The 4 Levers Every Founder Must Pull to Reduce Owner Dependency with Erik Schlesinger

Welcome to the B2B Growth Blueprint podcast, where we talk with entrepreneurs, founders, and leaders at B2B services, tech, and SaaS companies to learn the systems and processes they've used to create success for their business. And we'll also learn from marketing and sales experts to provide insights to help you grow your business. I'm your host, Mark Osborne. And the podcast is brought to you by Modern Revenue Strategies and their 10x ROI B2B Growth Guarantee. Schedule a free diagnostic call to learn the fastest path to double your B2B revenues in just 90 days. Hello and welcome to another episode of the B2B Growth Blueprint Podcast. I'm your host, Mark Osborne. Today, I'm very excited to welcome my guest, Eric Schlesinger. Now, Eric has built Build Scale Prosper after seeing the same pattern repeat across industries, which was great businesses were actually trapped by their own success. Owners who had built resilient companies through grit and determination often found themselves overwhelmed, indispensable, and unable to step away. Eric brings a background in building bank, brokerage, and technology businesses, and he saw how institutional buyers and investors evaluate a business and their scalability, the systems, their leadership depth, and really the value that's transferable within that business. And he also saw how few founder-led companies were really structured to meet those standards. And really what he describes as a succession crisis quietly unfolding across our business communities. So today, Erik helps owners align strategy, leadership, growth systems, and operational infrastructure to increase the company value, reduce key person risk, and eliminate the chaos that exists in so many businesses today. His work enables founders to move from dependence to durability, whether they choose to grow, raise capital, transition internally, or have that founder exit. So, Erik, I'm so excited to talk about some of these topics with you. Welcome to the show.

Great to be here today, Mark. Thanks for having me on. It's a pleasure to be here.

Yeah, so we've got some great topics lined up to chat about, but you bring such a sort of diverse background of, you know, working with some large companies and then transitioning into working with more midsize. Tell us a little bit about, you know, sort of the twists and turns of your career that brought you to where you are today.

Yeah, it's been a wild ride over the past 30 years, but I started my career by building high-growth business units and companies for some major banks and brokers and technology firms, including what became TD Ameritrade and another family-owned business that Sold part to the New York Stock Exchange, part to Merrill Lynch, and another part to Lehman Brothers. So went through a lot of twists and turns in that part of the business. And what I saw up close was that the way that sophisticated buyers and investors, what they really look for when they evaluate a business. And it wasn't what I really thought it was. It wasn't just revenue or quality of earnings. It was really about the systems and how independent the businesses were from its founders. And I realized that when I moved into the advisory world about 10 years ago, that most privately held business owners never get to see that lens. They poured their lives into their company, growing it the way that they thought that it should without really looking at how the market is gonna price what they've built. And what I really wanted to bring is that institutional perspective to founder and owner-led businesses so that they can create the endgame that works best for them and that they have options instead of leaving their exit to chance.

Wow. And such a needed thing, as you say, this sort of the succession crisis. And, you know, there's the stat that gets thrown around a lot, but it's worth sort of calling out for our audience, which is that, you know, 80% about of businesses that try to sell don't. And that's not, 80% of businesses where someone was like, well, I had a good run with it, I enjoyed it, it made a nice lifestyle for myself, I'm just going to close it down because I'm ready to retire and I've made all the money. That's 80% of businesses where someone wants to sell it because they think it's a meaningful transferable asset, and potentially they're banking on, uh, the sale prices of retirement. Potentially that business serves a key role within their community. And might even be part of a supply chain that enables other businesses both upstream and downstream to be successful. It's those businesses that are really sort of linchpins in the American economy. 80% of those don't sell.

Yeah, it's absolutely fascinating. And what's really interesting too is about 80 to 90% of business owners that actually do sell regret that decision within 2 years of selling because they weren't prepared and they don't have the options and the choices of how they can really exit in the way that they want. And they're forced to take buyouts and other situations where it wasn't ideal for what they were trying to do with their lives.

That's right.

