The ultimate goal of any successful business is to create value. One of the often overlooked components of achieving this goal is scaling an organization that runs without you.
Some owners focus on growing their profits, while others are obsessed with sales goals. Have you ever considered making it your primary goal to set up your business so that it can thrive and grow without you?
A business not dependent on its owner is the ultimate asset to own. It allows you complete control over your time so that you can focus on the strategy to grow a valuable company and spend less on the day-to-day management of the company. You can also choose the projects you get involved with and the vacations you take. From more time to more autonomy, the benefits are significant for both you personally and the business.
When it comes time to exit, a business independent of its owner is worth a lot more than an owner-dependent company. Potential acquirers know they are not at risk of business interruption when ownership changes hands. Nor are they hand-cuffed to the current owner. Here are five ways to set up your business so that it can succeed without you.
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1. Give Team Members a Stake in the Outcome
Transparency about the financial stakes, successes, and failures of your company establishes a culture of ownership among team members. Allowing and encouraging your employees to be “in the know” regarding the financial status of the company creates an environment in which they are motivated to meet clear and concise goals and feel like their contribution is having a direct effect on the success of the company. It signals a high degree of trust. You trust them to build company value and you are providing them a direct reward for their contribution.
There are both formal and informal ways to accomplish this. More formally, profit sharing is a pre-tax contribution to employees that gives them a portion of the company’s profits. This can be in the form of cash disbursement, payments to retirement plans, or share-based. It’s best to consult your accountant or lawyer to determine which is the best type for your business.
Less formally, incentive and commission plans can also foster this same level of ownership when employees are able to clearly and tangibly see how their contributions make a difference. Incentives can be tied to things like sales goals, customer retention rates, or even deadlines for project completion. When your staff can easily see how their contribution to the company’s bottom line contributes directly to their own personal bottom line, this increased emotional stake typically results in greater task and goal ownership, a drive to problem-solve more quickly and efficiently, and an overall increase in productivity.
By helping team members feel that their contributions are making a difference, you are able to more easily and seamlessly establish a company culture in which growth and increased market value are cornerstones.
At Limitless, we advise our clients to start with a less formal program tied to one or two financial metrics. Then, as your company scales, you can use a more formalized profit-sharing plan to attract and retain leadership talent.
2. Get Them to Walk in Your Shoes
If you’re not quite comfortable opening the books to your employees, consider a simple management technique where you respond to every question your staff brings you with the same answer, “If you owned the company, what would you do?”
This hypothetical allows for the employee to consider the situation from a position of ownership, fostering their own sense of emotional investment in the company. When they are able to view problems from the lens of your perspective as an owner, it allows them to gain an understanding of the problem from the top. Consistently encouraging your employees to ‘think like an owner’ builds a habit that fosters independent and autonomous problem-solving skills. And the more equipped your team members are with solving problems on their own, the less they come to you for advice and guidance.
While this approach seems rather simple, for owners that consistently adopt it, this technique can be a powerful way to empower employees and remove themselves from much of the day-to-day operations of the company.
3. Vet Your Offerings
Taking an inventory of the products and services that require your direct involvement to make, deliver, or sell is a critical step in building a company that can run without you. This one task alone can save you considerable time.
List out each product and service. Assign values on a scale of 1 to 10 based on their ‘teachability’. In other words, how difficult would it be to teach it to an employee? Assign a 10 to offerings that are easy to teach employees and give a lower score to anything that requires your personal attention. After you’ve determined how easy or difficult each task is, commit yourself to training employees on the most difficult ones.
Essentially, the goal is to offload responsibilities so that your team is equipped to handle these tasks without your direct involvement. Taking the time to inventory these tasks and assigning them to team members on a regular basis will transform your company into one that is more autonomous and self-sustaining. Employees will have more ‘buy-in’ to the company and we’ve seen time and time again how leaders emerge when given more responsibility and authority.
