Reducing Owner Dependence Before You Sell

The short version

Write down who will take each piece and what that person can decide without asking you. Then write down what limit they work inside. Do it for the jobs that would stall the company first if you were gone for a month.

A buyer is not buying your hours. He is buying cash flow that continues after the sale closes and you have left the building. If customers and pricing and the daily calls all run through you, he has to assume some of that cash flow leaves with you.

That assumption shows up in the offer. It might be a lower price. It might be a longer period where you stay on to help. Or it might be terms that hold part of the money back until customers stay. Sometimes the buyer just passes.

What is the thirty day test for owner dependence?

Try this before you talk to anyone about selling. Picture a morning thirty days from now when you do not show up and you cannot be reached by phone or email.

Write down what goes wrong and when it goes wrong.

Most owners can fill that list in without much thought because they live it every week. The first item is usually a customer who wants a decision. Then comes a vendor who will not move without your word. Then comes a payroll or banking item that needs your signature.

Work from the top of your list down. Anything that breaks in the first few days needs attention before something that would not matter until week four.

Where does owner dependence hide?

In most small businesses this does not look like a problem at first. It looks like the owner staying close to customers and keeping a hand on the money. Look in these places and you will usually find it.

• Customer relationships that live only in your phone with no second person at the company who knows the account.
• Approvals for spending and schedule changes that wait for you even when the amount is small.
• One machine or one system that only you understand, including the passwords and the fixes you use when it acts up.
• Pricing you carry in your head and rebuild from memory each time you quote a job.
• Vendor relationships that depend on your history with one salesperson and nothing written down.
• Hiring decisions that wait for your final say even for entry level jobs.

One item on that list is common and buyers understand it. Four or five together change the conversation because the buyer starts to wonder what he is actually getting once you leave.

What fixes reduce owner dependence fastest?

You do not need to reorganize the company to fix this. You need to move specific jobs to specific people and give them enough room to do those jobs without checking with you on every step.

Write down your ten recurring decisions

Most owners make the same handful of calls week after week. Someone wants a discount or a rush turnaround or a refund, and the team waits to see what you will say. Write down the ten calls you make most often and write the rule you actually follow for each one, then give that sheet to the person who will decide when you are not there.

Be specific enough that two people reading the sheet would reach the same answer. If a discount over a set amount still needs your approval, say so on the sheet.

Put a named lead in front of your top customers

Buyers watch how customers react when the owner is not the one talking. Pick the lead your customers already know and bring that person into the important meetings for a full season before you go to market. Let the lead handle a real problem in front of the customer and follow it through to the end.

By the time a buyer meets the account, the customer should already be used to calling the lead first.

Cross-train the critical job

Every operation has one job that stops work when that person is out sick or on vacation. Find yours and train a second person to do it to the same standard you expect from the first. Do not call the training done until the second person has handled the job during a busy week without help.

Set approval limits the team can act inside

Write down a spending limit for each lead and a clear line for the schedule calls they can make on their own. Anything inside that line is their call and anything above it comes to you. Once that is in writing the team can keep moving when you are in a meeting or out of town for a few days.

How does owner dependence affect your sale price?

In diligence a buyer is trying to decide how much of the profit depends on you staying. Two businesses can show the same profit on paper and sell for very different prices for that reason alone. The one that runs on a team with written authority will hold up better when a buyer calls customers and talks to staff.

The opposite case invites protection for the buyer, such as a holdback, an earnout, or a lower price. None of that helps you and most of it can be reduced by doing the work above well before you list the business.

None of this guarantees a price. It does give a buyer less reason to discount for a risk he can plainly see. That work matters most before you sell your business.

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