Monthly Archives: May 2015

1 Critical Management Trait Company Owners Need to Maximize Exit Value

Entrepreneurs, successors in family businesses and the vast majority of private company owners share one common trait.

They are extremely independent, driven by their vision of the business they’ve developed or the business they are charged with sustaining by those who blazed the business trail before them.

This independence and drive is both a blessing and a curse. These attributes are often solely responsible for the success and the growth of the business.

But, when it’s time to sell the company or transition the business to another family member, those autocratic traits most often drive business value down. And sometimes, make the business completely unsellable.

The single most critical management trait that a private company owner can develop is the ability to delegate.

So many company owners, through no deliberate intention, become the only knowledge keeper in the company. And worse, they become the sole owner of key customer relationships.

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They are so head-down and hands-on in their business, they give no thought or credence to dispersing authority, developing bench talent or allow others on the management team to assume responsibility through deliberate and effective delegation.

Owners simply don’t understand how this lack of delegation and management depth damages their business’ value. They don’t see their own company through the eyes of a buyer. A buyer quickly identifies the risks involved with buying the company. They see that owner ready to walk away with the vast majority of critical business knowledge and even worse, the core customer relationships.

At Capitus Group, we see and hear about this scenario on a regular basis. We quite often assess talent, recommend proactive management delegation and regularly promote the concept of bringing in a successor well in advance—at least 2 to 3 years– of the owners’ exit.

Many owners readily balk at this idea. They only see the cost of hiring that critical number 2 manager. They don’t understand that investing say $100,000 in a new manager today can result in value creation many times that. There are many cases where the return on that investment is 5 or even 10 times the cost of the investment.

Or, in the worst cases, the investment in a successor can make the company sellable when it otherwise would have languished with no buyer and no exit or value creation event for the owner. Ever! It happens all the time. In fact, recent statistics from the SBA show that over 300 businesses shut their doors for good every day because they have no buyer.

Effective delegation coupled with a sustained succession plan is a critical skill for every company owner to develop and perfect.

Note: If you have an interesting and/or educational CEO story of Head Noise caliber, write to me at cbishop@capitusgroup.com. I’d love to speak with you and share your story in my Head Noise blog. You can tell your story either on the record or, without attribution.

Cameron Bishop is a partner with The Capitus Group. The firm provides comprehensive business value enhancement and transition strategy solutions. Partners and Advisory Directors comprise an experienced team of business professionals who have successfully owned, run, grown and sold companies. Capitus utilizes proven value enhancement and risk reduction techniques to enable superior transition options.

 

6 Things Artists & Entrepreneurs Share but that Neither Would Like to Admit

Recently, I was interviewed by a writer who is preparing a book about business executives who evolve their careers beyond their traditional core profession. Over 90 minutes, we discussed a wide range of topics including my management consulting practice with Capitus Group. We also discussed hobbies and my plans to launch a new business based on a long-standing personal passion and interest in health and fitness.

As we talked, I began to realize just how much my work launching a company has in common with my occasional hobby as a painter.

Several years ago, I guess you could say, I became a painter. I chose painting because I decided it was time to start a hobby. I’ve always had an interest in art so I decided to try my hand at abstract painting. That seemed a safe choice.

As I stare at each blank canvas, I realize a sense of discomfort in the process. It’s very similar to staring at a blank piece of paper before beginning to write. Only worse. With paper, you can easily hit delete.

Then in recent months, as I work on the process of launching a new company, I have experienced that same sense of discomfort but until the interview, had not correlated the common challenges that art and starting a company have in common. They are very much the same.

Perspective and Tales from the Executive Trenches

Head Noise

This is probably not something that many artists especially would care to admit.

  1. Both artists an entrepreneurs begin with a blank canvass.
  2. Each in their own way, they must take, embrace and control risk.
  3. The painting and start-up process are highly creative endeavors. In each case, everything is new. Everything has to be invented. Each involves a tremendous amount of original thought which is ironically the most uncomfortable yet rewarding part of the journey.
  4. Both are highly motivated by an innate fear of failure. Sometimes, this fear is far more powerful than the satisfaction and rewards of success.
  5. Each discipline requires a plan. Artists need a vision for what they hope to achieve and some even add more structure by creating a grid to build on. Entrepreneurs, of course need a business plan created to achieve their business objective.
  6. Entrepreneurs and artists both must follow rules. Artists follow rules of color, balance, scale and style. In business, we follow the rules and constraints involved in the disciplines of budgeting, marketing, sales, personnel management and much more.

At the end of the day, both must attract and please a customer for that is the final arbiter of success

Note: If you have an interesting and/or educational CEO story of Head Noise caliber, write to me at cbishop@capitusgroup.com. I’d love to speak with you and share your story in my Head Noise blog. You can tell your story either on the record or, without attribution.

Cameron Bishop is a partner with The Capitus Group. The firm provides comprehensive business value enhancement and transition strategy solutions. Partners and Advisory Directors comprise an experienced team of business professionals who have successfully owned, run, grown and sold companies. Capitus utilizes proven value enhancement and risk reduction techniques to enable superior transition options.