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O P I N I O N
The value of irrelevance Owners interested in selling shouldn’t be the only ones leading their companies; making yourself irrelevant makes your firm more valuable.
F irms that command high market premiums are ones in which the owners are, in many ways, always seeking to become less and less relevant. If you’re the owner of a firm and you’re reading this, you’ve got to be wondering what I mean. What I mean is that valuable firms are those with a wide base of individuals who can step up and lead.
Jamie Claire Kiser
Ask yourself if you could leave your business for 30 or 60 days and have it run the same way that it would if you were there. The less valuable firms are the ones in which the owner is, or a small group of owners are, “the business” – meaning that if you aren’t there, you know that clients won’t receive the same attention, invoices will be paid late, receivables will trickle in, and employees won’t put forth the same effort. “When buyers know that your business is able to run without you managing every detail of the company, you’ve just made yourself a much more attractive prospect.” If you have to be there to make sure that the business runs properly, you’ve reduced your market value. If your second in command is paralyzed at the thought of making any decision without scheduling a meeting and obtaining your
advance approval, you’ve reduced your market value. If the owner is the business, the next question is: What, exactly, does the owner think he or she can offer to a prospective buyer? What do you have to sell? This is not a theoretical discourse on organiz- ational management. There are multiples and dollar signs attached to the answers to this question. Every buyer that we work with is more interested in the folks behind the top leadership than they are in the guy who wants to cash out and retire. The firms in which owners delegate operational tasks and client relationships to a motivated next generation of leadership always will be more valuable. When buyers know that your business “Valuable firms are those with a wide base of individuals who can step up and lead.”
See IRRELEVANCE, page 4
THE ZWEIG LETTER February 1, 2016, ISSUE 1137
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