By Ryan Binkley
Does anyone know your company as well as you do?
If you answered no, you’re in the same boat as many entrepreneurs I’ve interacted with over the years – and are potentially discounting the value of your company to buyers.
It is commendable to be passionate about your business, and forthright in how you want it to function and develop. Yet, if your business becomes overly dependent on you as the owner, it often becomes a detriment to both long-term growth and the offers you receive when the time comes to exit.
Below, I break down why clasping the reins too tightly can be problematic for a company’s present and future, and how valuable it is to have a strong, dependable executive team by your side.
There are many reasons why a business owner may neglect building a capable executive team. For some, they consider it an assault on their ego: if my team becomes more valuable than me, then what is my purpose? We see too many websites where nearly the entire company description is focused on the owner!
Others are complete perfectionists. They like things done in a certain way, at a certain time, and nobody knows how to do that better than them. This makes it hard to allow someone to approach the same task in a different way, leading to excessive micromanagement. Owners stay exhausted, team members are demoralized, company growth stagnates.
Some would like to have a team in place, but feel they are simply too busy to dedicate the time to recruit, train and mentor it.
Whatever the reason for this lack of a supporting cast, there are three critical reasons why this is particularly problematic:
Although you know the ins and outs of your business, that doesn’t mean every process or procedure you introduce is optimal as it could be.
Other senior team members, with different experiences, backgrounds and skillsets, may shed light on new approaches that you couldn’t arrive at on your own. These fresh perspectives might uncover more efficient ways to perform tasks, ideas to engage a wider audience, or ways to minimize expenses.
By occasionally giving way to the experts around you, it can inspire greater growth in your business, and unlock opportunities that you would never have considered.
In Vistage’s great article Why many leaders feel “lonely at the top”, it highlights that many CEOs experience feelings of loneliness across their careers, and that for 61% of those affected this way, it has a negative impact on their performance.
Among all of the positives and fulfillment of entrepreneurship, it can often go overlooked how lonely and stressful it can be to be a CEO without a support team. At times like this, having a capable executive team alongside you not only takes the weight off of your shoulders, but can also provide a crucial support network during challenging periods for your company.
Enabling an executive team to make decisions, present ideas, and provide honest feedback, work becomes more engaging and motivating for all involved.
The role that owner dependence plays in the value of your company is easily underestimated. Many business owners share the misconception that managing all aspects of their operations will be a positive for potential buyers – because they know how to make it perform.
But think about it: When the time comes to exit your business, where will you be? You’ll no longer be at the helm steering the company forward – someone else will need to do it. And if there is no one else in your business capable of doing this, that’s a big issue.
So, professional buyers often see owner dependence as a risk, not a benefit. Simply put, if your organization’s success is entirely due to your efforts, a potential buyer will likely demand a “discount” valuation during due diligence or insist that as part of the deal you stay on during an earn-out to ensure that the company continues moving forward.
Therefore, to avoid leaving cash on the table when you depart or find yourself involved in a deal you aren’t comfortable with, it is crucial to have a team around you that can competently manage the company if you were unavailable.
This reassures a prospective buyer that the investment they made in your business will be realized even without you directly involved, and they will be more willing to pay a premium to acquire it from you.
For more on what makes executive teams a powerful driver of business value, I’d recommend reading this excellent piece by Axial.
Hopefully this has given you a greater appreciation of the value of an executive team. Not only does it make life as a business owner less stressful and boost your chances of continuous growth, but it is a critical component of maximizing the value of your company in the eyes of buyers.
I cannot stress how important building a team is for the future growth of a company. Whether as a sounding board for new approaches and processes, or as a signal to buyers that there is a foundation in place going forward, it holds incredible value.
So, what can you do to build this crucial layer to your organization? Here are a few helpful tips from both a fellow business owner and M&A associate:
While it is vital that those you select for your executive team have the requisite skills and experience, it is just as necessary that they share your company values. If they resonate with your values, they will be more passionate about what your brand stands for and will be more likely to grow it in a direction aligned with your own objectives.
Plus, as the senior layer of your team, your executive team must embody and illustrate these values, as what they say and do will naturally trickle down to the rest of your workforce. By reinforcing these values as part of the recruitment process, you can ensure that your team is pulling in the same direction – a necessity for constant growth.
