Creating Independence from Owner in Growing Enterprises

You need to allow people the opportunity to struggle a little bit to problem solve and to come up with their own solutions. Because if we keep solving their problems for them, it's always going to be dependent upon us to deliver everything. If you have a business where only you interact with the clients, only you deliver, only you are selling, we've got a major problem on our hands. If you want to think of the long term growth and profitability of your company, we need to be thinking on building a team. Foreign. Welcome to the Wealthy Entrepreneur Podcast. I'm your host, Bob Govreau. Excited to have you here today. And you know what? Today we're going to talk about something that every business owner needs to focus on, concentrate on, or at least be thinking about as we're building a business. Because today's topic is going to be on owner dependence and how we can eliminate the company operating exclusively on us. And as business owners, we know that this is the case because before we go on holidays, we're trying to crunch everything in and always, you know, people are constantly demanding things from us. If the business operates without us, we could be absent from the company for an extended period of time and everything would be okay. We want to create a company that has that sort of value, that runs in that way, because otherwise we're just building a business based on us as an individual, based on our identity, and we want to build something greater than that. So before I jump in, I just want to formally welcome you to the Wealthy Entrepreneur podcast. This is where we dissect the elements that contribute to entrepreneurial success, from mindset and leadership to profits and revenue. And this episode is called Owner Dependence or something along the lines of how we can eliminate dependence on us as business owners. Now, what I want to start out is that there's really four risks and that we can identify that demonstrates that a business is completely dependent upon us as business owners. One is when the owner is the primary salesperson. And I know, you know, I've got to the point now where I've got 100 ish employees and I still take a lot of the sales calls. And so an element of that is that the company is still dependent on me to bring in new business and new business development. Now, with that said, for me, I do have a business development team that's in place. They can do it without me. I just like to come in and meet the new clients and I like to identify opportunities for them. So that's a way that I like to continue to have a role in the organization. Would it work without me? 100%. Would it work as well? Probably better. But this is just an area that I like to spend time in in my business. But when you're the primary salesperson in your business as the owner and there's no one else who can sell, something happens to you. The challenge is how are you going to continue to drive revenue into your business? Number two is only the owner can deliver. And I know for years I was in this position where I was trying to build a CPA firm really around the rest of the team and training them and teaching them how things would operate and how we deliver with high quality. And you know, for, for the longest time I would just say, oh, I'll just do it, you know, I'll just do it. And I started to have to push back to say, well, no, why don't you do it? And here's how I would maybe approach it. Or these are the things. But you need to allow people the opportunity to struggle a little bit to problem solve and to come up with their own solutions. Because if we keep solving their problems for them, it's always going to be dependent upon us to deliver everything. So we need to create a team. And that's the idea of a problem number two in that only the owner can deliver. Number three, only the owner interacts with clients. And this is definitely a challenge too. It's been a challenge in our organization as well as we've continued to grow that there's certain areas where, you know, there's higher level value conversations that come up. So it's not like you can throw any junior employee in who doesn't have experience or expertise to jump in and solve problems for people or identify solutions. It does take someone who has some experience or at least some, some good coaching along the way to help them get to that level. But if you have a business where only you interact with the clients, only you deliver, only you are selling, we've got a major problem on our hands. And the last one is a risk. And this one, this one isn't necessarily a suggestive. The owner is only doing this. But it's when your business offers too many things, right? And the idea of too many things means that we have, you know, 20 solutions, 30 solutions, 50 services, 45 products, so that the specific knowledge that people need to be able to deliver those becomes challenging. Right? If we have one thing that we're good at and we do it really, really well, it's easier to teach somebody to pick up on one particular thing. But if we have 50 things. You know, again, it takes somebody at a higher level to be able to do that. Which doesn't mean that it can't happen. It just will take a little bit longer than. And we might have a little bit of risk based on those people leaving as well to start over and to retrain. So for risks, really, owner is the primary salesperson. The only the owner can deliver. Only the owner interacts with clients. And that we just offer too many things that requires too much problem solving and too much creativity on a regular basis. So I want to pose the question to you guys right now, which I think is an important one. So if you, in your business, if something were to happen to you unexpectedly and