So what we did was we've created a 360-degree assessment across all areas of the owner's life, their business, part, their personal life and their financial life, so that we can bring that back together all in one place. And on the business side, we dive deep into the structure and all the value drivers, not from the owner's perspective and what it's worth to them based on the emotion and all of the psychological factors that go into growing a business for 10 or 20 or 30 years, but from the buyer's perspective. And that really dives into how independent the business is from the owner, what the growth potential is, customer concentration, and a whole host of other things like that. On the personal side, we really dive into what the owner is looking to do next when they do finally exit. Look at the emotional and psychological side of what it means to remove your identity for something that you've tied yourself personally to for many, many years. and make sure that when an owner does exit, they do it with purpose, intent. And ideally, we want to remove that regret that so many owners have. And then on the financial side, we work really closely with all the other advisors that are a part of the owner's team to really make sure that they can withstand whatever that next chapter might be. So, you know, I think, you know, one of the things you and I have talked about a lot that you really have been, you know, pretty intrigued about is, you know, how do owners fund these sort of changes to remove that owner dependency? And we would look really closely into the entity structure, the taxation of the business, and using different types of credits, including real estate and research and development credits, so that owners have the opportunity to offset what some of those investments might be. The goal is we have to create a holistic integrated view that gives the owner the clarity that they need to see whatever that future might be, not 3 different lenses of business, personal, and financial.

So that's a really interesting point that I think is worth sort of double-clicking into, which is, so you work with the business owner to sort of understand, well, where do they want to go? And then you kind of diagnose, well, what's the difference between where you are today and where you want to be? And then you also have, you know, sort of an ability to help them see some paths to getting there that maybe other folks wouldn't bring up by getting access to research credits and other ways to invest in their business and making their business more valuable, more transferable, and really sort of funding That future state that they're hoping to arrive, but without it all coming out of their own pocket. Is that right?

Yeah, whenever we can. You know, there's only so many options and every business is different and different business owners have prepared different ways and have different caliber of, you know, types of professionals that have been a part of their team. And so, but what we really look to do is to be creative and look at the business the way that it would if it was our own, because that's the way that I've always looked, whether I was inside of a corporate entity or advising clients or running my own businesses, this is personal to me. And, you know, I think tying that personal relationship back to the purpose of the business, what it means to the community, what it means to the families that are involved, and that's all important, important things to consider. And whenever we can do that, we want to find the financial means from the outside that are going to help that owner So we don't have to offset, you know, the operations of the business or the financial lives. But we also really dive into the profitability of all the different areas inside a business. So, for example, what we see often is that there are a lot of things that have grown in the business over time, and oftentimes the business owner has invested things that might have been profitable in the past and aren't. In one recent client engagement, the owner had an online business that took up 50% of the resources every year. But that entire business line was unprofitable. So we were able to readjust and reallocate the staff and the resources by closing down the online business that there was no clear differentiated business, no real value, and it was sucking up value and resources. So Whether we get those, the extra money from tax credits or from, you know, other means, it doesn't matter where it comes from, but we are really thoughtful in making sure that all of the investments that, you know, that our clients are looking at are investments that are going to be meaningful. They're going to help drive the business forward to where it needs to be when they exit. And that we're focusing not just on the top and the bottom line and the cash flow that the business owner can get now, but also that value multiple that's so important to have options and flexibility regardless of when somebody wants to exit, whether that's, you know, 2 or 3 or 4 years out or whether it's 10 or 20. A good strategic planning process like what we use serves the business owner well so that they have all of the choices if somebody comes to the table and is, you know, wants to acquire them ahead of what their, you know, anticipated timeline might be.

Yeah. So that's such a Great perspective. And, you know, so often, you know, the phrase, you know, no sacred cows or, you know, no pet projects and things like that. And so often businesses do get, you know, sort of caught where they're investing resources in a place that doesn't strategically make sense, but they kind of can't see it because they're so close in it. And so they need that outside perspective. Even though just getting that outside perspective isn't always the right perspective because as you say, buyers of businesses think about them differently than operators of businesses. And especially that if you think about through the lens of the people that buy businesses will buy many businesses.

Right.

