Earlier this year I was introduced to a 14 million revenue company in the construction industry with the managing three partners each earning less than their top five key employees. I was referred in because they, at the time, were considering selling the company. After initial analysis, it became clear that a few things needed to be changed. On the positive side the company had more business than they could handle but on the negative was that they could not expand. All three partners had little to no vacation in the last several years with one working 24/7 for the last three years.
In my journeys through businesses over the last several years has led me to see a common theme with business owners. The abilities individuals bring to becoming business owners are often at conflict with the later growth scalability requirements of company growth. Whether they lost their job, got tired of having a boss and/or just had the greatest idea ever it took a lot of optimistic belief in their abilities and the future. It is often that same optimism that convinces clients or customers to do business with their company.
Not surprisingly several years later the business owner starts getting tired of all the employee drama and operational headaches that pushes any owner to become envious of the simple life of his employees. They often wonder why they work more and sometimes earn less than their key employees.
One of the reasons the partners of the 14 mil revenue company for so little vacation stemmed for several reasons but two seemed to stick out. The owners were constantly being required to fix employees mistakes on worksites due to a lack of controls and how to use financial statements and other data to manage future growth. This is what I call "working in the weeds".
Now when they started the company they were sales kind of guys which usually translates to very optimistic individuals. And they were very successful in getting clients as they grew. But optimism has its Achilles heel in that it tends to ignore being critical of how things run. Operations, on the other hand, are usually run with a critical and sometimes negative point of view. It's constantly asking what could blow up or looking for possibilities that something could fail. So for three optimistic partners with a sales background putting controls into place was not something any of them wanted to focus on.
My observation has been that if an individual leaves employment from a financial or operations role they will struggle with getting clients. However, if they leave employment with a sales role they will struggle with running the operations and financials. Each struggle tends to produce problems in scalability. A simple but difficult solution is to sacrifice some revenue to free up time away from the weeds and produce a macro view that finds solutions. The hardest thing to do is to refuse business and spend the extra time-solving struggles for the future. Just stop running faster through the weeds and climb a tree to look down at all the weeds.
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John Hamel is the Managing Member of Austec Business Transitions, LLC. helping businesses optimize value relative to exiting their company.