One of the most difficult conversations to have with a client is to let them know that their business is nowhere near as valuable as they think it is. In this case, we’re not talking about valuation, we’re talking about the person running it.
Believe it or not, if you are the sole person that makes all the decisions, knows the business better than anyone in the company, is the customer and supplier interface and the “business can’t run without you”, that is NOT a good thing if you ever plan to realize the value of what you’ve built by selling your business to someone else. Unfortunately, we’ve seen this many, many times – a highly successful “cash cow” of a business that in reality has no value – why, because the person running it wants to “cash in” and without that person running it, the business would go down the tubes.
What you want to be thinking about early on in the business as it grows is getting people cross-trained on every aspect of the business, especially the things you, as the owner, do. That does not mean take your eye off the ball or delegate everything, that just means make sure you’ve got good, trusted people in every position, especially senior and management positions, so that if something happens to you (like you sell it and retire to an island somewhere), the company will still run well.
Good buyers that understand paying a premium for a good business look for that sort of thing. Our experience is that a buyer will pay for a successful company that has management depth and can run without the owner. What they won’t pay for is you to walk away with a bunch of their money and they are left with something that falls apart because no one else in the organization knows the customers, suppliers or what you did when you were there.