Being a small business owner is as part of the American Dream as owning your own home and raising a happy, healthy family. These are all worthy goals, however to be successful in all of them takes an individual who is willing to continuously learn and grow to improve each day. In this week’s lesson, we will discuss a business strategy that may sound contrarian, however I know firsthand from experience that it works. I was inspired to write this lesson by an article I read yesterday in the June 2008 issue of Inc. Magazine. The article was written by one of my favorite columnists named Norm Brodsky in the “Street Smarts” column he authors every month in Inc. Magazine.
Norm is a veteran entrepreneur who six businesses have included a three time Inc. 500, company. The title of his column Street Smarts: Get Lost is fitting. Each month as I read his column, I seem to identify and agree with most of the information he shares with his readers. In this month’s article, he claims that as a business owner he found that “taking more vacations increased the value of his company.” He goes on to write that over the years, it was extremely difficult to take any time off from his business. He would think about his business during every waking hour and his wife had to force him to take a couple of days off to get away from it. This mindset is very typical of the small business owner. I know this because I have known and serviced thousands of them over the years. They sincerely believe that the business will fall apart in short order, if they are not attending to all the details and making all the decisions each and every day. In Norm’s opinion and I fully concur, nothing could be farther from the truth.
I was fortunate to be motivated to read and study, and learn early enough in my business career to “work harder on my business” than “in my business.” Business owners need to devote the majority of their time planning, delegating and executing well thought out plans, rather than doing the physical labor or performing the services themselves. They need to devote their precious time to hiring and training the absolute best associates, in order to make their business run smoothly, without them even being there. That’s how you build a valuable enterprise that someone else would like to eventually buy from you.
Norm became a believer of this philosophy, and learned that the last company he recently sold, was worth so much more than previous businesses to potential buyers, because he evolved to taking 16 weeks of vacation a year. The buyers were thoroughly impressed that the business could grow its revenues and earnings consistently, without Norm being there every day at the helm. Most purchasers of small businesses know that the business success usually revolves around the founder and owner. The client’s loyalty is usually directly tied to the owner. Thus, when the owner sells and leaves the business, the loyalty of the client’s leaves with the owner.
I can identify with Norm’s observations, because my experiences were very similar. I was fortunate to have three partners in business and we were able to work harder on our business than in our business. We were able to build a chain of wholesale/retail stores and after store number four and through store number twenty four – never had to put a key in a door to open or close any of them. Each of us had a key ring for all the keys in every store as well as the alarm codes and other pertinent information. The total key ring weighed about fifteen pounds. And I always used to say that I hope I never have to open a store because I probably couldn’t find the alarm pad in some of them. The point is we had the insight to set up a strong management team at our headquarters; as well as a strong team of managers, assistant managers and key people at the store level – so that we did not have to be in any store at any time for it to function efficiently. We invested our precious time improving our systems and procedures which would enable us to service our clients with consistent service and have them love doing business with us.
This is not to say that we didn’t have any interaction with our clients. We were very involved in closing deals and building relationships. However, we were not the individuals our clients had to interact with to enjoy great service from our company. Our appearance was simply a treat for our clients, who sincerely appreciated the positive results from our well thought out systems and the methodical execution of our plans. They enjoyed dealing with our people.
Like Norm, taking more time off actually improved the value of our business. During the last several years of our business careers, my partners and I evolved into a four day work week. This meant each of us had 52 three day weekends equating to about 10 weeks of vacation time. This gave us time to rejuvenate our brains and come back with new ideas to improve our systems. It also made our company much more valuable to the purchasers of our business, because they saw firsthand that our people RAN our everyday operations and they couldn’t wait to get their hands on our personal income generated from the business. It’s all part of a mindset – to work harder on your business than in your business. And gear it to run without you to increase its market value to a potential buyer!