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Value: John Warrillow

The hazards of hiring 'star' employees Add to ...

One way to grow a business is to hire “star” employees who join you with their own client base in tow – think of the hairdresser who brings his or her clients to a new salon.

The problem with hiring stars to jump-start your business is that customers generally remain loyal to the star, and not to your business. When the star gets a better offer, he or she will leave your company or hold you hostage. Furthermore, when customers are loyal to your employees (and not your business), you’ll have a tough time getting anyone to buy your company.

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This is exactly why Jonathan Fields fought against the star growth strategy in building New York City-based Sonic Yoga. Rather than hiring employees with a built-in client base, he created a “Teacher Training Institute” to teach new instructors how to lead a class the Sonic Yoga way.

Most fitness studios list the instructor’s name beside a class on a calendar, but for the first four years, Fields listed simply the class time and format to prevent patrons from becoming attached to any one instructor; thus reinforcing the idea that any Sonic Yoga instructor was exceptional.

Mr. Fields, who recently wrote the acclaimed Career Renegades as a battle cry for would-be entrepreneurs, sold Sonic Yoga in December 2008, partly because the business was not dependent on him or any one of his instructors.

I asked Mr. Fields for to give advice for people looking to build a valuable and sellable company. “First off, decide if you want to build a lifestyle business or a legacy business,” he says. “A lot of people start lifestyle businesses thinking they will be happy, but if you don’t like doing something for someone else, you probably won’t like doing the same thing for yourself unless you also have a passion for business-building.”

He adds: “To build a legacy business, the secret is to build value independent of you. I never put my name on the door of our yoga studio and only taught one or two classes a week once we were fully staffed because I knew I wanted to have the option to sell it one day, and for it to be sellable, it needed to be valuable without me being there.”

Are your customers loyal to your business or your stars?

Special to The Globe and Mail

John Warrillow is a writer, speaker and angel investor in a number of start-up companies. He writes a blog about building a valuable – sellable – company.

Follow on Twitter: @JohnWarrillow

 

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