you were unable to work for a period of three months, how would your business perform? And, you know, I've reflected on this quite a bit for myself to say. And honestly, a lot of us as business owners, our identity is attached to running this business. And we need to move away from, you know, the business is, is only going to run successfully if we do it and if we do it my way, you know, again, we have to incorporate other people and their ideas and allow them to take initiative on things. Because there is a chance that something could happen to you in your business. It happens all the time. I don't want that to happen for you. I don't want that to happen for me. But there's a possibility that that could happen. And how would your business perform if you were gone for 30 days now, if you're the primary salesperson? Not very well. No new business would come in. Right. Other people would be able to jump in and help support. But if they haven't been trained or they haven't been coached on how to do it successfully, then how can we expect that that's going to be an outcome? If we were to be gone for a period of three months, who would be delivering? If we're the only person who's delivering, how could our clients continue to buy services from us or be satisfied with the way that things are going? If we were gone for a period of three months, who would be interacting with the clients? And if we were gone for a period of three months, who would help problem solve on the number of items that we have that were created. Services, products for all of our customers. So something to consider, right? And what we want to do is we want to approach this from a perspective of saying how do we create a business that if we were to be absent for three months, that we would be able to. And the company would not only just succeed, but it would probably thrive without us. And I got challenged recently from a business coach that I worked with, Alex Charfen. I've had him on the podcast, super smart Entrepreneurial Coach, probably one of the smartest guys I've ever worked with. And he challenged me and said, I challenge you to be able to take a month off this summer. And I accepted the challenge and I said, I will take a month off. I want to think this through and I want to plan for it. But the idea is one, to give your company the opportunity to operate without you. And from his perspective, from Alex's perspective, he suggested that in many instances where they put systems and processes in place in the companies that he coaches, they actually do better when the owner's gone because people are starting to think more, they're problem solving more, they're coming up with creative solutions to keep the customers happy so that once the owner actually gets out of the way, they tend to be even more successful. Now, again, every egotistical person who has their identity attached to an organization would say, well, I'm not sure that it would work better without me, but let's give it a chance to, to be successful and let's make sure that everyone is put in a position to succeed. So I will take that challenge this summer. I'll probably have to split it up over a two month period where it falls in the half of one month and half in another. But I will take that challenge because I think it's important for us as business owners to one, identify maybe where some of those pain points are so that we can fix them, and two, to make sure that we empower the individuals who are part of our team to understand how they can problem solve and fix those issues as they arise and deliver high quality service to the clients as is necessary so it's not dependent on the owner anymore. I want to make a note here too that when we reviewed business values and businesses that were exiting or owners that were exiting their business, one key factor that we determined with owner dependency was that those that didn't have the company dependent on them and it was essentially run without them, they maybe had some oversight or they were maybe part of an advisory board, or maybe they just checked in strategically on Monday mornings to check in on outcomes. The idea was that those people who the company has been built and not dependent on them sold for 155% more than everyone else. So if we think on average, you know, five times earnings multiple, I think the average is 3.76 times earnings. The value is much lower if there's full dependency on the owner and much higher if we can get rid of that dependency so that the company operates without us. Because I got to tell you, as a potential investor in a business, I want to make sure that the company is performing, that it's got good numbers, that it has lots of cash resources, that it's in a growing space. But I really want to know that the company will operate without the existing owner. And I know many of you are aware we acquired a cloud accounting company a few years ago now or a year and a half ago now. And I'll tell you, David, who is the owner of that cloud accounting, he definitely had the business operating without, without him for the most part. I would say that, you know, employees definitely had strong relationships with him and he was mentoring them and provided constant feedback to them. So with his absence I was leaned on a little bit more related to that. But he'd done a really good job creating a business that operated without him. Like a lot of the clients services just carried on once he was no longer part of the organization. And kudos to him and to anybody who can create that. And you know, I'm pretty committed to being able to create that as well. Again, 155% increase in business value on exit if you can not be not have the company completely dependent on you. And we have to think here too, you know, if we're looking for fast