A Business That Runs Without A Business Owner With Terri Starck
One of the great indicators of a business' growth is its ability to function without the business owner. This entails a lot of task delegation, taking off some of the weight from the business owner's shoulders and passing it down to those who can do them better and more efficiently. If you feel you are at this stage in your business already, this episode will provide you with some great insights about that transition. Bob Roark interviews Terri Starck, the founder and business strategist of LifePoint Strategies, a company that works with business owners who want a business that can run without them. Either you want to prepare for an exit or focus on the things that really matter and would make good use of your focus, Terri shows you the steps and the strategies to make that move while maximizing your business' value without skipping a beat. Dive deep into this great conversation to know the amazing services they offer and more.
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A Business That Runs Without A Business Owner With Terri Starck
We're extremely fortunate because we have Terri Starck. She is the Founder and Business Strategist with LifePoint Strategies. Terri, thanks for taking the time.
Thank you for having me, Bob.
Tell us a little bit about your business and who you serve.
LifePoint Strategies works with business owners who want a business that can run without them. They either want that because they're almost ready to sell and they want to maximize the value of their business prior to selling. They want a business that runs without them so that they can focus on the things that matter to them. Maybe they like to do more strategic work for their business. Potentially, they want to get back in the field and do the things that they enjoy doing and the reason why they started the business in the first place. Some of them quite honestly just want to play more golf.
The way I play golf, that wouldn't help much. I would spend all my time in the field not playing golf for sure. For the business owners, that sounds interesting. I'm going to try to play the role of the business owner and ask you some questions. That sounds intriguing. How do you work?
When a business owner calls us, we start by going through what we call the discovery phase. It is where we come into the business and interview some of the key players, the owner, COO, CFO, management team players, and some of the key employees. Once we interview them, we'll have a good feel for the overall business because we take them through what we call the business assessment. We'll then take a look at their finances, P&Ls, and do a pretty good in-depth financial analysis. After that, we do a leadership assessment to identify any of the gaps that they have in their leaders, maybe communication or abilities to confront or resolve issues, those types of things. Finally, we go through what we call our walkabout. We walk around the business and get the feel of the company and the culture for how people interact with each other and how the businesses run overall.
Once we do the discovery phase, then we move on and go through the strategy days. Those are two days that are packed with taking the information that we have gotten from the discovery phase. We will then prioritize what has to be done in order to achieve the financial goals of the owner as well as the leadership development goals. Anything else that needs to be done either to maximize the value of the business or get the business running on its own without the owner. Once we do the strategy days, then we're off to the implementation phase. In the implementation phase, we implement the findings that we have. Within one year, we'll achieve our vision of creating a business that runs without the owner and maximize the value of the business.
[caption id="attachment_5270" align="aligncenter" width="600"] Business Owner: Buyers are more cautious right now. They are apt at digging deeper into the finances and really want to know what's going on with the business.[/caption]
I'm back to being the business owner. You're going to come in, go through and do a discovery. How long does it take to do a discovery process in my business?
It's going to take two days. It's not going to be two full days, but we'll be interviewing those key individuals for approximately an hour each. Over the course of two days, we'll complete that discovery phase.
You're in my business for a couple of days. I'm assuming you let me know before you come in whatever additional documents, records or whatever you might need. When that happens and you get through the process and you've done the discovery phase, you then go, “Here’s where you are.” Based on where you are, what step between where you are in strategy happens? What is the behavior? What do you expect to see from the owner for their input to help you with strategy?
The owner will go through a similar process as the rest of the team members that he has selected for us to interview. From the owner, we will interview them. We will get a good feel for their organizational structure as well as the roles and responsibilities of the different individuals in the company. The owner or the CFO will give us copies of the P&Ls so that we can do an analysis of the last three years, sometimes five years if the business or the industry has gone up and down quite a bit. We'll do the same business assessment with the business owner as well as a leadership assessment with the owner.
I am that business owner. I've let you in, you have fact gathered and you're starting to work on the strategy. You go, “Based on what you said you wanted and what you have, here's the strategy.” The owner says yay, nay or modify, I'm assuming.
It's neither. We collaborate. We bring together the information that we have. We present our findings and go through it. We put the information together into a couple of different documents. We create a 3 to 5-year vision statement based on this information, as well as a one-year SMART vision, which the acronym SMART stands for Specific, Measurable, Attainable, Realistic and Time-oriented. With the SMART vision, we break it down into four different categories. We are going to achieve our SMART vision in these four different ways by focusing on one, money, the finances or the cashflow. Two is marketing and sales. Three is leadership development. Four is process improvement.
