Founder Dependence

Arla Wallace is an accounting professional with over 20 years experience. She spent several years working for both publicly-traded and private entities before founding her own business. Today she partners with small business owners so they can focus on operations while leaving the responsibility of staying on top of accounting tasks to her. She is a Certified Public Accountant (CPA) and a Certified ProAdvisor for Quickbooks Online.

Founder Dependence

In his February 2020 annual letter to shareholders, the Chairman of the Board at Berkshire Hathaway Inc. told his shareholders not to worry, “your company is 100% prepared for our departure”. You see, Warren Buffet and his partner Charlie Munger are aging and there will be a day when Berkshire Hathaway will operate without them. Buffett was re-assuring investors that the business succession plan for Berkshire is sound—a defined exit strategy, with a well -trained management team and clear instructions for handling his personal shares when he departs. By effectively reducing owner dependency, Berkshire Hathaway will be poised to operate with new ownership when that day comes. Can you say the same of your small business?

Founder dependence is real and it is a problem for many small business owners. If you find yourself performing all major processes of the business and there is no business continuity plan for an extended leave of absence, retirement, or death, your business value is at risk. This risk is problematic whether or not you plan to pass your business on to a new owner. Developing a succession plan will be unique to your business situation; however, reducing founder dependence can be achieved through similar means—these include hiring, training, defining processes and utilizing technology.

Build Your Team

For many small businesses, the owner starts out wearing many hats to both run the business and grow the customer base. Over time, the demands placed on a small business owner can be overwhelming and result in the need to hire help or lead to outsourcing certain tasks. Hiring the right people makes a difference, so look for those persons that contribute ideas and take responsibility for helping grow the business and helping you achieve long-term success.

Delegate Responsibilities

It’s natural to feel as if no one can do the work of your business as well as you can. While this may hold some truth, don’t be afraid to delegate. Empower the members of your team with the authority to run all components of your business. Coupled with delegation, this will enable your team to confidently carry out the operations of the business in your absence. In addition, scope out ways to automate business processes to further reduce owner reliance and control.

Document Key Processes

Sole proprietors often have a head full of knowledge and little documented. Put business standard operating procedures in writing. This includes not only the work to be performed, but also the expectations for delivery of services and managing customer relationships. Customers love founder-dependent businesses as this often results in a personalized level of attention and high probability of consistency. As such, focus on reducing founder dependence, while maintaining the customer experience.

Grow with Exit in Mind

The same attention given to forming your business should be now focused on your succession plan. Being intentional about building an empowered team with well documented procedures, will serve to enhance the value of your small business should you choose to sell or pass on your business to a new owner. The benefits of a succession plan will also help you and your team navigate the unexpected while you serve in the owner role.