Bob Gauvreau explains why owner dependence tanks business valuations. When a company can't run without the founder, buyers see massive risk. Building a team that works independently of you is what actually preserves value.
Of the handful of things that actually determine what a business is worth, which one do you think most owners would score worst on? By far, in my opinion, the area that people would score the lowest on when you're understanding the true value of their business would be owner dependence. So owner dependence is where the business doesn't and can't operate without the owner continuing to be part of it. It's the number one risk for any transition in small to medium-sized enterprises. And I believe that people underestimate the importance of building a team and building a business that is sustainable without them. And I think for the most part, if you're looking at business value, the major destruction is that the company is dependent upon that owner.
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