As the CEO of a successful construction and renovation company, Ross Smith was on a roll. He had built his company into the largest installer of ABMs in Canada with a roster of clients that included all the major banks. For years, he worked around the clock generating annual revenue in excess of $13-million. Business was good. Vacations were rare. But success was ostensibly at-hand.
Then, the unthinkable happened: At age 50, he suffered a massive heart attack and underwent a rare quintuple bypass. Thankfully, Smith survived, but he had a long road to recovery and would be unable to work for some time.
Would his business survive with Smith missing from the helm for six months?
Fortunately, prior to his heart attack, Smith was practicing something I call the ‘art of letting go.’ His business had all of the telltale signs of reaching a glass ceiling in terms of growth. While sales were great, they were plateauing. Smith was wearing too many hats in the company, often in areas outside of his expertise, covering not only sales, but finances, production processes, etc., and he was feeling burnt out.
“Like many entrepreneurs,” he says, “I had been too involved in the day-to-day running of the operation, trying to do too many things myself.”
I’ve seen many other entrepreneurial companies experience similar symptoms at or near the $10-million revenue mark. In many instances, these companies experience high senior staff turnover, because talented executives don’t feel like they have been given the autonomy to take the organization to the next level. The business owner’s need to give final approvals at every level bogs down staff.
Conversely, business owners feel they can’t find the right people for the job because they hire “do-ers” instead of leaders. These entrepreneurs feel wary that any one else can be as competent or passionate about the business as them.
Smith recognized these signs, and knew he had to work with his advisers to instill change for the betterment of his company. So, he committed to a succession and business development strategy that involved intensive monthly business planning meetings, and he set his sights on his company surviving (even thriving) without him.
Today, he’ll be the first to admit that this proactive planning is the main reason he had a business to come back to at all, once his recuperation was complete.
Letting go is an art because every business and its respective entrepreneur are unique. But there is a bit of science to it too, if you consider these four general guidelines.
1. Observe the 80-20 rule: Entrepreneurs tend to be doers, not just dreamers. But “doing” doesn’t mean doing everything. Bring in people who can do about 80 per cent of the work in the company. Let your team do what they do best. Then, as the owner, save 20 per cent for what you do best – leverage your key strengths.
2. Start with the end in mind: Some entrepreneurs tend to view their business as being theirs forever, but the problem sets in when quixotic thinking gets in the way of solid business decisions. One way to automatically put the entrepreneurial brain in the proper mindset is to look at things through the lens of an end sale. Will the decision you’re making today contribute to a higher company value? Truth is, salaried employees tend to respond differently than true business owners. Which one are you?
3. Get org chart smart: Strategic exercises such as SWOT analyses, position assessments, key client and confidential employee surveys from all levels of the organization can give you an accurate assessment of where the business needs to go. How many org chart positions are you currently filling? Keep the position you love, and fill the rest with capable talent to build a robust management team.
4. Commit to the long-term: We meet with many of our clients on a minimum quarterly basis, so we can identify challenges, see the implementation of solutions, then assess and re-align the plan as necessary. Typically, once the pieces are put into place, things start to take off slowly. It’s important to be patient and pursue long-term gain.
Having a third-party come in with a fresh set of eyes and impartial viewpoint is often the necessary solution to the common glass ceiling dilemma. Blood, sweat and tears form the entrepreneurial spirit. But I’ve seen it time and time again – a headstrong entrepreneur’s insistence on doing everything severely impacts his company’s valuation. Frankly, there is no way to sell a business at full value when all the equity remains in the owner’s head. A proper management team that shares the duties shows equity in the business – not just the owner.
Incidentally, under Richter’s guidance, as Smith ‘let go’ of his business, he doubled its annual revenue from $13-million to $26-million in just four years. Then he sold his share of the business to his partner and an outside purchaser.
Cary Selby, CPA, CA, is office managing partner at Richter LLP , in Toronto.