From Owner-Operator to Management Team: The Key to Selling Your Business

Hey ,

In this week’s edition of Unlock Wealth Weekly, we’ll talk about one of the key aspects of being investable: firing yourself.

There are a lot of ‘business advice’ books out there about growing your sales and profit, but very often the structure is a more important and neglected feature.

Why removing yourself from management is crucial for investor appeal:

As an owner-operator, your personal involvement in the business can actually be a liability when it comes to attracting investors. Investors want to see a clear path to takeover and scalability, which often requires a separation of ownership and management. When you're deeply involved in day-to-day operations, it's difficult to demonstrate that your business is truly scalable and ready for external investment. 

If your time and presence is critical for operations or keeping customers, then once an acquisition happens, all of a sudden the best member of the team (you) gets paid to leave and there’s a clear negative there to any investor. The best case scenario here is an earn out, where you stay in the business for a period as a managed employee. These structures sometimes work, but is that really what you wanted to do the deal for? 

Getting a solid profitable management system in place is how you truly make the exit you’ve always dreamed of.

In short, the benefits of building a management team are increased efficiency, more scalability, and that you can focus on what you love and are great at. 

Steps to building a management team

1. Define the roles: Identify which areas of your business are most reliant on you and reverse engineer a perfect candidate that would free up all of your time. 

2. Hire key personnel: This can be an ego dip if you identify as the leader and in the short term new hires can lower profit, because you’ve been doing double the work for half the pay.

3. Develop a leadership culture: Foster an environment where leaders can grow, develop, and take ownership of their responsibilities. Make them feel and operate as the owners.

Common Mistakes to Avoid:

When building a management team, it's essential to avoid common pitfalls:

1. Hiring the wrong people: Make sure you're bringing in candidates who actually want to support the business themselves and share your values.

2. Lack of clear communication: Ensure that your management team understands their roles, responsibilities, and expectations.

3. Insufficient training: This one is very difficult if it’s a first time hire, chat to leaders who have already done these hires for help with that.

Transitioning from an owner-operator to a business with a management team is a significant milestone. By following these steps and avoiding common mistakes, you can build a strong start to getting your business sold, cash with no earn outs or burnouts.

Hope this helped!

Unlock Wealth Weekly Team