The Osborne Group’s Value Builder is a quick business review tool which looks at eight enterprise attributes, assessing their strength against a data base of like businesses. The results show how your business is performing in each category, highlighting strengths and weaknesses in the competitive world.
One attribute that is often a small business weakness is the dependence, particularly in terms of customer contact, on the founding owner (and usually also the president). Even businesses reaching $30 million in sales can be very much bound by the range and strength of customer bonds to the owner with whom they (almost) always interact. While this is often an early stage strength, it can quickly become a vulnerability.
If the owner is entering the late years of his or her working career, the lack of a motivated and competent management team to offset the owner’s dominance in the customer sphere or as the key visionary decision maker will be a business killer. Not surprisingly, banking relationships can become strained and customers with foresight will begin to seek alternate supply sources when they perceive they are dealing with a one-man operation.
Savvy owners, recognizing this weakness, develop a management transition plan – perhaps several plans depending on the circumstances.
If interested second generation family are in the picture, when can they assume leadership? While this may be a desired outcome, their experience and confidence may yet be years from sufficient readiness. Sometimes the family members are not the best choice for top leadership but can be strong contributors elsewhere in the business. These are hard, but necessary, assessments to make.
In my experience, getting more than one potential leader into the management stream is the best option. A truth is that it will take one to two years to develop an outside hire into a good replacement for the founding owner. Hiring practices often concentrate on sector or technology specific skills and experience. In reality, looking for proven leadership skills and a personality willing to work with the departing owner (if they ever fully depart) is a much more reliable start to putting transition management in place.
It may take hiring of several managers in key disciplines to fill out a competent management group.
Stronger financial management resources are frequently needed as well as logistical expertise. Business development capability is really the lifeblood of a smaller enterprise so serious investment in this function cannot be overlooked. And yes, like buying equipment or any other enterprise asset (e.g. patents or channels to market) the expenditure in and nurturing of the management team is an investment with a real ROI.
Perhaps the most critical message in reviewing this business attribute in the Value Builder process is the need to understand that it will take significant time to make this transition. Three to four years is common. The more specialized the business, the longer and harder the task of creating a successful transition to team-based business management. Tested against the Value Builder data base, a business owner can readily gauge where he stands versus the marketplace and begin the task of finding and installing a more assured future for his business.
For a Value Builder assessment of how your business stacks up, visit: