Laurie Barkman
Photo: Ashley Hylbert
How do most trusted-advisor businesses end? By closing the door and walking away.
That is the sad fate of most agency owners, strategic consultants, and other professional advisors who sell that expertise for a living. Most lack expertise in planning an exit.
Successful trusted advisors typically focus on increasing their visibility and reputation so they can fill their sales pipelines with right-fit clients. In a word, they are great rainmakers.
“Trusted-advisor business owners who are rainmakers drive more than 25% of total revenue,” according to author Laurie Barkman. And that can be a problem.
“Rainmaker owners tend to have strong connections because they are involved in every facet of the customer relationship,” says Barkman, author of the book The Business Transition Handbook: How to Avoid Succession Pitfalls and Create Valuable Exit Options. “They are responsible for service delivery, product development, sales, or maybe even client service. That’s a lot for one person to handle, but is it sustainable?”
While these relationships can fuel growth initially, over time it presents risk to the value of the business. Relationship-based deals may be verbal agreements rather than papered; there is a risk that if the owner is no longer involved, these relationships and the associated revenue will evaporate.
“Over time, if the owner is the person driving growth, revenue will flatline because there are only so many hours in a day, and there may be limits to one person’s personal capacity to sell,” says Barkman. “Not to mention, there’s risk in the business if something happens to the owner’s capacity to work in the business.”
I recently interviewed Barkman, a business-exit planning advisor who is the former CEO of a $100 million company that sold to a Fortune 50 firm. I met Barkman last winter and got a sneak peek at the book when she asked for some editing advice.
In my research, most trusted-advisor business owners are accidental business owners. Odds are they spent most of their professional career in a professional service business and somehow along the way, they ended up owning a small-to-midsized firm.
The average trusted-advisor business owner doesn’t count on a future pay day from a sale that probably will never come.
Most trusted-advisor rainmakers did not study business or management. They fear they have blind spots and what they don’t know can hurt them. As small business expert Michael Gerber puts it, they are so busy working in the business it leaves them scarce time to work on the business.
But there is an alternative.
Another type of trusted-advisor owner is what Barkman nicknames “the architect.”
“The architect develops a framework that others execute,” says Barkman. “If the owner is the architect, this will increase the organization’s sales and marketing capabilities over time. This can mean outsourcing your marketing, or hiring people to help you build your marketing processes and systems.”
Architects plan their exit. Here are three ways Barkman advises owners to transition from rainmaker to architect.
Delegate. Delegate responsibilities that are outside of your skillset or sap the lifeblood from you. A business that relies too heavily on the skills or relationships of the owner is a less transferable and valuable business.
Train. Hire and train salespeople to do the selling. Training others will expand growth opportunities and enable you to focus on other aspects of the business. Steps that business owners can take to decrease organizational dependency on themselves include expanding leadership teams, cross-training and increasing the skills of management teams, delegation, and standardizing practices.
Build. Create processes and systems so that others can do the selling and marketing. When the business relies too heavily on the skills or relationships of the owner, there’s a negative effect on value because there’s a risk that the company won’t thrive into the future without them.
Trusted-advisor business owners don’t have to only make their wealth while they are still working. Getting the money out of the business and investing is not the only retirement option. With the right investments of time and effort, trusted advisors can properly prepare for a profitable exit.