In your experience, you've worked with hundreds of business owners over the years. Do you see a significant difference between the person that wants more time to play golf or be outside the business versus the person that's selling?
No, we don't. Even amongst the hundreds of industries that are out there, there's always commonality between them. Even the size, whether we're working with a business owner who is around $1 million or $30 million, there are similar issues that are in these businesses.
I think about it from the buyer's eyes. If you think about the buyer looking at the company, this business owner can be absent and it runs without him. That's consistent either way from a buyer's eyes. Both of those are good goals for business owners. That's congruent and that's a good thing. Once you've got the strategy, you’ve agreed and you've got all this, then there’s the execution part. What action, activity, or participation do you have with respect to execution?
In the implementation phase, we collaborate and decide together what the business owner or the business owner's team wants to execute on and what they prefer us to execute on. Almost always the leadership development piece, they ask us to come in and create that management team that runs on its own. We implement scorecards. We call them loyalty cards because the goal is for the team and for the customers to be loyal. We establish key performance indicators for each one of the employees that drive the owner's dashboard. If the owner is on the beach in The Bahamas, he can pull up their dashboard and be able to know that his business is doing well.
[bctt tweet="In the selling world, if you're a business owner, a surprise is a bad idea." username=""]
The owner of Wendy's used to have what was called the bun report. Dave Thomas, the owner of Wendy's used to pull up the bun report and it would tell him how well each one of Wendy's stores was doing based on that bun report. It is the same thing with the owner’s dashboard. We always look at margins. The first thing we want to know other than, “How are your sales?” The second question is going to be, “How are your margins?” When the business is based out of those margins, then we could create your bun report and you'll be able to know how well your business is doing no matter where you're at.
You have to be careful with the bun report title if you're on the beach. I think about a business owner that has multi-lines that they're doing. Do you drill down into the various profit centers or lines that they have to determine which one's more profitable than the other so the business owner knows the levers to pull?
It's important that we're focusing on the correct service or products that the business is providing. We know what the margins are for each one of those. We are focusing on the ones that provide the highest margins. I'm working with a company that is getting ready to sell. Interestingly enough, their sales have gone down over the last few years. The line items that provide the highest margins are the line items that they're not focusing on. It's going to be fun to be able to show the increase in net profit when we focus on those line items, those services that provide the highest margins for them. It's going to be a great way to increase the value of their business.
In your experience, when you talk to business owners who had a passion to start and they were pretty much everything, CFO, CEO, COO, do you find it frequent that the business owner after your analysis may go, “I was unaware that this item over here was one of our largest margin items?” Are they usually unaware or are they aware?
It depends. Most CEOs are unaware because most CEOs are visionaries. It’s rare that CEOs are numbers people. They don't know. They might have a feeling. Sometimes that's what gets in our way is that we have a feeling, but we're distracted by other things that are going on in the business. We don't focus on those things or we lose sight of those things. When we come in, we're focused on what has to be done. We know we have a limited amount of time, a year to come in and get things straightened out and keep things focused on increasing those margins and net profit.
I think about the quality of decisions that the leadership team makes with and without that information. I don't know how they make quality decisions without it.
It's true. It's because a business owner has a good feel. They think they have a pretty good feel and they've been able to get by doing it this way. Unless something drastically changes, then they keep going with the status quo.
Through the years, you come in and you take this diamond in the rough. You move it down the pipeline until it's polished and pretty. Do you often hear commentary from their lenders of the differences that they see?
Not the financial institutions. We don't communicate with them. What we do here are comments from the management team and team members. That's the interesting dynamic that shifts. The team members are excited to see us. The management team is excited to share with us the progress that they're making. They become these excited little kids again. They're excited to tell you the progress that they've made.
You’ve got the gold stars going. For many business owners, I'm a fan. I'm a business owner myself. They're busy doing their business that they go, “Nobody told me this stuff.” They go through it and they see that and go, “I did this and this came out the other end.” They're excited. I know from a buyer's perspective, you work with companies getting ready to sell. After you've been in a company, getting pointed, going down the road, and sorted out, what are you hearing from the buyers when you've been in a company helping them out?
We're not communicating with the buyers, but we're communicating with the sellers. We're prepping the company to sell. Once we get it to that point, then we don't talk to the actual buyers of the company because then our role is done. Our goal is to take the business, get it ready, pass it back to the broker and sell it.
