If something catastrophic were to happen to you, would your company survive? Do your employees depend on you to make decisions, solve problems, and even run day-to-day operations?
If your business cannot run without you, then your business may be in trouble.
When you are unavailable to run your business, your employees encounter bottlenecks. They do not know how to overcome them due to a lack of confidence and experience and the habit of depending on you for solutions.
So, if injury or illness were to keep you away from your business for a long time, then your business ship will surely sink and, with it, all your hard work in building and running it.
Let us take the catastrophic further. Suppose you lose your life. What will happen to your family? Will your successor (if any) be able to run your business the way you did? Or will your family receive enough from the sale of your company to support their needs?
Investors see owner-dependent businesses as high-risk ventures and do not value them highly.
With such a low-valued business, your family could get low returns on the sale of your company. In the worst-case scenario, they might only receive the liquidation value of your business assets. You did not grow your business to give your family this future, right?
On the other hand, if your company can run smoothly without you, that independence adds value and looks attractive to future buyers (even if you do not plan to sell). Investors seek system-dependent companies that are easily transferable, not owner-dependent companies.
The Importance of an Independent Business
Business owners often take on more responsibility than they can handle. This is understandable in the start-up stage. However, they become too accustomed to working like that: wearing many hats, serving as the go-to person for their employees, and defining themselves by their work. Sometimes, they do not even realize that they carry the entire burden of running the business on their shoulders.
A business owner’s involvement in every aspect or department of their business increases their responsibilities and ties them to the company. They cannot take a vacation without worrying about their business. While on vacation, they spend their “free” time communicating with employees just to keep the business running.
When you consider a catastrophic scenario resulting in the owner’s sudden and extended or permanent absence, such situations adversely impact the business. Therefore, it is essential that you equally distribute those responsibilities among others in your company.
Trust your employees to work on the tasks for which you have hired them. Let them shoulder the responsibilities as per their job roles. In short, do not micromanage.
Not only will this be free time for you, but:
- It will transfer your focus to other areas of the company, like value creation, and
- Add grow the company’s value in preparation to sell it someday.
Focus on Other Areas of Your Company, Like Value Creation
A typical entrepreneur, wearing many hats, may start their day as the customer service agent and end it as the bookkeeper. It leaves them with little or no time to focus on growing the value of the business.
You need a time-out from routine tasks to focus on value creation activities, such as leading and motivating your employees to increase profitability, diversify and expand the customer base, enhance your product and service range, venture into new geographical areas, etc.
As your company grows, the business strategy grows with it. It would be best if you devoted time to that. Delegate the day-to-day tasks and responsibilities of running your business, so you can effectively execute that growth strategy.
Grow Value in Preparation to Sell
Prospective investors or buyers want to see a next-level management team capable of running your company and growing your business value independently after your exit. Most strategic buyers invest for profits and do not intend to oversee day-to-day operations. This means your business should be able to operate by virtue of its systems, processes, and values, not by your involvement.
If the owner’s departure impacts the business’ success, its systems and values are wrong.
How Can Your Business Run Without You?
You can accomplish the freedom of knowing your company does not depend on you.
Develop Effective Processes and Systems
Take a look at all the “hats” you (as the business owner) wear and learn how to delegate those responsibilities to your employees.
Begin by recording what exactly you do, then teach your employees those exact processes. Break each operational process into simple, reliable, and repeatable steps so that your employees can execute them independently.
Include appropriate supervision wherever necessary. Use suitable tools were needed to automate those processes and to strengthen those systems.
Let your employees do the jobs you hired them to do, using their discretion. Watch them from a distance and interfere only when they make a mistake.
Good judgment evolves from experience. Leaving them to recognize errors and resolve problems will build justified confidence in problem-solving and decision-making skills. It will also free up your time.
Test It Out: Take a Much-Needed Vacation!
An easy way to see how the company does while you are gone is to take a short vacation. If your employees are not confident making decisions without you and contact you constantly, then the company cannot run without you.
Check for bottlenecks to improve processes and systems. Train your staff on how to handle difficult situations without your involvement. Develop a knowledge-sharing culture in which employees share the issues they faced and how they resolved them, and the best practices for doing some tasks.
Take short vacations at regular intervals to check the progress of your company’s independence. When you are confident of success, take a lengthy vacation out of reach of employee contact. This is the ultimate test for checking your company’s dependence on you.
If your business passes this test, its future, should catastrophe strike, is assured.
Ensuring that your business can run while you are away or when you sell the company creates immense value in the long run. You may initially find delegating daily tasks daunting, but it is essential for growing value.
By organizing tasks, documenting processes, building reliable systems, training your employees, and delegating responsibility, you will create a business that can run without you.