For more on the significance of shared purpose and values across your executive layer, this review from Bryan Horn of Over Under Clothing, one of our clients at Generational Consulting Group, gives you a strong sense of its worth.
If you are concerned that you are overly controlling in your company, or that micromanagement underpins your approach, ask yourself the following questions:
If these answers reinforce the fear that your business is too dependent on you, start delegating more work to the members of your executive team. They may not do it exactly the same way you do it. They may get it wrong the first few times. But over time mistakes will be erased, and you’ll have a stronger, more capable team around you.
This means there’s less pressure on you to be present at all times because others can steer the company in your absence, and potential buyers will be more enthusiastic about the opportunity presented by your business.
As renowned leader General George S. Patton once said:
“Never tell people how to do things. Tell them what to do and they will surprise you with their ingenuity.”
Although there is no one-size-fits-all approach to this, it is important to establish a working rhythm that is effective for you and your executive team:
It will take time for your executive team to get up to speed with your understanding of the business, but with the right structure in place, that is time well spent. This will ensure they are consistently nurtured, involved and engaged with the development of the business, and that their skills and confidence remain on an upward trend.
If you are interested in some advice on effective leadership, I explored that topic in-depth in a previous article – you can check it out here.
Finally, it can sometimes be difficult to look beyond the day-to-day minutiae of running a business to reflect on whether your executive team is as strong as it should be, or if your company’s growth or value has stalled as a result of this.
An impartial perspective from professional consultants, such as our team at Generational Consulting Group, can help you identify any issues that could be impeding your company’s growth potential. This could include advice on establishing a true executive layer in your workforce, or team-building exercises that get everyone on the same page.
With this external insight, you can be guided down the right path towards establishing a dependable, solid executive team. Plus, by establishing a distinct, documented growth strategy – contributed to by all senior management – everyone is clear on what the future of your business looks like. It won’t all be your responsibility anymore…
Establishing an executive team and dedicating the time and effort to nurture it pays off in more ways than you might have imagined before reading this article.
Not only will it offer fresh ideas and approaches to how you can grow and operate your business now and in the future. Just as importantly, it will help create a viable, buyer ready business that gives buyers confidence in the long-term viability of your organization when you depart.
At Generational Group, our primary motivation is to give entrepreneurs across North America the ideal platform to secure the financial reward they deserve for the time and money invested into building their business over the years. Identifying possible red flags to buyers, like the lack of a dependable executive team, is just one way we help clients achieve this.
I am pleased that I was able to work with Andrew Byrd throughout this experience. From the first meeting we had in Minneapolis I felt that I was in good hands. His knowledge and expertise is second to none. He guided the process consistently throughout. I feel lucky that I was pared with Andrew and could not be happier that I chose Generational Equity to handle this major life event. Thank you Andrew and GenEq for everything!Eric Erlandson, Owner, Action Fastenings, Inc.
We thank you Eric and Generational Equity making our dream come true.Larry Moore, Owner, A Company Portable Restrooms
We were represented by Michael Goss with Generational. The due diligence was grueling and exhausting, but Michael propped us up and kept us motivated throughout the process. Debi and I continued to ask each other how we could possibly make it through this process without the assistance of Michael. Michael's professionalism and knowledge is absolutely amazing, and we are so blessed to have had him by our side as we made our future dreams come true.Bob and Debi Lee, Owners of BL Technology, Inc and BL Tl Services, LLC
Your wisdom and experience were invaluable to me during this once-in-a-lifetime transaction.Ralph Noblin, President of Noblin & Associates
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I need to say an immense thank you to Don Ho for his stellar work ethic, attention to detail, and tireless effort. Also thank you to the whole crew at GE! Without you, Don could not do such a phenomenal job. We were shooting for closing and funding before the end of 2020, due to the uncertainty of the political landscape and taxes. I am happy to report we closed last week and will be funding tomorrow.Dr. Caty J. Catron PhD, RN, VA-BC – Owner, Vic The Picc, LLC
We had the pleasure of working with Mr. Ahmad Behjati Managing Director, M&A, for Generational Equity during our acquisition of Papa's Dodge in late 2021. Generational Equity and Mr. Behjati represented and marketed Papa’s Dodge. As our primary contact, Mr. Behjati was professional in every facet of this acquisition process, conveying valuable advice most times and assisting us in every step of the process.Rick Greene of Dobbs Equity Partners LLC
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After attending a conference with GE, I decided that the value they bring would be worth the expense and as soon as I started working with them, I realized that was the right decision. When we started to get LOIs, Fred Zweifel took the lead on the communication and supported negotiations throughout the process, which got tricky as we moved forward. I learned that it can be common for companies to make a great offer then work to erode that price with their discoveries, but Fred and the GE team kept that from happening.Caroline Connelly, CEO, OptoTest
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Greetings Mike. Thank you for the captivating and compelling presentation you made at the Phoenix presentation last week. Over many years in business yours was the most informative and well-presented presentation, on any subject, that I have ever attended! Your energy and enthusiasm combined with your concise and captivating support of your positions with easily understood examples and data was compelling.Pete L.
