A Job Disguised as a Business

We’re working on a client grow-by-acquisition project and have found the industry is not only very fragmented, with a lot of small companies, but too many of them are “A job disguised as a business.”

These owners are so busy bidding, selling, designing, installing, doing service work, etc. they don’t have time to pay attention to the business itself. They can’t answer basic questions every owner should know, and it overwhelms them to fill out a short questionnaire that should take no longer than 10 minutes (most are check the box type questions).

A big question is, “Is there value and if so, how much?” The only (real) buyers for these businesses are companies in the same industry who can handle all the functions the owner is doing. There’s not nearly the equity there would be if the owner worked on the business versus in the business.

My advisory business doesn’t have much value. A CFO for hire, on his or her own, doesn’t have much value. A firm with multiple advisors (of any kind) has value, either to an outside buyer or via an internal succession like law firms, CPA firms, construction firms, and others. It comes down to an owner doing the basics:

  • Create a capable team.
  • Delegate responsibility not only tasks to them.
  • Realize your employees might not do it as well as you, or as fast, but three people at 80% is better than just you at 100%.
  • Let them grow so the business can grow.
  • Be organized with processes and especially with the financial systems and statements.

In a recent deal the business buyer said while he’s never managed 50 people before he feels comfortable because of the middle-management team. That’s a heck of a lot better than when the owner has their fingers in every aspect of the day-to-day operations.

“If you attack the establishment long enough, they will make you a member of it.” Art Buchwald

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