If you’re following my Building a Sellable Business series, you know that my goal is to help you build your business to sell it – for profit. Most recently, we’ve been looking at how to add value to your company so that buyers offer you the maximum purchase price possible. In this article, we’re going to focus on hiring great employees – the team that helps you grow your business. They will manage and run your business in your presence and in your absence. They will either give you a competitive advantage you need in the market or damage the foundation you’ve laid for your business’s success, so pick wisely.
00:33 – How Strong is Your Bench?
02:32 – Hire the best You can afford
03:30 – Identify which Team Members will bring the most value
05:04 – How to Recruit the right Team Member
05:38 – Agencies
06:49 – Hiring Yourself
10:45 – Why hire an Executive Team?
14:22 – How much will all this cost?
20:14 – Use an Outside Business Coach or Lawyer
21:10 – Summary, How’s Your Bench?
If you’re like me when I first hear the question, “How strong is your bench?”, I think about the bench full of second-string athletes at a football, baseball, or basketball game. These strong and talented athletes are just waiting for their chance to jump into position at a moment’s notice. Coaches constantly rotate players on and off the field, or on and off the bench, to showcase and preserve the strength of their overall team.
Essentially, I’m talking about that kind of bench, but this article is about small business owners, not football coaches. There aren’t any second-string team members in business. Every player in our business has to be an all-star. As I touched on in Article #5, you must hire the best people you can afford.
There aren’t any second-string team members in business. Every player in our business has to be an all-star.Click to tweet
But why? Why do we business owners want our companies to operate without us?
Well, the businesses that can operate without the owner present tend to bring the highest market value at sale time. Buyers don’t want a business’s success to depend on one person. Your executive team, or the group of people who run the company when you’re not there, is what makes your company more attractive to investors. The deeper your bench goes, the higher your sale’s price goes.
Think about this. If you go to sell your business, and every business decision and process depends upon you, the owner-entrepreneur, what will the buyer do when you’re gone? Who will know how to operate the company, implement the business plans, and ensure that the management systems run seamlessly? No one. No one will know what to do, and the investor won’t necessarily want to get into the thick of business operations like you did.
With an executive team in place who can operate the business with or without you, your business is going to be much more attractive to a buyer who’s looking to make an investment in a company that can double or triple its value without their involvement.
Additionally, you’re not going to grow to reach your company’s full potential unless you relinquish control of your business. You have to let go of the reins. Without an executive team present, your business is going to plateau. It’s going to become stagnant because everything depends on one person’s physical and emotional capabilities. Without talent around us, we business owners can only drive our businesses so far.
At this point, you may be thinking, “Sure. Having talent is a great idea, but what’s this going to cost me? How am I going to pay for the best team?”
Hiring great employees won’t be cheap, more than you probably want to spend. But in the long run, it will cost you much less than if you never make the decision. You may pay a professional manager 20% more than you expect or want to pay. But, if your business can grow by 25%, 30%, or 40% under her leadership, then your increased revenue more than pays for her great talent. Your initial sacrifice could exponentially increase your company’s worth to investors.
A rookie mistake many business owners make is to be cheap on the hire. I don’t think you can overpay the right team. I really don’t think you can. Hear me out. When sports teams win championships, no team owner questions the players’ compensation. From the least talented to the most talented, every player’s performance mattered.
Money is an awesome motivator. It can motivate people to do good, and it also, unfortunately, can motivate them to do evil. When I was a kid, my mom used to tell me, “You’d clean out a horse stall with a fondue fork if someone paid you enough.” I agree with that! Our team members will be more motivated if they’re paid what they think they are worth. If you don’t think they’re worth that, hedge the bet with a performance-based bonus structure. Make the hiring experience a win-win experience to keep your team motivated to perform.
But if your business’s worth grows after hiring great employees and other team members, how do you afford the pay required to attract them to your company in the first place? Actually, I seldom find that my clients can’t afford great talent. It’s not a money problem. The problem is where the business allocates its dollars. If you want to build an unbelievable bench to compete in the business market, you have to decide you’re going to do it and allocate your money accordingly.
Look at hiring a team of all-stars no matter what the initial cost. All-stars win championships. Talent increases worth. Building an executive team that’s full of winners is going to take time and patience. You’ll have to recruit the best and offer the right amount of money. When the time comes for you to sell your business, you’ll be rewarded with a handsome sales price. Remember, buyers want to invest in an autonomous business.
So, where do you start? Sure, you see the need to find the “right” people for your business, but how in the world are you going to make that happen? This is my method:
Once you master this hiring process, whether you go through an agency or hire the individual yourself, you’re going to repeat it until you’ve built out your entire executive team. Yes, I said “team.” You can’t stop after hiring one person. You’re trying to fill your team bench because you want this business to operate autonomously without you, the founder, the Grand Poobah.
You’re not going to win a championship right away. Your business won’t sell for millions now, but if you plan ahead, you can win that business championship. You can stack your bench with the right people who will buy-in to your business plan and know how to implement the best management systems. Your business will grow, and that scalability will increase your company’s sellable value.
So how deep is your bench? Is it filled with all-stars? If not, why not? Get rid of the excuses, and go build a dream-team. Your business depends on it, and your future depends on it.
In the next article, we will be discussing the importance of having cash reserves for your business’s day-to-day and long-term value.