“When considering your ‘exit flight’ from the business, there’s a danger that the ‘weight’ of owner reliance – far from securing the ‘smooth take off’ you’d hoped for – might only lead to a fatal crash landing for your well laid plans”.

Pretty much every small business starts life as an entrepreneurial venture, where the founder is the driving force behind the idea, product, or service that becomes the very essence of the business itself. The Founder’s expertise and vision are often crucial for the business’s success, especially in niche industries or innovative markets where their unique knowledge plays a significant role. ‘Founder-Owners’ are passionate to see their vision come to life and are often highly motivated and hands-on in their passion to see every department succeed to make it happen.  And when resources and finances are often limited, they end up taking on multiple roles to keep costs low and maintain control over critical operations thus becoming ‘Owner-Managers’.

As a business expands, it becomes vital to reduce owner reliance by fostering a culture of delegation, investing in employee development, and implementing processes that allow the business to operate efficiently without solely relying on the owner’s direct involvement.

However, in some cases, businesses have relied on the owner for so long that it becomes ingrained in the Company’s culture and management style to rely on the Founder for decision-making and direction at every step. This ‘over-reliance’ on the owner may hinder scalability, limit employee growth, and create bottlenecks in decision-making.

In these circumstances – often accentuated by the owner’s failure to instal any active procedures to share and transfer business and operational knowledge to others within their Team, a potential buyer questions if the business can thrive independently from its current owner. This doubt is a huge risk for the buyer that can drag down their perception of the overall value of the business.

An ideal buyer seeks an organisation with proven, well-established communication channels among its independent departments and a streamlined decision-making process that enables it to function and prosper regardless of whether the Founder or Owner is there to call the shots’.

Avoiding ‘Owner Reliance’ does not just mean surviving an ownership transition, it means crafting a successful business thriving on Leadership, Resources, Culture and Experience.

If you are business owner and wondering how to evaluate if your business has ‘Owner Reliance’, ask yourself the below questions:

1. Does your company have an overly flat structure where all the decisions funnel through you?
2. Are you the first point of contact for all the clients, suppliers, and any key contract personnel?
3. Do your employees hesitate to take routine decisions without your approval?
4. Do you find it difficult to delegate routine and critical tasks to your employees?
5. Are your employees fully educated and trained to handle even the ‘niche aspects’ and knowledge of your business and sector?
6. Has the company developed a culture around your preferences and convenience?

The answers to these questions reflect the level of dependency of the business on you as the owner. If you are aware that your business is heavily reliant on you, it is best to start taking some measures to ensure the growth and long-term sustainability of the business.

By implementing key strategies and practices, you can gradually decrease the business’s dependence on you and foster a more self-sustaining and efficient organisation. Here are some steps to help achieve that:

• Develop Standard Operating Procedures (SOPs): Create detailed and fully documented SOPs for the key processes and tasks within the business. These documents ensure that employees have clear guidelines to follow and reduce the need for constant owner supervision.
• Empower and Delegate: Encourage and train employees to take on more responsibilities. Delegate decision-making authority to capable team members, so they can handle day-to-day operations without your constant input.
• Training and Skill Development: Invest in employee training and skill development programs. By enhancing employees’ capabilities, you create a more competent and independent workforce.
• Establish a Strong Management Team: Build a capable management team to support you in decision-making and oversee the key aspects of the business. Having competent managers will distribute the workload and reduce reliance on your direct involvement.
• Encourage Innovation and Initiative: Foster a culture that promotes innovation and independent thinking among employees. Encourage them to come up with new ideas and solutions to problems.
• Implement Performance Metrics: Set clear performance metrics and key performance indicators (KPIs) for employees and teams. This helps by objectively measuring their performance and progress without the owner’s constant oversight.
• Monitor and Review Progress: Regularly assess your progress in reducing owner reliance. Use the Team’s key performance indicators to track improvements and identify areas that still require attention.

Lastly, ‘Create a Succession Plan’ to develop a strategy for the smooth transition of leadership during your exit, even if you are not planning to exit or retire anytime soon.

Remember that reducing owner reliance is a gradual process that requires patience and persistence. Over time, these efforts can lead to a more resilient and self-sufficient business that a potential buyer will value more highly and be motivated to acquire.

Remember, Successful Exits do not rely solely on one correct action, but rather on managing associated risks effectively, as even a single risk can lower the price the buyer is willing to pay.

Therefore, it is crucial to be well-prepared for an “Exit” strategy, even if you currently have no immediate plans for it.

As a long-established premium provider of business sale advisory services to UK businesses, EvolutionCBS offers business owners a complimentary and confidential discussion on how their specific objectives could be met and provides pragmatic, practical advice on how to begin preparing both themselves and their businesses for future sale or investment.

EvolutionCBS works with owners of UK businesses in any sector, finding buyers from around the world through highly targeted research and supporting clients with dedicated Director-led teams, at every stage of their journey to a successful sale or investment.

If you are an owner or shareholder of a business and would like a no-obligation consultation on the sale of all or part of your business, please email: info@evolutioncbs.co.uk or contact us on Tel: 0118 959 8224.