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An Alternative to Ownership Transition – How to be a Successful Absentee Owner

by Peter Lachance on Apr 02, 2018 1:57:26 PM

At Trilogy Partners, we often talk with business owners about the key considerations they need to make when they transition ownership of their company to one or more people, or to another company.  However, there is an alternative to selling your ownership interest: You can systematize its operation so that employees can run it “on autopilot,” meaning that you will no longer need to steer it on a daily basis.

Putting your company “on autopilot” allows you to put off selling if you’re not yet ready to fully retire, and it expands your options for selling your company on better terms.  For example, perhaps none of your employees stand out today as the obvious choice to become the new owner. However, in 3-5 years, personal growth and increased self-confidence can change that picture.

A few decades ago, Michael Gerber wrote “The E-Myth,” a book about systematizing businesses to make the owner’s life a lot easier, while increasing both profit and sales.  The concept was popular with owners who wished to get top dollar when selling their business because turnkey businesses, where the buyer doesn’t need the seller to stay on an employee, are worth more.

The most difficult part of being an absentee business owner is that you must work yourself out of your job as the “face of the company” and allow others to step up and take over.  You may need to hire a new leader if you can’t cultivate one of your employees to do it, because not everyone wants to be the leader, and most people aren’t wired for it.  If you’re going to step all the way out of your business, you may have to develop or hire two leaders: one who is a visionary who can grow the business and develop new markets and large customers, and another who is the integrator who manages the daily operations.

Get Professional, Experienced Help

Trilogy Partners helps business owners to sustainably maximize their cash flow while they back out of their business, either to sell or enjoy owning from a distance.  The main thing you’ll need to do is to allow us to help you step away in a planned fashion.  That’s easier said than done for most owners, so that’s where we enter the picture: unlike other consulting firms, Trilogy Partners doesn’t prescribe recommendations and then leave you to make it all happen.  Instead, we partner with you long enough to ensure that the implementation is sustained.

If you are considering a future ownership transition or if you would like to explore how to become an absentee owner, please contact us at results@gettrilogypartners.com.

 

Ownership Transition – Key Things to Consider

by Peter Lachance on Apr 02, 2017 8:50:33 AM

All of our clients own businesses, and a recent Washington Post article claimed that sales of small businesses hit a record high in 2016.  From time to time, business owners get to a point in their lives when they want to map out an effective exit strategy for at least two reasons: 1) they would like to enjoy themselves while they’re still in good health; and, 2) they want to ensure their company’s legacy for the sake of their employees (and customers).

Trilogy Partners is currently working with a number of clients to transition business ownership either to internal hands (remaining owners, employees and/or relatives) or external hands (other companies or entrepreneurs).  In both instances, the owner is usually interested in maximizing the sales price, while also ensuring that the business can afford to survive.  In my experience, what’s not obvious to most business owners is that they must work themselves out of a job in order to maximize sales price and let others take over their legacy where they left off.

The idea of working themselves out of a job – even to maximize the sales price – is a tough pill to swallow for most business owners, especially for founders.  It’s not that the founder’s talent, skill and knowledge go unrecognized; it’s just that the new owners want to run the business, and they really can’t have anyone standing in the way.  Your mere presence may cause confusion to employees and customers.

Your business has to be sustainable without you in it if you want to achieve the best sales price and the best contractual terms as well as to ensure that your legacy will live on.  The business buyers you desire will view your business as a stream of cash flow, so the more confident they are that the stream won’t dry up, the more your business is worth to them.  Obviously, remaining successful will require that your best employees stay on to operate the business.  Smart buyers will provide incentives to those employees to entice them to stay on, and they won’t micromanage them.  If you value your legacy and your employees as much as you value protecting your net worth, keep this in mind when selecting a buyer.

Is Your Company Ready for Your Departure?

Here’s a simple test to discover how ready your business is to sustain itself without you in it: If you died today, what would become of your business?  Be honest with yourself (and write it down).  List what you must do to achieve a better outcome.  Don’t be surprised if it looks daunting.  With good professional help, and plenty of willpower on your part, you can create a sustainable business that runs without you in it.

Get Professional, Experienced Help

If you want to ensure that your legacy lives on and take a vital step towards maximizing the sales price of your business, get experienced help to prepare your business for sale.  At Trilogy Partners, we work with clients to ensure they have a sustainable business strategy, an organizational structure designed to implement that strategy, and the right people in the right seats.  We also help our clients clarify personal motivations and goals which in turn helps them to make better decisions when navigating the complexities of selling their ownership interest.

If you are considering a future transition and want to know how Trilogy Partners can help, please contact Peter Lachance at 609-688-0428 or at plachance@gettrilogypartners.com.

The Key to Sustainable Business Success

by Peter Lachance on Feb 29, 2016 1:34:19 PM

There’s a popular saying in the business world: “hire slowly and fire quickly.” It seems that very few organizations follow that sage advice.

Most people are hired for their experience. Yet, most people are fired for their behavior. Given this fact, I often wonder why organizations hire quickly and fire slowly.

It takes a ton of effort and money to recruit candidates, select who you think are the best ones, put them through expensive training, put up with their bad behavior, write them up ad infinitum, then fire them after a heck of a lot of damage has been done. After years of repeating the same mistakes, why haven’t employers figured out how to implement an effective recruitment, selection, management and development processes?

I believe that I have found the answer: Most organizations place far too much emphasis on skills and far too little on behavior. There is little effort to remove the mask of good interview behavior to determine if they will be a help or a hindrance, and recruiting is often focused on the rush to fill the position.

I recently read a great book entitled, “What’s Your Impact on Business – The Sherpa Guide to Business, Behavior and You” by Brenda Corbett. The author presents a very simple but fundamentally powerful formula:

Positive Behavior + Positive Skills = Positive IOB (Improved Impact on Business)

Let’s think through the logic behind this simple formula. I think everyone would agree that employees who exhibit excellent skills and excellent behavior contribute greatly to an organization’s success.

I propose the following result when applying the IOB formula in the case where the wrong person gets hired:

Negative Behavior + Positive Skills = Negative IOB

The proof is contained in millions of highly-skilled employees who are fired every year because their poor behaviors spread to other members of their team. The good news is that great coaches can help you salvage some of these employees. The bad news is that your recruitment, selection, management and development processes are probably misaligned with your goals.

What does the IOB formula predict when you favor good work behavior over good skills? That there is no such thing as “negative skills.” Therefore it would be impossible for the IOB formula to result in a negative IOB when skills are zero and behavior is positive:

Positive Behavior + No Skills = Positive IOB

Where’s the proof? It exists in many areas of your organization. You have employees whose behaviors are remarkable, who hold huge untapped potential, and are capable of learning new skills at lightning speed. On top of that, they are the ones who discover better ways of performing tasks, making their team stand head and shoulders above the rest.

So let’s sum up the root causes of Negative IOB: unfocused and hurried recruiting, hasty selection decisions, complacent management behavior, and broadly scattered investment in developing people, all leading to poor uptake and an exodus of great talent.

The IOB formula works to your advantage when you focus your recruiting, use behavioral interviewing to select high-potential people, coach your managers to keep their behavior positive, and focus your training capital to develop your high-potential employees to take on new challenges.

Following the IOB formula, your organization will experience sustainable business success. If your organization has this challenge, call me at 609-688-0428 to discuss further.

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