Inadequate Second-Level Management

Inadequate Second-Level Management When Selling a Business

In the last issue (#66) we discussed the obstacle created by Inadequate Recordkeeping / Accounting Systems / Financial Reports. In this issue we'll discuss another frequently encountered obstacle to a successful business sale: Inadequate Second-Level Management.

A Favorite Famous Quote
"No institution can possibly survive if it needs geniuses
or supermen to manage it. It must be organized in
such a way as to be able to get along under
a leadership composed of average
human beings."  Peter F. Drucker  

Inadequate Second-Level Management When Selling a Business

Are you able to take a two-week vacation and feel like your business is in good hands?  Are you working 45 hours per week or are you working 55 to 65 hours per week?

If your answer to the former question is yes and you are only working 45 hours per week, you may be in good shape as it relates to second-level management.  If your answer to the two-week vacation question is no or you are working 55 to 65 hours per week, you may have a big obstacle that needs to be addressed to successfully sell your business.

Buyers need to rely on your key people after acquiring the business

From a potential buyer's perspective, reliable, qualified second-level management is a significant benefit that adds a lot of value to an acquisition.

Buyers need assurance that customer relationships can continue without the current owner's involvement.  They also want to know that employees have the ability to deal with difficult issues that inevitably arise in the day-to-day running of a business.  Buyers usually want the flexibility to take time off and want to have a life outside of their commitment to the business they intend to acquire.

If you don't have a much of a life outside of your business, it could be a strong indicator that your second-level management is inadequate or non-existent.  Granted, good people are hard to find.  But small business owners have to persevere and identify talented employees, train them and provide increasing responsibilities.  Owners need to delegate and "loosen the reins" and perhaps also "loosen the purse strings" for their best employees.

If all the knowledge about a business resides in the owner's head and has not been adequately transferred to key employees who are capable of running the business in the owner's absence, it's a significant obstacle that might preclude the possibility of a successful sale.

In the long-run, the investment in a few key people will .....