This post was originally published on 3rd June 2015.
In business terms, who do you look up to? Who do you aspire to emulate?
Ask these questions and a lot of the usual suspects come out. Richard Branson, Oprah Winfrey, Steve Jobs, Anne Boden, Warren Buffett, Stephanie Shirley, Bill Gates and a whole lot more. The key to the success of these people was their ability to let go. The ability to allow other people to take decisions in their business in order for it to grow.
Richard Branson is easy to understand because the Virgin brand has been so prominent. Virgin Holidays, Atlantic, Records, Trains, Media, Megastore, Voyages, Radio, and my favourite, Virgin Wines to name just a few.
No way was Richard Branson across every aspect and every decision within all these companies. He hires a crack team who run each company carrying the Virgin brand. But you can bet he knew every penny being spent when he first started up and he was jack of all trades.
Anne Boden doesn’t personally approve every loan application received at Starling Bank, there are people in position to do this.
The most successful entrepreneurs of our time own businesses and brands which are self running. These entrepreneurs choose the role they take within the business, or act as figureheads in semi retirement. They are not involved with the minutiae of day to day business affairs. They have moved themselves up the hierarchy as their businesses grew.
Looking for a handy checklist that will walk you through all that’s needed when preparing your business for sale? We’ve created one with all you need – and you can download it here.
Hub and spoke delivery
Hub and spoke is a term often used in the airline industry. Traditionally, flights were all direct (point to point) but connecting smaller, less popular locations was not cost effective. So the hub and spoke model was created and adopted by most larger airlines.
At the time of writing, only our old friends Virgin are offering direct flights from Manchester to New York for the summer of 2021. That’s a point to point flight. If you wanted to fly British Airways, you first have to fly from Manchester (spoke) into Heathrow (the hub) and then out to New York.
In retail, the hub and spoke system works well for distribution. Stock is moved to several central distribution centres around the country, and from there, delivered out to numerous regional stores. It is the classic bicycle wheel image of a hub around which many spokes exist.
Are you the hub of your business?
Operating a hub and spoke business might be right for you. The problem comes when there is a single person who acts as the hub of all knowledge, often the business owner. This causes problems.
You may well have seen images of Jeff Bezos at a desk in his own garage when he first launched Amazon. At that point, he would have been very hands on and doing practically every aspect of business himself.
These global entrepreneurs learned very quickly that they have to move on from that. Jeff Bezos learned that his value was not in packing and posting every book out to customers. His value was in growing the company, launching new ideas, and hiring in the people who were good at the stuff he wasn’t.
Why is it important that we talk about this?
You know that you are the hub in your business when everything revolves around your decisions. Here are some tell-tale signs that you are too central to everything;
- Your revenue streams are at a standstill – with only you driving new business growth, your revenue will have plateaued as you personally reached capacity
- You are the person responsible for payments and purchases – if you’ve not authorised anyone else to do this on your behalf, it can cause delays and frustrations with customers and suppliers
- Your phone is constantly ringing – add distance by giving someone else responsibility and instructions to deal with certain clients or particular aspects on your behalf
- You are first in, first out – starting early and working late because the work volume requires it. What tasks are you performing that could, with a little trust and training, be delegated to others
- Clients and customers always ask for you – empower people to look after specific relationships instead of you. Introduce them, train them and then build trust in your contact that they are an excellent alternative to talking directly with you
By operating as the hub of your business you’re stifling the potential growth of your business and holding it back. It slows down the rate of growth you otherwise might see. (Amazon was founded in 1994. Less than 20 years from startup to global domination).
It’s also really unattractive
As sure as eggs are eggs, one day, you will have to hand over the running of your business to someone new. That might be family, but more often than not, you will be looking for an open market sale to new owners.
Having a business that is heavily reliant on you as the owner is unattractive and off-putting to buyers. What’s more, it also de-values it. This is such an issue for buyers, that the Value Builder program dedicates an entire module to Hub and Spoke operations and how to move away from them.
Case Study: The effort to change costs less than the increased value buyers will pay you
A recent client we worked with had a very nice business with a turnover of £1.5m and growing rapidly but with the owner very much the hub of operations. At that point, we valued the business at around 3x profits.
Roll on 12 months and we had worked through the Hub & Spoke module in Value Builder. The business has appointed a general manager who took over some customer and supplier relationships. They had taken on a dedicated accounts clerk who brought speed and efficiency to the billing process. They also empowered and promoted some engineering staff to provide them with more responsibility when responding to customer needs.
Approximate total cost in increased wages was £200k p.a. There was also an element of time and training costs, but all of this enabled the owner to focus on business development and new markets.
What it culminated in just 18 months later was an improved valuation of 5x profits and an overall sale value in excess of £9m.
Part of this increase came from growth the owner was able to focus on. Part came from the buyer’s perception of how smoothly they could take over the business with little disruption to customers.
A buyer puts a lot of added value in a business that doesn’t actually need their day to day involvement. Day to day involvement of this business owner had diminished to some very specific tasks. Customer facing work was now delivered by others and they would see no effect from the sale.
You need to become replaceable
Sadly, there is no magic wand to wave and as with all businesses, we start with a business plan and goals.
Revisit the goals of your business and what you want your business to achieve. If the business isn’t yet self running the odds are that you won’t be anywhere close to achieving those goals…..or at least some of them.
Reset your thinking and decide which goals you can be replaced on. Which goals you can comfortably hand over to other employees to deliver, if you equip them with the knowledge and expertise to do so.
Draw up a shortlist. There are going to be aspects of your day to day work which you enjoy doing and aspect that only you can do as owner. Those you can keep. For everything else, you need a strategy to move them out of your control. To do this, you need to think of Lego.
