The “One Man Band” Family Business
Part of my legal practice includes business succession planning. Combine business succession planning and the small business entrepreneur, and you have the issues of how to successfully plan the “exit strategy” of the small business owner (quite often a family owned/run business.) This is a subject close to my heart, since I have mentioned in other posts that my family has had a successful small business for many years, and I learned at a young age the effort it takes to be a successful entrepreneur.
When we discuss an “exit strategy” for a business, we might be contemplating the possibilities of the sale of a business; the “buy out” of one partner; the “division” of a business; the retirement of one partner (or the owner); the orderly passing of the business to a family member (or to a key employee or group of employees). In all of these instances, it is far better to have a future plan (an exit strategy) in place than to have no plan. (I have written about some mechanisms of orderly succession planning in a previous article – Seven Steps of Successful Succession along with an infographic – available on my website http://www.barbaradalvano.weebly.com)
But what happens when the family business has evolved into a “one man band”? The business has no “heir apparent” and is run through the efforts of only one person – the “go to person” for every single issue. True, there may be other employees, but there is only one decision maker in the business (the owner). Every critical (or not so critical) decision goes through them…A One Man Band!
How can one possibly strategize for the exiting of that person from the ownership role/functions? Indeed, the business revolves around their single knowledge, expertise, professional contacts, and experience in every segment of the day to day routines. Perhaps no one would even consider purchasing the business without the owner’s expertise in place. As the “one man band” begins to look toward retirement, or something overtakes them requiring their exit from the business, what might be a good exiting strategy?
In one scenario, perhaps there is no wish to retire, but eventually circumstances such as failing health require a “fall -back position” about the business. Yet, the worst situation to be in is to have no “fall back” position. One plan of action to be considered for the “one man band” small business is to start the exiting strategy early. Take control of the decision, rather than having the decision overtake you!
Consider Downsizing! Your immediate response…DOWNSIZING!?? I am running the business ALONE! I am the SOLE entrepreneur! I NEED an income! There is NO ONE ELSE! I am the GO TO PERSON! How can I possibly DOWNSIZE!
One possibility…scrutinize your customer/client base and decide which customers/clients are your “best” (i.e. most profitable type). By drilling down into your customer base…you might be surprised to learn that some customers categorized as “good customers” were ones that were slow to pay your invoices; did not pay on terms; made unreasonable demands on your time or staff; argued every invoice or returned products; in short…they were not such “good” customers after all! By clearly defining your customer base, you can then decide which type/class of customer you want to retain in the future. Define your “best customer” profile, and set about focusing on those customers. Note here: I wrote focus, not ignore all other current customers, after all you have a reputation to consider!
True, over time, you probably will lose customers, but that is the idea, to have a most profitable and manageable client base into the future. Keep in mind, you are planning a successful exiting strategy here, you need no longer take every customer who calls you or walks through the door (like you did when you were struggling to build the business). You become more selective.
Next is to focus your marketing efforts ONLY on your best core customer/client base. Use those precious marketing dollars on only your very best potentials. After all, you still need customers and through attrition you will lose customers. But the secret will be to have better paying (easier to manage, less labor intensive) customers. You have already defined – who are your “good” customers.
Next, if you have any support staff – can you eliminate some positions? Can you manage with part-time or contract help? With fewer (better) customers you will require fewer support staff and perhaps less office space…another savings! Could you eventually even run the business from a home office?
Use advanced technology to “automate” processes: invoicing, tracking, scheduling, customer contact, marketing. Investing in technology makes sense in a small business as well as a major corporation.
Lastly, increase your prices/rates. This may sound counter intuitive, but with fewer, better paying, “easier” customers, the new customer base would be more likely to pay a bit more for your expertise/product line/service. Will you lose some customers…Yes…but that is the idea, to retain only those who will best suit your new downsized situation/plan.
Admittedly, this downsizing/streamlining exit strategy might not work for each and every business sector, but it is something to consider for the VSB (very small business)…the one man band.
With good planning…The One Man Band can be playing a new harmonious melody into the future. Have a question about a legal issue of business succession planning? Call or text me.
Working to Preserve Your Wealth and Protect Your Future in a Constantly Changing World.
This post has been brought to you by the Law Office of Barbara Ann Dalvano. This information is provided for educational purposes only and to generate ideas, provoke thought and facilitate conversation. It is not intended to create an attorney-client relationship. Each person’s situation is different and this information should not and cannot be relied upon as legal, tax, accounting or investment advice.
Barbara Ann Dalvano, Esq.
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