I had a great consulting call the other day with a business owner who was thinking of selling one of his businesses. He simply didn't have enough time for it.
Why was this guy able to have 5 or 6 managers reporting to him when he was an executive in a big company but now only one manager was driving him crazy?
Learn about the difference between delegating tasks vs. responsibilities. Want to speak to me? http://www.clarity.fm/davidbarnett
Transcript:
Hey there I want to
make a little video because I had a really cool call with someone on the phone
the other day. A quick consult call and it ended up being an hour. It was a
business person who owns a couple of different businesses and two of the businesses
that he owns are the same. But they are in two different provinces, so they are
far away from each other. And basically every year he sits down and does some
planning as to what he wants to do for the coming year. And he looks at all the
options for all these businesses, and he wanted to talk to me about the idea of
selling his business that is in the neighbouring province. And I basically I
asked him all sorts of questions. But it came down to two questions about this
potential selling of this business, and I basically asked him, why do you want
to sell? And he had opportunities to use money, that was number one, and number
2 it took a lot of his management bandwidth and waste a lot of his time.
So we went through
briefly the whole idea of selling it and sort of did a back of the napkin
calculation of what the business might be worth, what the terms of sale likely
would be, and how much money he would end up with if he tries to sell it. And
is that enough to accomplish his other goals or opportunities etc. But when I
started asking him about the personal reasons for getting rid of this other
business, what kind of time or bandwidth does this would take up for
you? He started to explain to me that sometimes every day there is something he
has to deal with in that other business. Now I had spoken with this
entrepreneur before, and I knew a little bit about his history, and I knew that
he was a senior level vice president of a large corporation. And would have had
many managers reporting to him when he was back in the corporate world. So I
asked him, I said, how many managers did you supervise when you were in your
corporate job? And he said, quite a few, sometimes five or six.
And I said were you
stressed out and had no time then, and why were you able to manage five or six
managers in your executive role, and you are having difficulty and stressed out
by managing one manager now. And it's a great question, in fact he wasn't able
to answer it. So I had to prod him a little bit more, and basically it comes down
to something that his fundamental in the book E-Myth by Michael Gerber. And
it's the difference between entrepreneurs and technicians. And even people who
know how to properly manage and be entrepreneurs sometimes need a little bit of
coaching and a little wake up call to get themselves back on track. When he was
a corporate level executive and had many managers beneath him, he would manage
by numbers. So a person reporting to him had a certain role and they had
targets they had to meet, and he let them work at that. And he probably review
the numbers every week or every month, and when there were problems he would
outline expectations and give them support or help if they needed it.
But he let them do
their job. So in big corporate enterprises, what you see is a delegation of
responsibilities. In small businesses what you technically see is not a
delegation of responsibility but a delegation of tasks. So the owner is so busy
he can't do everything but he still wants to make all the decisions. So I pointed
this out to the guy, I said you are interfering in the work that the manager
has to do. And they are not making decisions, they are not doing everything
they could do because you are always getting involved. So why are you managing
in this fashion today where before when you worked for the big company, you
didn't do that. Again, why, what's the difference? And what I think, and this
is from my own experience and observing so many small business people over the
course of time, is the difference is, it's your money. When you are the
executive at a big corporation some person that reports to you, they might make
a mistake that costs $10,000 and while it may affect you and it may affect your
bonus or something by having an impact on the numbers for the year. It's not
your $10,000 they lost, it the company's $10,000.
And I think it's
that level of detachment in the big corporate world that allows these big
corporations to actually function because people will actually delegate
responsibilities. And not be so concerned that any little mistake is going to
cost the individual within the corporation personally. Now in a privately owned
small business it’s totally different because if he let that manager do their
job, and made a decision that lost $10,000 they just lost 10,000 of his
dollars. And that's the difficulty, so I think it was sort of a breakthrough
with this guy and he realized that what a lot of people do is that, there is
never a good financial reason to sell a profitable business. You can never get
for a good profitable business what it is worth to you.
That's why people who sell small businesses always do so because they have a
pressing personal reason. The numbers never quite make any sense, you always at
the end of the day go, Jeez well if I just kept it for another 2 or 3 years I
would have the same money anyway, right. So that's why you have to have a
personal motivation to actually pull the trigger and do a sale. So he is going
to work on himself over the course of the next year and try to actually
delegate responsibilities to his manager in the other province. And try to
manage the way he used to back when he was an executive. I thought that, that
was a really great call, if you would like to speak to me about some of your
business deals or talk through a decision or pick my brain and do a quick
consultation. I'm available all the time. The easiest way to get to me is at
clarity.fm/davidbarnett. Any way until next time talk to you later. Bye
The Invest Local Book blog is all about small business, franchises, local investing, home economics, small business systems and borrowing money for your business. It's full of great content and I look forward to seeing your feedback. Sign up for my mailing list and don't miss a thing! [CLICK NOW]
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