23 Nov The Most Common Mistake Business Owners Make
If you research successful entrepreneurs, you will find that a lot of businesses aren’t started by people with tangible business skills. Instead, most businesses are started by enthusiastic disruptors who don’t know a lot about running a business. This is why a lot of business owners make a common mistake: they spend too much time working in their business and not on their business.
Working in vs. on your business
Although these statements appear similar, there are subtle but important differences. The most successful business owners we come across are those who spend more time working on their business. The best way to determine if you are in this group is to step back and see if you are spending most of your time in operations or in strategy. Why? Because when you decide to sell your company, you are not normally part of the package. More so, working too much on day-to-day operations increases your company’s key person risk. Yes, you still need to get your hands dirty, but you should always be thinking of your company in its post-founder phase.
But my company is different
I know while reading this post many founders will assume they are different. Delegating jobs and tasks is hard for many entrepreneurs. Many tend to be control freaks with a great attention to detail. If you are one of these founders, you might be saying the following in your head:
“Operations is where the income is generated, I don’t have time for strategy”
“Our clients prefer to deal with me directly”
“I am so busy, I do not have time for big picture stuff”
“If I step away, the staff will not function as well”
If you are spending too much of your time in day-to-day operation, it likely means you have not structured your company properly. More importantly, you might struggle to eventually convince someone to purchase your organization. Although it is normal for the founder to remain involved in a company 3-5 years after an acquisition, largely to steady the post-sale turbulence, the buyer will be looking past you. Mainly because they do not want to rebuild the company from scratch. Buying a car that is solely dependent on the current driver, would not be an ideal purchase from a car dealership.
When you’re working on the business…
A true entrepreneur works on their business, spending their time applying the knowledge they learn through either mentorship sessions or courses. They do this to achieve one main goal…. growth. Your aim should never be break-even, even if you are paying yourself a healthy salary. You never want to be a company that is standing still, or at least appearing that way. Working on day-to-day operations generally means you are not driving growth. Don’t get us wrong, day-to-day work is important and at times you need to get your hands dirty. What we are suggesting is that the time spent on strategy and growth will pay dividends in the long run. You should always be looking for new opportunities, growth drivers and development. More importantly, you should always keep your eye on your exit strategy. One way to help you do this is to understand your company’s ethos and the purpose of what you are doing. This will allow you to make decisions faster, like recruitment. A strategy is hard to form when it has no foundation and your company needs to stand for something. It is easier to find a buyer when you can sell them a vision, and growth is always a more exciting story than the alternative.
The importance of advisors
You do not know everything, even in areas you class as strengths. The average time to exit is 10 years, so you need to establish a long-term game plan. Assembling a team of advisors, in particular strategic advisors, will help guide you towards this end goal. You should not wait until you want to sell before you speak to a sell-side analyst. We discussed this in detail in our blog “Good companies don’t get sold, they get bought”. So, what does an A-class advisory team look like?
- Sell-side advisor
- Consultants – strategy, marketing and sales
The combination of the skills above will help guide you towards your goal, an eventual exit. However, getting this team of advisors, who all have different skills, to work together can be tough. Most companies do this via a combination of Board/ Observer seats and monthly strategy sessions. Your job as a leader is to listen to all the advice and decide if you want to take it onboard. You don’t need the advisor team to vote on it, the general consensus will be obvious. You can pay them for this service or offer them advisory shares. If your end goal is an exit, shares will help the team align.
Planning today will help you in the future. Not having a plan will likely result in you “fighting fires” all day. Some entrepreneurs love to be busy, and therefore always find things to do. Although this is good, spending some downtime on company strategy is a better use of your time. If you are fighting fires too often, you have not hired well enough. You need to focus on working on the company, not in the company. Hiring a key set of advisors early in the process vs. at the end will lighten this burden. More brains on a topic will always result in a more positive outcome. You need to take the lead of this panel but should aim to take their advice on board. Making decisions and learning from a cohesive advisory team will push you to be a better entrepreneur. The end goal is that you should, in essence, be irrelevant to your business and could walk away at any time. Oddly enough, this helps to increase the value of your company.