For instance, if I have a roller-making factory, someone else can come in to manufacture and sell those rollers just as well as I can. But if I am a graphic artist, a specialty photographer, or a consultant, it’s another story. My knowledge and skills aren’t transferable. This is what’s known as proprietary knowledge.
Having said that, let’s explore the consultant example a bit further. Many people who launch consulting practices start alone, often working out of their homes. Many remain that way by choice – essentially one-person organizations. Others expand, bringing in staff and renting or purchasing office space.
At what point does the business have a “life of its own” separate from that of the owner? When is it worth something? The answer lies in both the number of staff members and in the role of the owner.
First, let’s look at the obvious – the size of the company. It would be very rare for a business to be worth anything if it has just one or two employees. It’s impossible for a company that small to establish a value for itself separate from the owner. To become a saleable company, a business must grow to a size where work is generated by staff other than the owner/president.
As a general rule, a company would probably need to have at least five to ten staff members for it to be marketable.
Next, let’s examine the role of the owner. To take a company from having a single employee – the owner – to a company that’s worth something on the market is a significant transition – not only in the dedication it takes to grow the business, but also in the way the owner must revise his or her role along the way.
The owner who, over time, becomes a facilitator in his or her business rather than a worker is more likely to end up with a saleable organization. The business becomes less driven by, and focused on, the skills and abilities of one person and evolves to the point where it could run successfully under another owner.
There are several aspects to the owner-as-facilitator role. First, the owner learns to train, delegate and support employees in taking lead roles on projects and accounts. The owner needs to learn how not to be the front end, lead person on every big account. This is a gradual external, as well as internal process, since long-time customers are often reluctant to deal with anyone but the owner.
I’ve had my own experience with this transition since I began Robbinex as its president and sole employee. Over the years I’ve had to make a conscious effort to develop and evolve not only the company, but also my own role within it.
Years ago I stopped doing the in-depth analysis work that is required for each business sale. I brought in a former partner with Price-Waterhouse specifically to do that work and today he heads up a team of five focusing just on due diligence. When it was time for me to become less hands-on in presenting educational seminars for business owners throughout North America, I brought in someone to take over. I believe that delegating the responsibility has allowed our business to grow and accommodate the extra activity.
If business owners are wondering whether they have developed their companies to a marketable level, here’s an interesting way to find out: disappear for a while.
I was stricken with an inner-ear virus that prevented me from working for almost three months. The team in place carried on just fine without me – and that’s the way it should be.