results, we do it ourselves, right? If you think of, okay Bob, there's a one hour project and it needs to get done and needs to get done, right? Well, if I need a fast result, I'll do it myself, right? That is not helping my team learn and it's limiting the ability for me to take on other things at the same time. Because if I'm taking on that project, there's no other capacity to take on anything else. I can't be the leader, I can't, you know, be selling, I can't be interacting with clients, I can't be vacationing with my family. Really if I'm taking on that one particular task, that's the only thing I can focus on. And I'm not helping build my team. I'm not helping create capacity. And if all I do is take on tasks, then my schedule, let's just say it's 40 hours a week. My schedule of 40 hours a week of just completing tasks is going to fill me up. And once those 40 hours are done, I don't have any more room. I Can't take on any more. So it limits our ability to grow and to build a business. Whereas on the other side, if we want to build growth and we want to build for room and capacity to continue to grow into the future, yes, we may take on some slower results because we're building our team. Right. You might not be able to get that task done in one hour. It might take three because you've got to show somebody for 20 minutes and it takes them two and a half hours to do it. But the ability to show somebody in 20 minutes and show another person in 20 minutes and another person in 20 minutes. So in, in one, that same one hour, you've got three outputs because you took the time to help those individuals understand what needs to get done. So you've now spent one hour and you've got three times the outcome. Other people are working on it. It's not going to be done as fast, it's going to be done a few hours later. But you've got three times the output because you've grown and you scaled and you've mentored a team. So super important, if you want to think of the long term growth and profitability of your company, we need to be thinking on building a team. And you might say, okay, Bob, that sounds great. How do we eliminate owner dependence? Well, I have four ideas for you and four ways that if you implement these sort of tactics into your business, you will be less owner dependent. The very first one is start creating standard operating procedure procedures. Document how things are done. Because if you. So for example, if I'm recording this podcast right now, what I should be doing is actually outlining. Here's the steps, here's the intro, here's the, here's how we build out our content, make our five points get out, say thank you. If I build that out and I've created a level of success, I can then share that information and that knowledge and transfer that to somebody else. So we want to be able to do that. And a lot of, for our team, a lot of what we do, we, we really like to use loom videos and loom videos. Allow somebody in our organization to, if they've done a task and they've really done it well, they can record. This is exactly how we've done it. And the next time they can teach someone on their team, say, this is how we did it. This is how we did it. Well, here's how I walked through it. It's on a loom video. Not only could it be the next person in line. But it can be 10 years from now, people still learning from that One Loom video and really all it was was me walking through and creating a bit of a narrative while I did it. So standard operating procedures are super important and valuable in eliminating owner dependence or eliminating key manager dependence as well. So if you think of a risk as it from a business owner perspective, if you have key employees who are the only ones who can deliver certain things, the idea would be that you have a risk if something happens to them. In this particular case, operating standard operating procedures loom videos, however you want to record it. By doing that you're eliminating your risk, you're increasing the value of your company and likely the scalability of your delivering as well. Number two, automate as much as possible. So you know, automations have been around now for quite a few times, quite a few years. Software has been amazing as far as how this goes. You know, being able to automate tasks, send out emails, to be able to just have things happen at a certain timeline without your direct involvement are super powerful. Right? So those automations automatically eliminate not only your manual input and the dependence on you to get those things done, they also eliminate any sort of manual input in many of those instances. So to be able to automate, send out emails on demand, to be able to send out follow ups, if you ask information from a client and they don't respond, have an automatic follow up related to that. If you have someone who enters into your universe and they don't buy, you should have a follow up going in there to say, oh, it looks like there was an issue. How can we support you in acquiring what it is that you were looking for? Automators can save a lot of time and also increase your follow up, get employees acting like owners. So one of the major factors of owner dependence is the fact that we haven't shared our vision and we haven't shared our values with the organization and what's important to be successful as a business and as an individual in our business. And what we want to do is we want to be very clear on our mission. Again, our mission is to empower business owners with confidence through good information, good financial information, so that they can build their companies, they can create financial success, reinvest and impact more people and together we can change the world. And when we start getting employees bought into that, why that purpose, that