I was thinking about the business owner that's not been through your process. The buyer shows up and goes, “Do you know your margin?” “No.” There's all this disconnect. I think about the company that's been through this process where it's all identified, the teams are in place, the CEO or the owner can be offsite and the company still runs. I think about the behavior of the buyer in those two situations. The buyer that has complete transparency and, “I can bolt this piece on,” as opposed to, “I'm going to have to come in and drill down.”
What we see is that the owners that we're working with clearly know, especially in this situation with our economy and with COVID. Buyers are more apt to dig deeper into the finances and want to know what's going on with their business because they're a little more cautious. They're scared to buy. They want to know for sure that they are getting a business that has done its due diligence. When the buyer purchases it, there's not going to be anything hidden that's going to jump out at them and they're going to be sorry that they bought that company. The owners that we work with know that we know our stuff and that we're able to get their business ready to sell, they won't have any fears. A potential buyer will go in and take a look at their P&L and they know that things have been done properly.
There are no surprises. In the selling world, if you're a business owner, a surprise is a bad idea, particularly when discovered by a potential buyer. I'm that business owner again. You have come in and let’s say I don't have my team fully assembled. I don't have a CEO nor CFO. I don't have those people in place. What does that look like as you start trying to identify key players and trying to get them on board?
It depends. There are times when we help the business owners hire a CFO or a COO. The owner is the CEO and that position stays in place. There are other times when we help hire complete sales teams. One example, we were working with a construction company and the owner was responsible for 80% of all the sales. He wanted to sell his business. What happened is we helped them to hire a complete sales team and the director of sales. They became the face of the company. The owner was able to come and go and the business runs without him. It was one of those wonderful situations where they had no management team in place. We were able to bring together a management team and train them on how to lead the company without the business owner, how to run effective meetings that are results-oriented so that people would come to the meetings prepared with what they had accomplished. They were able to resolve issues right then and there without letting them fester. The business runs well without the business owner.
Does that business owner also have his version of the bun report?
I'm stuck with the bun report forever.
He does. The cool thing about this business is that they have an online dashboard. They use a software application called Smartsheet. They do construction worldwide, mainly in the United States. Anybody on their team can bring up their version of the bun report. They will be able to see where their projects are and how they're doing.
It is like the dashboard of your car. You can look at that and you go, “There's a red light on over here.” I think about the ability to take and go, “Everything else is fine. I need to see this as an anomaly.”
That's how you program the dashboard. Whether you're using a simple Excel spreadsheet, Smartsheet or anything else that your organization uses. You can program it so that when you're in the red, you are in the red and the owner can see that right off the bat.
[bctt tweet="For value creation, get your business ready for a sell. " username=""]
Better early warning than figure out that you have blown the motor and didn't know. Thinking about the people that are reading and go, “What size companies do you work with?”
It's between 1 and 30 million. It can be 100 employees or less is what we work with. Some of them could have 200 employees. It can be as small as ten employees.
Do you specialize in any particular industry?
I love blue-collar. They're hard workers, whether it's plumbing and heating, those types of things. We're working with two Ace Hardware stores. They're retailers and they're still that same green though. They're hardworking, amazing people that roll up their sleeves. I've worked with Ace Hardware stores for years, on and off. I've done some retreats with the Rocky Mountain Ace stores. It's a regional marketing co-op. I’ve done change management training for them. I'm working with two of the stores on inventory control management, increasing sales and those types of things. You can't find a harder working group of people than those guys and gals at Ace Hardware stores.
I was in the Ace. I love going in there.
They always have what you need.
We take Ace Hardware store people a bit for granted. I think about inventory time for them. I would hate being them to do a physical inventory, who counts the nuts and bolts. You work with those people. You've also worked with some other companies as well. You talked about the construction space. For the construction company that you worked with, was the problem that they brought you in for the one that you solved?
Yes. They brought me in because the owner wanted to retire and potentially so. I came in and worked with them. I created that management team and the dashboard. They had been tracking their projects. They do project management. We simply tweaked it so that he would have an owner’s dashboard as well when he was gone. We created the autonomy of the team because the company relied on him for 80% of the sales. He had been in the industry for a long time. He was the face of the company and travels all the time. That was the other big deal for him is not having to travel as much anymore.
To take from where they were sole dependency, he was the business. I don't know what a multiple for...