Even though we had 50 employees and were growing by over 10% a year, the business I had was unsellable. Why?
I discovered the embarrassing answer while trying to fix what I thought was the problem.
Our growth had been solid, but we had financial issues. For example, despite the frenzied activity, profit was razor thin. We knew we would never be able to sell the business given the financial results we were achieving, so we needed to figure out why things were so lean.
After doing a system-wide analysis we discovered a key problem. It turned out that 40% of our clients were still being charged under our original pricing model. This old pricing was designed with company stability in mind, but it offered limited potential for upside. Meager margins were baked in, but we couldn’t lose big either.
Good news! We had a problem. We discovered the cause, and we knew the solution. We just needed to change the pricing model for these clients. So naturally, we waited.
We waited almost 6 months to change the pricing for those clients.
When we finally fixed the pricing, I was granted enough self-awareness to see the actual, embarrassing problem that was making my business unsellable. Me.
It was about me, the owner, and the decisions I was making. I was the problem.
The external forces are easy to blame. Luck, timing, the economy, competitors, employees . . .there are many factors that determine if a business will be successful or not, and even more that determine if the business will be sellable. Ultimately though, it’s about how the owner decides, guides and engages those variables.
In this case, I was afraid. I feared that the price increase would cause too many of the clients to bolt to a competitor. I was fearful that pursuit of profit margin would create set-backs to our growth and systems. So, I waited. When we eventually made the change a small percent of clients left, but the profit produced by the clients that stayed under the newer pricing model far outweighed the loss.
Motivated by a desire to minimize risk, I kept putting off an essential price increase. And that motivation (which served my business well in the past) sabotaged my ability to change my business the way it needed to be changed. And this wasn’t the only time that happened. I was consistently making decisions, despite knowing better, that took my business away from where I wanted it to go.
As discouraging as that self-awareness was, recognizing the problem gave me the ability to do something about it.
First, I tried to change my daily outlook. I tried to make day-to-day decisions differently. Long, painful story short – that didn’t work.
Finally, I determined that I was better at hiring managers than I was at managing, so essentially, I ran away. I hired management and then stranded myself in a satellite office where I could observe, strategically guide, but not influence daily decisions. And as dysfunctional as that sounds, it worked.
We successfully evolved and then sold the business.
I spend a lot of times these days talking to business owners who want to create transferable value in their business (make it sellable). We talk about sales, operations, financial results, and many other tangible parts of the business. But often, if the business isn’t reaching the owner’s goals, we go back to the source: the owner.
How about you? Are you the problem? If so, take heart because you’re also the only solution to that problem.
Hopefully you don’t need to isolate yourself like I did. But if your business consistently fails to produce the results needed to build transferable value, it’s probably time to look in the mirror and recognize that ultimately, only the owner can make a business sellable (or unsellable) as the case may be.
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