mission of what we're trying to accomplish, when they buy into that and they buy into the values, the better together all in own it, choose opportunity which are Our core values for our organization. When people start buying into that and saying, yes, this is just something that I'm so committed to, we get employees acting like ourselves. And in that case, they'll start problem solving more, they'll start taking more initiative, and they'll be more passionate about continuing to see the organization be successful. So to get employees to act like owners, we have to give them the opportunity to understand the true why, align themselves with that and attract those people who have similar values so that they're passionate about pursuing the objectives of the business as well. And then lastly, create accountability. And I'm going to do a whole podcast on accountability in the coming episodes here. But one of the things that we did really well to end off 2023 was to increase an accountability element to our business, where we have a lot of really intelligent people who are really skilled, they're professionals and wonderful, wonderful humans at the same token. But when they don't necessarily understand what's fully expected of them in their role, and, you know, they're always questioning whether they're doing enough, whether they've done too much comparing themselves to other people. But when you can standardize accountability across a team and everybody knows exactly what their objective is and what their role is in contributing to an organization's success, then you can truly have the team generating results without you, without having to do all the sales. Right. When you can identify that it's, yeah, it's somebody's role other than yours to participate in the sales or delivering the product or service or interacting with the clients. When we're able to define everyone's contribution towards that, make sure that it's an agreement and that it's fair, you know, that expectations are set for individuals to accomplish these things, but they're reasonable and they're attainable. Right. So we're setting everybody up for success. And then when everybody delivers together and we can create some, maybe internal pressure to help each other perform, man, oh man, do you create an organization that's set up for success. So, guys, this has been a whole episode related to owner's dependence. It's probably one of the greatest risk factors, I would suggest, in being able to exit from your business. If you are a business owner, an entrepreneur who is actively involved in your business, but the business is completely dependent upon you, you're going to have a lot of challenges exiting from this business, definitely exiting from this business with a high multiple, so that you get paid for all the hard work and what you've built along the way. This has been the wealthy entrepreneur focusing on owner dependence. If you have any comments, make sure you drop them in. If you like this episode and this information was valuable, give us a follow. We would love to make sure that we notify you when the next episode's coming out, which is going to be every single week. We've been committed to that and we're coming up to our first full year here shortly. If you know somebody who you feel their company is taking over their life, where you feel like that individual is never going to be able to exit from their business successfully and they're just working a hundred hour weeks because they just can't build a team or a business that can help support them as well. You know, we don't want to be completely consumed by our business. We need to make sure that we're getting active, we're getting healthy, we're eating well, we're getting exercise, we're enjoying life a little bit because part of the reason we started our business in the first place was to be able to enjoy some of that flexibility and some of the reward for our hard work. So we need to focus on being less owner dependent. One of the programs that we've built is called our Million Dollar Year. Million Dollar Year ca. And in our Million dollar a year program we talk a lot about owner dependence. We've got a lot of trainings in there on how you can implement these systems like your standard operating procedures, automating tasks, getting employees to act like owners, setting up your mission, vision, values, understanding your purpose, your why, and also how to create an accountability track inside your business and creating a meeting cadence that will allow you to let your employees buy into the organization. So if you're interested in learning more about that, feel free to check out MillionDollaryear CA. It is a group of entrepreneurs just like you and I who are in there actively on a weekly basis. There's weekly trainings and there's two to three years of different coaching calls and, and trainings that have been included in there. And those are all part of the membership plus the mastermind and collaboration of working with like minded individuals including the ability to celebrate our success. Because outside of a group of business owners, you know, people aren't necessarily cheering us on as business owners to see us continue to succeed. But us as business owners definitely understand what it takes to get to where we are. And this is a community where we get to celebrate the success of, of each other. So if you want to check that out, Million Dollar Year ca for those of you who've just joined. Thanks for coming in. I'm super happy to have you here. Hopefully we'll see you on the next week and I appreciate any feedback we can have. Any comments, we'll make sure we respond. But you've been listening to the Wealthy Entrepreneur podcast. This is Bob Govreau. Thank you so much. And we'll see you next time.