And so they bring a lot of expertise at that. The people that sell businesses, these business owners, oftentimes will sell one business in their entire life. And so having that outside perspective and a perspective that allows them to see what are those buyers going to be considering is really crucial.

It is. And, you know, you brought up the point about, you know, a lot of owners invest in things and they don't really see where, you know, things are going. But that becomes more and more important over time as business owners are getting closer to whatever their endgame might be. And what a lot of owners don't think about is what the investment of time really means to that return on investment. And they get distracted and lose focus, or they invest in things that might be what you and I would call a pet project. They might be able to take flyers when they're 20 or 30 years out from retirement. But as they get closer and closer to whatever that exit might look like, it's more and more important To be thoughtful and go where not just where your heart lies, but where you're going to be able to create the value that's transferable because that'll give you the options if you want to pass on your business to your family or your employees. If you want to keep your legacy, it gives you strength whenever you go to the table to negotiate, and it'll bring more more owners to the table, which will ultimately create competition, and it'll create you know a real market. for something that's valuable, not just valuable to the owner themselves.

Yeah. So as you were talking, it reminded me of such a sort of easy analogy, which is, you know, just think about, you know, as you invest in the marketplace, you know, when you're younger, you make riskier investments on some tech companies that may or may not pan out. But if they do, it would be really worthwhile. But that strategy has to change as you get closer to retirement. And we see the same thing in businesses where When you're first starting the business out, you take some bets, but then you sort of refine, well, what's working and then get better at it. We do a lot of work with helping companies grow and scale with their marketing and sales systems. And it's really interesting how frequently companies see lots of different experiments as sort of a sign of maturity. But it's really, it's a sign of immaturity because stacking all of these tactics leads to sort of stretching and breaking and stressing the system. Whereas the really sort of successful companies are the ones that identify a very precise go-to-market motion and then they get very good at it. So good that they figured out problems their competitors are still struggling with in a key area that creates that moat, creates that wall and makes the business more attractive, more transferable rather than, well, we're kind of a B or C player at 10 different things rather than being an A+ player at one different thing.

It's such a great point, Mark. And, you know, there's really so many things to unpack in what you just talked about. The first thing I want to mention is you're right, growing a business is just like investing in the markets. And the earlier that you go to market, the more time and the more flexibility and the more options you have to grow a business that moves from being owner-dependent into being stable, into being scalable, and into being industrial, an industrial-strength type of business that's really attractive to other buyers. So I recommend that people really start thinking about exit whenever possible, 7 to 10 years ahead of time. And that allows you to move in a really thoughtful, really precise direction that optimizes your ability to move as the market changes, as your goals might change, or whatever other factors might, you know, come to fruition and get in the way of the rest of your, you know, dreams. And, you know, because life happens, right?

That's right.

And the worst case you can get into is being in a place where you're a forced seller Or you're burnt out and you just can't do it anymore. And so along the way, building that freedom in and moving from being in your business to being able to run your business like an executive or a senior leader and think about allocating capital is a really big mindset shift that really helps people that are, you know, able to have more time and to be more thoughtful and precise. And that's what we bring to the game that a lot of others don't. Which is this more, more institutionally orientated focus. But it's not a focus on being corporate for corporate's sake. It's being a thoughtful owner that knows where you're going and why you're going there, allowing you to build up something that's much bigger. And it's a true asset instead of just another job that you've created that isn't transferable to anybody else.

Yeah. So as you were talking, it was reminding me of some things, which is that for most entrepreneurs, most of their wealth is tied up in their business.

Yeah.

