Why did you decide to become an entrepreneur?
If you’re like most owners, you aspire to have the freedom that comes from owning your own business, such as the freedom to decide how you spend your time and energy, the freedom to choose whom you work with, and the freedom to control your capital and revenue.
This desire for entrepreneurship and freedom can often lead owners to aspire towards a much bigger business, which they think and hope will lead them towards completing all of their goals. Unfortunately, the opposite can often be true, and most owners who strive for growth with more revenue and profit as their singular goal often run into problems. Less free time because they are spending more time managing an ever-expanding set of offerings and responsibilities, less freedom because added complexity inevitably leads to more conflicts, and less expendable income and profit because available cash and revenue are immediately reinvested into growth. So, in many ways, growing a larger business gets you further from your ultimate goal of freedom.
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. That is to start thinking of your business as a child, and to transform your role into guidance and leadership, pushing that business to grow into an independent, thriving, and successful adult.
If your goal is to create a business that can thrive without you, then the first thing you will want to start with is to begin making different decisions and changing your mindset to see things differently. That over-demanding customer who wants your attention on their project no longer looks so attractive, and that exciting new product that’s going to require you to sell no longer looks so promising.
By focusing on the role of the parent rather than solely a business driver, the demands on your time lessen as your employees begin to grow into their new roles and pick up more of the load. You may also find your business selling more as you build a team of qualified salespeople, rather than relying only on yourself to drive the top line. The ultimate irony here is that your business may end up being more valuable the more hands-off you become. That’s not to say your input, experience, and time are no longer valuable, the quite opposite is in fact true, you are just simply shifting to a more appropriate role as a business owner.
A long-term goal to keep in mind is that acquirers and potential buyers are more interested in 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 businesses’ day-to-day activities, and had reduced his time commitment to just one or two days per week.
Another great example is David Hauser. Hauser started Grasshopper, an Internet-based phone system that was built into a very successful business, generating $30 million in annual revenue before it was sold it to Citrix for $165 million in cash and $8.6 million in stock. Hauser had reduced his schedule to working just one day per week at the time of the sale of his company.
To recap, growing revenue and profits will be valuable to a potential acquirer in the future, but if you make these the only goals, you may find yourself with less of what you want. Less freedom, less growth, and less revenue. Change your mindset, replace your many roles and hats with qualified and talented employees, and begin to treat your business like a child. A child who needs your expertise and guidance to become a thriving adult, and revenue, profits, and ultimate value will come as a by-product.