Raising Your Business Like a Child
Why did you decide to become an entrepreneur?
If you’re like most owners, your answer is likely to at least touch on a desire for the freedom that comes from owning your own business:
- The freedom to decide how you spend your time.
- The freedom to choose who you work with.
- The freedom to earn something more than just a paycheck.
This desire for freedom often leads owners to aspire for a bigger business, which they think will give them what they want. Unfortunately, owners who strive for more revenue or profit as their primary goal often wind up with:
- Less time - because it’s spent managing an ever-expanding set of offerings.
- Less freedom - because complexity inevitably leads to conflict.
- Less money - because any available cash is reinvested in growth.
Instead of thinking of your business as something to push harder and faster, there’s an alternative that may get you closer to what you want. Imagine that your business is a child, and your role is to guide her into becoming an independent, thriving adult.
If your goal is to create a business that can thrive without you, you will start to make different decisions. That demanding customer who wants your direct attention on their project no longer looks so attractive. That exciting new product that’s going to require you, personally, to sell no longer looks worth it.
By stepping into the role of parent rather than business driver, the demands on your time lessen as your employees pick up more of the load. You may find your business selling more as you build a team of salespeople rather than relying only on your personal sales to drive the top line. The ultimate irony is that your business may end up being more valuable than a larger peer, where the owner is still the primary driving force behind sales.
Acquirers want businesses that will survive the loss of their owner. In many cases, they will pay a premium for companies where the owner is in the background.
Consider the case of Damian James, who sold his network of mobile podiatry clinics generating $11 million in revenue for $13.2 million. He credits much of the sale to the fact that he was no longer running the business day-to-day and had reduced his time commitment to just one or two days per week.
David Hauser started Grasshopper, an Internet-based phone system he built to $30 million in annual revenue before he sold it to Citrix for $165 million in cash and $8.6 million in stock. Hauser was down to working just one day per week at the time of the sale of his company.
Growing revenue and profits will be valuable to an acquirer, but if you make them your only goal, you may find yourself with less of what you want. Treat your business like a child who needs guidance to become a thriving adult; revenue, profits, and ultimate value will come as a by-product.
March 30, 2023