Because, and, you know, I've certainly done this myself, you've got some extra capital laying around. Should I put that in the stock market where I'm giving it to someone else to grow their business? I don't know what decisions they're gonna make. I don't know if I trust those decisions or Should I invest it in my business where I think I'm pretty good at it? And I've, I've got some ideas on ways I could make it better if I had a little more capital. That, that's an easy choice for most entrepreneurs. They invest in their own business, they invest in, in their own thing. So that means most of their wealth is tied up there, but they fail to connect that with another sort of startling statistic, which is half of all entrepreneurs will be forced to sell, uh, when they're not ready. And so they're putting all of their eggs in this basket thinking, well, when I get ready to think about an exit, I'll have time and I'll be able to really maximize it. But I'm not ready to do that yet. Today I'm just focused on growing. But half of all entrepreneurs will either run into disease, maybe even disease of a partner or a loved one. loved one or something that needs— that causes them to need to pull back from the business, even if they're, uh, heart and, uh, healthy as a horse. Divorce, where sometimes you have to, you know, split up assets that exist there. Disagreement either with your own business partners or even suppliers, uh, that you might be dependent on. So one of those things is likely to make 50% of all entrepreneurs forced to sell when they weren't planning to. If they haven't taken the time to think about that end goal and to prepare themselves for it, they'll be caught unawares.

Yeah, and that's, you know, a great point, Mark. And it's one of the key segments that I, you know, I mentioned the forced sellers and the burnout operators are 2 of the key categories that we work in. In fact, you know, right now I have a client that has cancer and we have to Create a transition plan over the next couple of years that really is more aggressive than what you know we would like to be doing. And I've also worked with them, with folks including my own brother, to unwind businesses after they've got sick or passed away. And it's a really hard thing to do when you have all of those other emotional and psychological factors or things that are going on. And while we do that. My goal is not to have to unwind things in that way. It leads to a lack of options and very often fire sales where whoever the remaining folks are don't really have a good position of where to go forward. We just have to— you get what you get and you don't throw a fit, right? But it's really a much better outcome if an owner plans ahead and if they really think through what they're trying to do and why, and then start to make moves because we can do things over a multi-year period. And, you know, there's really 4 key lenses that we generally look through to transform a business or 4 critical levers that we look at. And the first one's the strategy. There's a lot of business owners that go through their business and they have had a really, really good strategy when they start out. But after 20 or 30 years, very often that business kind of evolves into a business that's run on the key relationships that they have. And oftentimes the market moves, particularly what we've seen in the last 5 years since 2020, with all the dramatic changes that have happened in the world and in business in particular. But the 4 key levers are first looking at the strategy, redefining the business. and what they need to do, not just to have profitability and cash flow for the owner and their family, but to really move toward that desired endgame that they're looking to have. We make sure we know who the ideal clients are and position the business clearly in the market, not from where we were in the past necessarily, but based on the capabilities that have been created over all these years, which that gets into the intellectual property that business owners often accumulate amongst them and their teams throughout a long-time tenure. The second thing we really focus on is building a consistent and predictable growth engine. Many business owners suffer from the rainmaker's dilemma where they're the key relationship person and they're bringing in almost all the business. Unfortunately, that's something that's not valuable to a buyer without keeping the owner on for an extended period of time. And it really creates risk and it creates earnout situations and concessions that often require the owner to continue to be a part and to hit performance goals that they're often not— they're not in control of anymore. And so by removing the owner from that process as much as possible, creating a good thought leadership program around the intellectual property and the, you know, sort of critical components or the key subject matter expertise in the business, bringing in other people that can own and operate and manage that sales process that's so critical for converting businesses into being really sellable assets. We also really dive into the operational components of the business. Given my background in technology and very advanced technology, I find that that intellectual property that exists is often disconnected from manual heroes that have to use tribal wisdom to really keep the train moving on the tracks in the right direction. And so we love to find really, really good intellectual property, create and build some technology around that, integrate with third-party party products in a really smart, intelligent way so that then we also make the customers and the growth engine a core part of what a buyer is buying, which creates additional value along the way. Naturally, whenever you have small teams, they're really tight and people and culture matter. We really dive into making sure that any of the changes that we're making over time are really going to be beneficial for not just the owner, but their team and the people involved. And so that the business doesn't collapse if the owner is forced to step away early or if they become a part of whatever the transition plan might be. But when we really align these 4 key lenses around the endgame, what we are able to do at that point is not just grow revenue and profitability, but we're systematically lowering the risk And increasing transferability and improving the freedom and the options for the owner for the entire journey of the rest of their career with that business.