The youngest of children can take a pile of plastic bricks and create something magical with them if they follow the instructions.
Whatever fear you have had as owner about relinquishing control of your business to your employees can be minimised if they know exactly what is expected of them. If you provide them with the instructions.
So this is where some of the softer business tools like setting a vision for the business or a mission statement come into play. Defining the attitude of the business and how you want it to be perceived by the wider world and also defining the attitude of the people within it, which defines the character of the people you recruit.
Then the harder business tools join the instructions. The processes or procedures you want your employees to follow. Define how a thing needs to be done, document it and share it. Then regularly check that everyone is delivering to the same standard. If you like, it’s the McDonald’s concept of walking into any restaurant in the world and knowing that you Big Mac you order is going to taste the same as the one you get at home, because every one is made to an exacting recipe and process.
Simplify, duplicate and subscribe
When you’re documenting your processes for your employees to action, bear in mind if they should be simplified and easily duplicated.
The whole reason to get you away from being the hub of your business is so that you can spend more time focussing on growth. Putting processes in place that are simple to follow generally makes them easy to replicate as well. So when you do move into that new market or new product line, your processes for delivery by your employees are easy to implement and easy to train.
The other aspect to consider is your ability to build subscription models with your customer base. If you can build a model which means your customers subscribe and renew automatically, without any real babysitting from the business, some of your employees are even redundant from the process.
Case Study: Splosh, Smol, TrueEarth…
These companies are just 3 of many who have established themselves against the rise of plastic waste across the globe. They have taken the water and fillers out of household products to reduce the size of the packaging.
Instead of a household buying 3kg boxes of washing powder or 2 litre plastic bottles of fabric softener, small packages arrive through the letterbox on a subscription basis at a time selected by the customer.
They sell the concept on the idea of convenience (never run out with a scheduled order) as well as environmental issues (save the planet) and customers subscribe in their droves and then share their experiences on social media, which is pretty much the only marketing platform they use.
These companies began to spring up a few years ago, but in the time of a global pandemic when people were encouraged isolate, having your household staples delivered through your letterbox sent subscriptions soaring.
You need your employees to commit to the new way of working
If you’ve run your business on a tight reign for many years, your employees may well be sceptical about the changes you want to make. They may well think that if they take responsibilities from you, they are in the firing line if something were to go wrong.
If you have documented what you need in enough detail, this should be avoided, but you do have to train and bring your employees on this journey with your.
Show them what it’s like to walk in your shoes for a day. It is something they may not yet understand. Explain the reasons behind the changes you want to make, how it will benefit the company and how it will benefit them as individuals.
Bringing employees into your confidence in this way will help them to engage with the process and be more committed to it, but some companies still go further.
Case Study: Rowlinsons Knitwear
As Donald Moore of Rowlinson Knitwear attests to in an interview with Gavin Preston, when he joined the business there were physical fights happening on the factory floor.
In order to change the business to become a better place to work they set to and started working on the shared company values. Fist fights on the factory floor were not on the list.
Whilst this is an extreme example, the company followed through universally in their approach to what was acceptable behaviour, and what was no longer expected. Those employees who could not or would not make the journey with them to the new way of doing things were slowly let go or replaced.
Slowly the business changed and so successful was the focus on attitude and behaviour that they eventually rolled this out to their customers and their suppliers also, dealing only with those who mirrored their belief systems.
They ultimately made the decision to put the business into employee ownership, which is the next discussion point.
Gifting shares or other stakes in the business
If you employ excellent people, they are could be the target of a head hunter and be lured away from your business. So for some companies the best way to ensure key employees stay with them it to tie them into the business.
Some are are given an improved benefits package by way of company car, medical cover, increased holiday entitlement. Some are entrusted more with flexible working schemes. Others are gifted shares in the company. If you are preparing your business to be sold and their support will increase the sale value you achieve, shares equate to a financial bonus of success.
Whatever you decide is applicable for your situation, make sure your employees know that the benefit they are receiving is a direct consequence of the increased responsibility they are taking from you.
Draw the line and connect the dots so there is no confusion.
Walk the walk and give credit to the team.
When you have successfully started to extract yourself from your business and responsibilities have been passed to your team, remember to recognise them.
There is nothing more demoralising than watching someone else take credit for the work you have done. So you may have been the head of your company for a long time, but if someone else has achieve success, give them credit and don’t hog the limelight.
Being vocal within your organisation with your praise and recognition will encourage and promote more of the same behaviour from the rest of your employees. Walk the walk, don’t just talk the talk.
For external announcements, you may still be the owner and figurehead, but try to share the press announcements under the names of other team members. This will be noted by your ultimate buyer and add to their view that you are not the sole hub of the business.
Find your personal niche
If you are successful with your transition, you will find yourself with time on your hands that you need to fill. How close you are to selling the business will guide what you do.
If you’re a few years off selling, your focus will still be on business development and exploring new markets. You might increase your networking opportunities and become more prominent as a presenter/speaker at business events. All activities which will drive the growth of your business, which is now being delivered by your employee team.
If you are closer to selling up, you have a few more options that could fill the time. Many take NED positions and support other companies. Some take positions within charities to give back. Others step back into semi-retirement and hit the garden or golf course.
Remember, you don’t have to fill all 24 hours of your day with work – time off is allowed. The one thing you should not do is shadow your employees checking every aspect of their work as they go. That’s not quality control. That is mistrust.
How we can help
Whether it is trying to identify the right subscription models which will work in your business or whether its understanding how to best get buy in from your employees to your new way of thinking, Uscita is at your side.
Our Value Builder coaching sees us working through these topics on a regular basis with businesses. You can start yourself down the route to a self running business either by taking your initial Value Builder Score below or by getting in touch to set up a discovery call.