Why was my business unsellable?
I was sitting at my desk and I thought I had the answer.
A business broker had just told me that he couldn't sell my business because it didn't show enough profit.
Increase the profit and I can sell your business!
It should be easy enough to do. We were doing $5 million in revenue each year. I should be able to squeeze some more net income out of that top line. Solve that problem and I can sell my business, right?
Wrong. I discovered the real, embarrassing reason why my business was currently unsellable while trying to fix the profit problem.
I dug in.
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 structure was designed with company stability in mind, but it offered limited potential for upside net. Meager margins were baked in, but we couldn’t lose big either.
This model was designed to reduce risk, and it was clear that it was always going to limit our profit potential.
We just needed to change the pricing model for these clients to increase profits.
We had a problem. We discovered the cause, and we knew the solution. What comes next is natural.
Naturally, we waited.
We waited almost 6 months to change the pricing for those clients.
When we finally made the decision to fix the pricing, I was granted enough self-awareness to see the actual, embarrassing problem that was making my business unsellable.
It was about me, the owner, and the decisions I was making. I was the problem.
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 would create set-backs to our growth and systems. So, I waited.
I made the decision to put off pursuit of higher profit.
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.
When we eventually made the change in pricing a small percent of clients left, but the profit produced by the clients that stayed under the new prices 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.
Clearly, I was the problem. I had to try to find a solution.
First, I tried to change my daily outlook. I tried to change myself and make day-to-day decisions differently. Long, remarkably painful story short – that didn’t work. This part of me, the part that kept seeing the downside, that kept seeing the risk (not the reward) simply wouldn't let go. I could see where we should go, but I couldn't keep myself from making daily decisions that sabotaged our ability to get there.
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.
I picked a great team, I told them where I wanted to the business to go, and I got out of their way.
They Successfully Changed the Business, and Then We Sold It
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, those things are only the symptoms that point to the real problem. 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.
Don't be embarrassed, but don't be stupid either.
Take a look and take a step.
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