So you obviously have a very comprehensive approach with these four different lenses and the impact that it can can make for businesses. There are likely some you know entrepreneurs listening today that are like. Wow, I recognize the need. I should start figuring out some ways that I can start to extract myself from this sort of founder dependency or owner dependency that exists. But I don't know if I'm ready to bite off all of this. What are some things that businesses can start to do that are a little, you know, a bite off that elephant instead of eating the whole trunk?

It's a great point because action in the right direction is the most important thing you can do. But I kind of think about this as a 90-day action plan. What can you do in this quarter that'll make a meaningful difference in the trajectory of your business? And, you know, I think there's 3 primary things you can do on your own if that's what you want to do. And the first one is time track. It's not a fun process, but track everything that requires you personally To help understand what the business is dependent on you versus what is not. But you can also make it an exercise for your team as well. And you don't have to do it forever. Do it for 3 or 4 weeks just to kind of get a true sense and book it into your calendar as well as you're going through the day. But you'll often find 25 to 50% of your time and your team's time is being spent on activities that aren't really driving the business forward. The second thing is focus. Pick one lane, whether it's really diving into the strategy, the sales, or the delivery part of the business. You know your business well, and you probably have some intuitive sense of where some of those problems might be. And you don't have to get everything right, but develop an 80% of the playbook so someone else can start owning what you're doing. And then the third thing is to transfer the relationships. Intentionally start to transfer one of the major relationships from you to one of your, the key members of your team with a very clear plan so that the move, you can start the move of shifting away from you to being the hero to the architect. But if you're really apt, what really makes the most sense is, is really to contact us and to go through our 360-degree assessment process. It'll show you how your business is performing versus the key factors that owners are going to look for. I'm sorry, buyers are going to look for when they evaluate your business. It'll help you understand where you sit on the owner dependency maturity model. It'll give you an estimated value of your business and what you might be worth now, and the ability to look at and define your endgame options and see how aligned your business, your personal, and financial pictures really are. And then ultimately, we can look at what needs to change to help you reach your endgame. And from there, you can decide whether you want to tackle this yourself, you want to work with your existing advisors to do it, or to bring in help, whether that's us or somebody else. But at least you're making those decisions with a clear, informed, integrated view instead of guesswork. And, you know, really, you know, Mark, you and I talked about this in some of our previous conversations. You know, of course, I want to help people, but my bigger mission is helping the owner community, the founder community of business owners understand that they have owner dependency and what they can do about it because there's plenty of institutional money out there and there's plenty of capital in high net worth companies and sponsors and corporate refugees who have left the corporate world with a package and are ready to buy a more simple business as their entire retirement hobby. The real problem is there's a disconnect between what buyers want and what owners think that they need to provide to the buyers. And part of the disconnect is in valuation and owners wanting more than The market's you know willing to pay for, but a lot of it is just simple simply that business owners built a business to provide a lifestyle for their families, and they never they've never been through the buying process to understand things from the lens of the other side. And my goal is to help bridge this gap and to help the our community so that we don't lose all of these meaningful businesses that are really the core. of what America is all about. So yeah, yeah, the main thing is, is get started, integrate the business, the personal, and the financial situation all together. And if you need help, I'm happy to help you. Just go to buildscaleprosper.com, grab our information, and send me a message, and I'm happy to chat with you and help you out if I can.

That's fantastic. So get started today. Pick an area, focus on it, make some, make some goals for the next 90 days. And if you really want to get serious about this, dig in with Build Scale Prosper and that 360-degree assessment so you can really understand the way a buyer would look at your business and understand where you are in terms of both your business as well as personal gaps. So, Eric, thank you so much for taking the time to join us today. I learned a lot. I'm sure our audience did as well.

Thank you, Mark. It's a pleasure to be here and, you know, really look forward to, uh, you know, to helping out you and, and the rest of your, uh, team as well.

All right, talk to you more soon. Thank you for joining this episode of the B2B Growth Blueprint podcast. We hope you've gained insights to grow your business. If you enjoyed this discussion, please rate, comment, like on your favorite platform, and share to others who will find it useful. Do you know a CEO, founder, or leader at an early-stage B2B services, tech, or SaaS company who would like to be a guest and share their story? Send us a note. Let's schedule a conversation.