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Rasmussen’s fifth top tip – Develop your business to run on auto pilot

Monday, 28 May 2012
By Print 21 Online Article
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One of the major issues with the running of small to medium (SME) sized businesses is that there is an over reliance on the owner – frequently they have a hand in just about everything; they work in sales, production, estimating/quoting, HR, operations, finance and marketing. Ascent Partners principal, Richard Rasmussen believes they work in the business, but not on the business.   

The problem with this is that when it comes time to sell the business, there is a high degree of perceived risk by the purchaser. This equates to a lower business value.

The most frequent area of perceived risk is that of client retention – i.e. how many of the clients will ‘stick’ with the new entity, without the previous owner being involved. The smaller the firm is, the greater the likelihood that most of the sales are generated – or dealt with – by the owner.

The best way to reduce risk is to develop processes, systems and people, and for the business to be less reliant on the owner to ‘do the doing’. In a perfect world, most businesses should be presented for sale as being run, or capable of running on auto pilot.

A great book on this subject is E Myth Revisited by Michael Gerber. It’s an easy read without too much business jargon; I am sure most printers will be able to easily relate the key messages it presents. One of the major benefits derived by building a business to run on auto pilot business is that it gets the business owners to think more about what’s really important in the business. It’s hence highly relevant to succession / transition planning.

The book’s central message is that most SME businesses do not reach their full potential because their owners spend too much time doing the work (doing the doing), rather than managing and growing the business. And that creating a systemised way of doing things within the business is the key to breaking the cycle.

Think of what you would like to see if you were purchasing a business. Would a business that is very reliant on the owner, where he or she is fully hands on and where there are no systems in place, be as attractive as one where the workers are doing the work, and the owner is focussed on managing the business? Which one would you pay more for? Which presents the greater risk?

I understand that SME businesses have to rely on the owner to do the work in some areas, but that’s not to say that processes and systems can’t be put in place to minimise much of their involvement. A good way to look at it is; what would happen to the business if the owner was not around for a period of time? Would the employees be able to pick up the day to day tasks without the business suffering? Are all the bases covered? Can the employees take over the day to day operations of the business for a prolonged period?

A simple example of systemising within the print industry is the development of an integrated estimating, quoting, job bag production, invoicing and delivery system.  And also in sales and marketing – i.e. how we market / sell, what client follow up systems we have, what KPIs we have in place for quote win / loss ratios etc. The production and review of financial statements is another, along with systemising the collection process.

These systems do however take time to develop. It’s not an overnight fix. It’s more about examining the way you do business, and over time developing systems and processes to improve the business. In sporting parlance, it’s about working on ‘the one percenters’. By doing this, not only will you reap the benefits when you are running the business, but you should also reap a far greater return when it comes time to sell.

Having a business run on auto pilot also provides more options in the way you transit out of the business. This could be in the form of family succession, management buy-out, trade sale, or finding a CEO to manage it, perhaps with equity options.  You never know you may develop the business to such an extent that you can maintain an interest, obtain a yearly dividend, and not be involved in the day to day operations.

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