Can your business survive without you? If you had to take several months off unexpectedly, would you have a business to come back to? If your answer to these questions is no, your business is dependent on you. If you do not make changes to make your company stronger and more independent of you, this will affect its sale value and could prevent a sale entirely. Let’s talk about what strategies you can implement for reducing owner dependence. 

Why Owner Dependence Is a Liability

When entrepreneurs start their own businesses, they often have to rely heavily on their own resources to achieve success. They work 80+ hours a week, hunt down every last lead, and pay themselves last because they often can’t afford staff. 

As a business develops and grows, however, it’s smart to spend time creating procedures and standardizing how everything is done in the company so that no task is reliant on one employee. Every role should have built-in redundancy, and the more important the job, the more critical this becomes. 

Any potential buyer will evaluate how well the company can run the first day after the sale. That buyer will ask questions like: 

• How many hours per week does the owner work? How many does he work on site? 
• Is the owner the primary manager of the business? 
• How long can the business run with the owner absent?
• Are key employees directly tied to the owner?
• Will key employees exit the company with the owner? 

The answers to these questions will directly impact the buyer’s sense of risk and what he is willing to pay for it – if anything. Remember, buyers hate risk, so it’s well worth it for any owner to address problems well in advance of a transition or sale. 

Reducing Owner Dependence

Ultimately, the end goal of reducing owner dependence is to strengthen the company to the extent that it no longer needs the owner to be successful. This seems like a straightforward, desirable goal, but many owners have spent their lives building their businesses. The idea that they could be made redundant in their own life’s work can be difficult to accept and is one reason why some owners stay too long or decide not to sell. 

If you do want or need to sell your business in order to move on to the next chapter of your life, we recommend these steps to reduce owner dependence.

Assemble Your Management Team 

You may not have the right people in place yet to effectively manage your business without you. This is why it’s crucial to begin planning your exit strategy well in advance of a sale. It takes time to find the right talent and assemble a well functioning management team. If you do not already have a solid second in command, begin by hiring for that position first. Look for people who understand your industry, who can be effective with your staff, and who will respect your company’s goals and mission. 

Often owners will have team members in key positions who have been there since the beginning. If they are likely to retire around the same time, you will need to find and train their replacements as well. Give your team the resources they need to do their jobs and the encouragement to do them with confidence, and then trust them to do the rest. 

Delegate Your Duties 

Once you have a solid management team that you are happy with, you need to take a vacation. There’s no way to truly test if your staff can make decisions and solve problems on their own if you are always there. Begin by cutting back your hours and shortening your work week, and then take longer and longer vacations. This will give your team the experience they need with your customers, making important decisions as challenges arise. Over time you will be used to not being at the office, and your team will learn to trust themselves and take ownership of their roles. 

You will know you’ve done your job well when you don’t have to do your job at all and your company is still growing and thriving. 

Create Your Processes and Procedures

Again, absolutely nothing essential about the business should only live in the owner’s head. Documenting key information, writing down policies, and creating processes and procedures for every aspect of the business is crucial to its long-term success. It may seem like a tedious chore to write down how and why everything is done, but it will pay off in the long run when buyers see that this documentation is in place and your staff is trained in its implementation. 

Plan Your Exit

You don’t have to be ready to exit your business now, but you should begin planning for it. Have a written exit plan in place and set an exit date. The better you plan, the more prepared you will be for anything that might require adjustments to your plan. Looking back over the past few years, how many business owners were truly prepared for a pandemic, lockdowns, recessions, supply chain problems, and a shortage of workers? Strong companies run by capable, flexible people survive these kinds of challenges, while others go under. 

Sound Challenging? We’re Here to Help!

Using the above strategies for reducing owner dependence will increase your company’s value, improve its marketability, and raise its sale price. If this seems daunting to you, Prometis Partners is here to help you analyze your company’s strengths and weaknesses, identify any changes that need to be made, and implement them for maximum success. We can tailor your exit strategy to your specific needs and goals. Start by Get started by scheduling a meeting with Vincent Mastrovito today.