T.D., thank you so much! You are a great leader! I love how you are using your gifts and talents to better others. You are clearly a GREAT COACH! This 3 day session undoubtedly changed the future of our business, and very well may have been the sole catalyst to save my company, my health and my marriage! A genuine “thank you” from the bottom of my heart.Bryan D. Horn, Owner, Over Under Clothing
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The most important contribution I think Ahmad made was with his personality and work ethic. He is sincere, efficient, and very hard working. He was available to me at all times, whether it was for specific detail of the negotiation or just to talk through the bigger picture. He listened, advised, and recommended, but never forced his idea or opinions. In the time we worked together, he became a valued colleague and also a friend.Salvo Stoch, Founder and CEO of Sleeping Partners
I would like to thank you and your firm, Generational Equity, for being our valued advisors in our journey.Bil MacLeslie, CEO, ipHouse
I wanted to write you a quick letter to express our appreciation and our delight on the outcome of helping us through the process of our recent sale. We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.Terry D. Wickman, President, Keytroller
I couldn’t have asked for a better team than Michael and Deborah. We couldn’t have done it without them.Robert Evans, President and CEO of Mealtracker Dietary Software
Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).Bil MacLeslie, CEO, ipHouse
Thanks to you, the entire GE team and especially Michael Goss for driving a great valuation, coaching me and driving the process across the finish line. Please let me know if there is anything I can do to support GE going forward. P.S. Given my experience with GE I felt comfortable enough to sign up with Generation Wealth Advisors!Tom Currier, Former President & CEO, Rackmount Solutions
Through the sale process, Generational brought in several interested buyers and we closed in about 6 months. I am so glad I accepted that invitation to the conference and could not be happier with the whole process. The team at Generational coupled with their knowledge and guidance was so valuable that in the end, I know I could never have done this on my own!JoAnn Ellis, Owner of Fondren 5 Star Kennels
The process was much more involved than I expected and your help, experience and advice was a big factor in making the negotiations go as smoothly as possible.Terry D. Wickman, President, Keytroller
The help you provided us during each step of this process made us feel very comfortable and confident we were selecting the right approach to transition our Company.Andy Graham, Vice President, Modern Heating & Plumbing
Thank you again for all your guidance and support. Any company will achieve what they intend, if they have you on their team!Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
We were happy to see the interest in our company and what we cherished has not just a valuable company but an important company to the communities we served in.Larry Moore, Owner, A Company Portable Restrooms
I wanted to take this opportunity to thank you for all that you have done for us. Not only did you take care of all the aspects of the sale but took extra care to make sure we knew what it looked like every step of the way. I will definitely recommend your company to anyone that is in a position to or looking to exit their business.Shane and Johanna Kline, Owners of Vision Upfitters
I must say that I have never worked with a more driven, competent and focused individual as Don Ho.Jay Dinnison, Owner of Sharpe Mixers
I decided to attend the conference and hopefully receive some guidance on how to structure an exit plan of my business. Upon arriving at the conference, I was so impressed with the presentation given by Generational Equity that I set a future appointment that week to discuss the possibility of selling my business with their Senior Managing Director David Robinson.JoAnn Ellis, Owner of Fondren 5 Star Kennels
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