Double dip or bumping-along-the-bottom to slow growth? The debate about the economy continues and I have no ability to predict the future, but I know a couple things that were true before the Great Recession that will certainly be true after: Demographics is one; entrepreneurs are usually terrible delegators is the other.
In spite of economic news, talk about getting-by has stopped; my clients and connections are back to more traditional commercial conversations about getting ahead. Those of us still standing realize that we have got to get moving again, and I'm grateful; it's a heck of a lot more fun to help folks working toward a goal--often a fabulous retirement, even if delayed a few years--than staving off disaster, but the lawyer's mind keeps looking for trouble.
The pig-in-the-python effect of the baby boomers, which has affected society in so many ways for decades, was going to be a significant challenge for the exit plans of business owners even before the recession. The number of human-owned businesses changing hands as the boomers retire will be unprecedented. The first boomers reach age 65 in 2011, and that supply bubble, with its corresponding pressure on prices, has only been growing as the sale of businesses came to an almost complete stop in the recession. Even now continuing credit challenges for potential buyers and, in many cases, depressed valuations of many potential sellers, continue to delay the normal cycle of small to mid-sized business transitions.
Business owners thinking ahead to eventual exits have to contend not only with the erosion of investments and savings we all have suffered; their ability to sell at a price that will fully enable that fabulous retirement, at least during the great boomer exodus, is at risk, too. Changing that fact requires changing that other fact mentioned in my lead. A business owner who delegates to, and builds the capabilities of, key employees increases both the current and future value of the business.
"He couldn't wear all the hats" of being president, chief executive, chief financial officer and even secretary (his signature is on the board minutes) as the company grew," he said. "Being the classic entrepreneur, he was trying to do everything," Driscoll said. "It's physically impossible to run every aspect of the business. We reached the stage where we had to delegate and elevate people. It's a classic learning stage we went through."
Sound like you? Well, if so, then you're in good company, for that classic entrepreneur, described in this last Sunday Denver Post, was Denver Mayor, and Democratic gubernatorial candidate, John Hickenlooper. Business owners typically try to do too much, and in this crisis many have had no other choice, but as they begin to peer out of their recession bunkers, my strongest recommendation to my clients is to build (or rebuild) a key employee group.
A key employee group makes a business a business. Without key employees, clients who might otherwise be making buckets of money are often disappointed to find that they have little to sell when it is time to exit. The boomer bubble will only intensify that disappointment.
The human-owned business that builds on its key people builds a win-win-win scenario. Win one: the owner who delegates (eventually) reduces stress, gets more time away from the business, and makes more money. Win two: buyers are more likely to be interested, and more likely to pay a bigger purchase price, for a business that runs itself (instead of depending on you). Win three: those key employees will be happier employees after you empower them, and they can also be the buyers.
What's in it for me, the lawyer, if you start focusing on your key employees? Well, I get to work on the various contracts that go with such a plan, like employment agreements, non-competes and incentive plans aligning the goals of the key employees with the goals of the owner. Legal contracts, I should point out, can't be the beginning and end of your key employee investment, as my friend Tom Downey pointed out in an article about motivating young employees, but it works for other employees, too:
The best technique for motivating Millennials is to layer a social contract on top of the monetary contract. The social contract says if they give more to the company, the company will give them more in return: job satisfaction, responsibility, a sense of purpose, advancement potential, real communication and an enjoyable workplace.
Do that and I'll also get to work with you on the host of opportunities (and obstacles) that come the way of growing businesses, and eventually we'll conclude your exit plan. Your business will be a standout among the masses vying for buyer attention. Even if a third-party sale isn't for you, you'll have a company that you can transfer to key employees or family, and they will already know how to run it without you.