Additionally, this effort will free up your time and allow you as the owner to focus on more strategic, high-level tasks and goals. Having the peace of mind to know that your subordinates are capable of handling these key tasks will allow you to more firmly establish a blueprint for success and establish a trajectory for growth and scale.
4. Create Automatic Customers
A recurring revenue model ensures customers buy from you on an automated and regular schedule. This means creating a service contract with your customers that will fulfill one of their ongoing needs on a regular basis. It doesn’t have to apply to ALL of your product or service offerings. But even getting your recurring revenue stream to 10% or 20% of your business will have a huge impact.
The recurring revenue business model allows your business to establish a long-term relationship with the customer and fosters a sense of dependability and security. Rather than deal with constant negotiations and renegotiations of contracts for products and services offered, implementing an automatic renewal service allows you to retain the customer over the long term. Building a relationship based on dependability and understanding of expectations allows for each party to maintain peace of mind - the business regarding its income and the customer regarding the delivery of products and/or services.
An example of this would be the Keurig coffee maker. The coffee pods required to fit with the product are brand-specific and are the only option for compatibility with the machine. With this recurring revenue model, Keurig has established a long-term relationship with its customers and ensures continued revenue so long as the customer chooses to utilize the base product.
Another example would be a subscription-based service such as a mobile application or a magazine subscription. There are other common types of recurring revenue models including the network model, the surprise box model, the all-you-can-eat library model, the private club model, the membership website model, and several others.
Be creative! There is no shortage of possibilities when it comes to recurring revenue models. One is sure to fit your company’s product and service offerings.
5. Write an Instruction Manual for Your Business
If you are really committed to getting your company to run without you, then write it down. A set of Standard Operating Procedures (SOPs) for each critical role is imperative to the long-term success of your company. Not only does it provide an educational tool to teach others, but it also eliminates any risk should you or another key employee become, but we also hate to say it, incapacitated.
SOPs function as an instruction manual for employees that help with outlining repetitive tasks and procedures and ensure that your team is equipped with accurate information that is up to the standard of the business. Having detailed and clear SOPs allows your employees to continue operations with or without your direct supervision and without fear of making a mistake.
Additionally, SOPs act as a preservation of “legacy knowledge” for any instance of employee turnover that may occur. Rather than having an overdependence on specific individuals to achieve the function of a role, you can ensure that anyone with the proper skill set is set up for success. Life happens and it’s impossible to know when an unexpected life event may prevent a current employee from performing their essential function. SOPs can act as a form of insurance against operational disruption in the event of turnover as well as to set up new employees for success in their respective roles.
While it can seem difficult, or even counterintuitive, to establish a goal of removing yourself from the company’s operations as much as possible, it is, in reality, a testament to what you have built. By creating a business that is self-sustaining, your legacy will be one of efficiency, growth, and success.
Building a company of value comes from your ability as a leader to create an entity that is capable of surviving without any specific individual. Processes and procedures should be established in a way that allows for the company to meet its mission and achieve standards with or without the direct involvement of any one specific individual - including you!
At the end of the day, any successful company’s goal is to create value for the owner(s). One of the often overlooked, yet most critical means by which to meet this goal is to ensure that your organization becomes a self-sustaining enterprise – that it can run without you. By giving your team members a stake in the financial success of your company, having them think like an owner, delegating ownership of responsibilities, crafting recurring revenue models, and providing detailed SOPs, this goal is very much attainable.
Transforming your company from one that requires your constant input and supervision into one that is able to function without you, will significantly increase its value. Acquirers will see a company that is able to operate efficiently and successfully without dependability on any one individual and therefore is much more likely to have a smooth transition to the new owners – a truly valuable asset indeed.
Want to Establish a Business that Runs without You?
The Scale-to-Sale System™ is a simple method for scaling and building the value of a company, proven to work across thousands of companies worldwide that incorporates several diagnostic tools, including the Value Builder Score. Those businesses that achieve a Value Builder Score of 80 or greater are worth double over the average-performing business.