By Jeff Bell.
Image: iStock.
Taking ownership of a business—building it from scratch or in acquisition—requires insight, responsibility, money and courage.
It also requires hard work, long hours, curiosity and kindness.
And actually, quite a few more attributes. At the head of them all, may be mindset.
Sydney business creator Kobi Simmat has provided a great manual for the business owner titled How to Build a Business Others Want to Buy.
As the title suggests, this is about preparing our business for sale—which he says thinking about should probably inform our decision from the very start. Far from being an opportunistic reflex, it is best done intentionally, methodically and probably over a couple of years. This certainly aligns with our thinking in the Band of Leaders (BOLA) group.
Among the models that he relies on, Simmat details the 5Ms that make or break a business: Mindset, Momentum, Management, Marketing, Money.
Each is worthy of the closest consideration, but it is mindset that I would like to expand on here. In BOLA, our key focus is on leadership and what is it if not a state of mind—which determines our behaviours.
To Simmat, our behaviours at the head of a business may characterise us as one of, or a combination of, the following. This is what I have taken from his narrative:
- The Technician has highly developed knowledge and skills based on deep experience in the business. From this base, and with a certain amount of self-confidence, the Technician may start his own business. Then, everything depends on the Technician and in time, he is in high demand and is able to afford to draft others to assist him the business. These new employees have high respect for the Technician, they admire how everything seems to revolve around him, and they see how the Technician both attracts the contracts and delivers on the most difficult of technical challenges. Everything depends on the Technician, and they are happy to work for him. The Technician, like the hub of a wheel, is the business.
- The Manager. As the business becomes so demanding of the Technician’s time and energy there comes a decision point: bale out; hold as it is; or grow. Choosing the latter, the Technician must now formally develop those people to independently take on the component parts of his role. The Technician must now also systematise the business—identifying, describing and documenting the processes and procedures. Specialist help will also be required for support roles, such as accounting, marketing, ITC and legal. The business is now a team effort—the former-Technician-now-Manager finds that he is relying on people who are often out of his sight and his direct influence—yet they will hopefully maintain the standards he set as the founding Technician.
- The Owner. In our business career, we will have been that Technician. But many a Technician finds that the transition to management and then on to Owner, requires a whole shift in mindset and therefore, behaviours. What got us here will not be enough. We are now faced with the leadership challenges of the enterprise—inspiring, influencing, negotiating and building trust. The store of knowledge, the development of our people and the maturity of our systems must mean that the business is capable of functionality fully without us. Given the right presentation, it is something that we can sell with confidence, for which we can expect a high multiplier and which will go on creating wealth for the next owner.
The value of any business is determined by the net return, with that multiplier which may be a 2 or 3, plus stock, plant and equipment and retained earnings as applicable.
The justifiably ambitious Owner—with a remarkable business and a differentiated product—will be striving for a multiplier in the order of a 5, 6 or even higher.
Simmat challenges the Owner to aim for a factor of 10—in any goal. Such ambition requires a strategic mindset and focused action.
As an Owner you may find a strong attraction to BOLA membership as we position ourselves to deliver opportunities for members to create a remarkable business capable of attaining an exceptional multiplier.