure how you are doing on Hub and Spoke is take a vacation. You can start small and just take a vacation for a couple of days to see how your business operates when you are not there. When you return to your business find out where the break downs were and start plugging those holes with training, process improvement and making sures things are documented for employees. Next, take another vacation a for a week or so and see how your business performs. It is at these crucial points where a business breaks down that you know will need to be reinforced before you will score better on Hub and Spoke.
How Dependent is Your Business upon You ?
Do You Know What Your Company is Worth?
Contact DBG Advisors today! Get full value for your company.