Want to Sell Your Business Eventually? Invest in the Right Staff Now
Small and medium-sized business owners may enjoy running their companies for many years with little thought to selling. Then the thought of selling may be on their minds more often than it was the year before. But unless action is taken sooner than later, their companies may not sell for as much as they need to retire.
The truth is that it’s never too early for owners to start getting their company, and themselves, ready for a sale. The savviest leaders start prepping years in advance to ensure the company is in the best possible shape. This approach makes it more appealing to buyers and usually nets more money for the seller.
When business owners start tackling the steps for getting their company ready to sell, most of them ponder their exit strategy, clean up their books, and try to increase sales. One of the biggest, and most overlooked, points of importance is the company’s management structure.
A Potential Problem: Lack of Middle Management
Small business owners are almost always powerhouses who’ve built the company from the ground up. It’s their baby, and they protect it fiercely.
This loyalty propels the organization’s success in its first years but can be a hindrance as it scales. If there aren’t talented managers hired and immersed in the company, several negative “side effects” can occur.
- Lack of delegation. Growing companies require more tasks to function every day, which can overwhelm an owner without experienced, knowledgeable staff to handle them. If an owner keeps everything from accounting to marketing to vendor management under their own umbrella, it can overload them and cause a breakdown in productivity. Important initiatives can go off the rails, damaging the company’s reputation and bottom line.
- Missing specialization. Nobody excels at everything. A business owner may be the best innovator in the world but may lack sales skills. Or, they may rock selling but are terrible at managing people. A marketing guru or technology expert may be the ticket to growing the company by leaps and bounds faster than if the owner tried handling these initiatives independently. Companies without specialized staff may not grow in value as much as those that have hired skilled talent to reach their goals.
- Company stagnation. Several vibrant leaders from different walks of life bring creativity to the table. These outlooks can lead to unique, competitive ideas and ways to move the company forward successfully. While an owner may have good ideas, they can’t possibly produce as many as multiple people can. Over time, a lack of new, innovative ideas can stunt a company’s growth and even cause it to move backward.
- No succession plan. As critical as it is, many small and medium-sized business owners don’t have a succession plan. When few managers are shouldering the responsibility of running the company, succession plan is usually lacking. Companies without a long-term succession plan may run into damaging problems like tax issues and even being able to keep the doors open. If there are few middle managers, the organization may struggle to find qualified people to run the company once the owner leaves.
A Buyer’s Viewpoint: Too Much Work
An entrepreneur may look at a lack of middle management as a good thing. They can make all the important decisions and maintain control of the business they worked hard to build. Plus, it keeps labor costs low.
Buyers may have a different opinion. When investors view a potential purchase, a one-person-run organization may look like a ton of work. If they decided to buy the business, they would need to find, train, and place a new team to run it. This effort may be off-putting to investors who want a simpler process.
Business owners who don’t relinquish some control and take the time to hire strong, talented managers could be getting in their own way, especially when it comes to selling their companies.
The Solution: Proactively Invest in Talented People
Entrepreneurs that see the big, long-term picture can build better, more investor-friendly companies. Success starts with accepting that they can’t do it all themselves.
- Promote talented middle managers. As the company grows, give those high-performing team members who are knowledgeable, driven, creative, and possess strong people skills a second look. These employees could make excellent middle managers. By promoting from within, leaders can feel confident they are getting a manager who understands the company and its expectations.
- Hire middle managers. It won’t be possible to cherry-pick every middle manager from current employees. Fresh blood can bring exciting new ideas and opportunities, making it smart to look outside the company to find managers, too. As the company scales, hiring these high-quality hires, training them, then retaining them becomes a necessity for long-term viability.
- Hire a top-level team. Depending on the size of the business, owners may need to hire or promote managers to be members of their C-suite. These employees will be vital in driving the company forward and forming its overall initiatives.
- Foster two-way communication and trust. As the management roster grows, the owner’s role transforms into a visionary who guides the company rather than a person working in the trenches. Leading by example is an effective way to ensure communication between top and middle managers down (and up) the chain is respectful, efficient, and productive.
Whether you’re wanting to sell your business next year, or are just planning for the distant future, it’s never too early to find the right people for your team. By investing in your staff, building a strong leadership team, and letting some control transition to other’s capable hands, your business will be more appealing to buyers and more lucrative for you when the time comes to sell it.