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Why your Business Value doesn’t depend on you as the owner

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Why your Business Value doesn’t depend on you as the owner

By , July 22, 2020
business value not dependent on owner - Succession Plus

If your business value is built around you, then you don’t have a business, you have a job!

One of the main risk factors for SME business owners in preparing their business for sale and achieving maximum value is the dependency of the business on themselves. No one wants to buy a business that is entirely dependent on the owner. Any business that can’t operate without the owner can’t possibly be worth very much money at and if often not saleable at any price. For instance, if the business does not make sales unless the owner is involved, or can’t produce or deliver the product without owner participation.

Typically, businesses that are built up over an extended time often start as a one-man-band (the owner) and grown by adding additional staff into the business. Sometimes that process does not involve proper delegation to allow other employees to make decisions and manage aspects of the business without owner involvement. In other cases, appropriate systems, policies and procedure documents aren’t in place, so employees have to check back with the owner for approval or to check on what the next step should be. Not only is this inefficient and unproductive, but it also leads to an owner dependent business.

To convert a business like this into a valuable asset, the owner needs to be (in the nicest way possible) removed. That is, no aspect of the business should be dependent upon the owner, and all policies and procedures, systems, process manuals, workflows, templates and checklists need to be in place. Employees need to have delegated authority to run the business without referring to the owner, the capacity and resources to make effective business decisions based on pre-agreed limits and within our corporate governance structure to manage risk to reduce owner dependence.

Most employees are happy to take on additional responsibility provided it’s set up properly, communicated clearly and within boundaries and limits designed to protect both parties. Not only does this make the business more valuable by reducing the risk, but it will also make it a more enjoyable place to work and most likely improve productivity and profitability, therefore the business valuation.

Our ownership mindset program works with employees to help them think and act like business owners and focuses on achieving the above outcomes. Get in touch to speak with an Accredited Adviser today.

Craig West

Craig West

Executive Chairman | Succession Plus

Craig West is a strategic accountant with over 20 years of experience advising business owners. His background as a CPA in public practice has provided invaluable experience in the key issues of concern to business owners.

In March 2014, Craig was appointed Executive Chairman of the SME Association of Australia, Australia’s largest small business organisation representing over 300,000 business owners.

In October 2014, he was awarded the Exit Planner of the Year at the Exit Planning Institute Annual Conference in Texas, USA, due to his innovative development of an exit planning process to help business owners maximise business value and achieve a successful exit.

Craig’s proprietary structure - a Peak Performance Trust - has won the Australia-wide award for the Employee Share Ownership Plan of the year twice in four years.

In November 2018, Craig launched SME Experts in partnership with Mark Bouris’ Mentored on Podcast One and quickly grew the monthly podcast audience to over 26,500 downloads; in October 2019, he released a new podcast focused on medium-sized businesses - Mid-Market Matters.

In July 2021, Craig joined the NSW Committee for STEP (Society of Trust & Estate Practitioners) – focusing on advising families across generations.

Craig has also launched a SaaS platform, Capitaliz (which captures the 21-step process), to assist other advisers internationally deliver advisory services at scale.

In November 2021, Craig was appointed Executive Chairman of NSW Leaders, a business mentoring group for leading NSW businesses.

In July 2022, Craig West received the award of Doctor of Business Administration for his research thesis titled “Examination of the key factors driving business exit options in Australian Small and Medium Enterprises.”

Craig is passionate about encouraging business owners to think strategically, maximise the value of their business and achieve a successful exit.

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