Throughout my career, I have worked with many businesses across different sectors and markets, however, when looking at the nature of a business, I consider there to be only two types.
My initial question when consulting with any business owner is, “Is your enterprise a lifestyle business, or one that I would call ‘properly corporate’?” There is a big difference between the two, especially when it comes to the business owner’s retirement and the value attributable to each type of business.
A lifestyle business can be identified by considering the role of the business owner. If the business owner works very much ‘in’ the business and is the driving force, then, although the business may be generating suitable profitability, it is unlikely that when the business owner wants to cease working, there will be any significant value attributable to such a business. Working ‘in’ the business may earn the proprietor a satisfactory income but without consideration of the end game, maximum value would be difficult to realise.
On the other hand, the proprietor who works ‘on’ their business and looks at the business itself as their product, may well go on to achieve significant value by way of a sale when the time comes for them to sell. Consideration of the ‘in’ versus ’on’ conundrum can significantly determine the roadmap of a business. Working ‘on’ a business involves establishing good corporate governance, good quality and accurate management information and strategies that are regularly considered and reviewed.
Thinking about a business differently and starting to also consider the end game will ensure that a business owner follows a path in a practical way that allows value maximisation. Breaking down critical areas of the business and allocating responsibility and accountability should turn an enterprise into a process driven machine, improving its attraction to a potential buyer.
The question I am often asked is “How do I achieve that?”
A business owner’s perception is that large immediate changes are required to transform their business, but this is not the case. I often use the term ‘elephant burgers’ - it’s impossible to eat a whole elephant in one go but it can be digested in bite size chunks over a period of time. Initial reactions to this term vary, but ultimately when the penny drops, it can become a light bulb moment.
Often a proprietor working ‘in’ his business doesn’t know that there is an alternative and that there is an opportunity to think about their own business in a different way, with a view to ultimately realising significant value. Over the course of the coming months I will be running a number of seminars entitled “What you can measure you can manage”, which will give proprietors of SMEs the opportunity to understand how, with the use of strategies and accurate management information together with regular corporate governance, they can grow their business and significantly increase its value.
Should you be interested in attending one of my complimentary seminars, please contact my colleague, Georgia Thomas (email@example.com) to register.Back to top