Take Flight – Business Growth Strategies with Business Coach Dan Holstein

The Risk of Key Person Reliance - Business Value Drivers 1/10

February 24, 2022 Dan Holstein Season 1 Episode 75
Take Flight – Business Growth Strategies with Business Coach Dan Holstein
The Risk of Key Person Reliance - Business Value Drivers 1/10
Show Notes Transcript

If you are considering exiting your business in the next few years, NOW is the time to get to work on increasing the value of your business.

This week's video is episode 1 of 10 in my Driving Business Value series, and is all about Key Person Reliance. Key Person Reliance or Dependency is where any one person is too important to the business, which can cause your business value to diminish.

Check out this week's video to learn about the  4 main areas of Key Person Dependency, and if any one of them may be impacting the value of your business - and what to do about it!

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00:00
Hey everybody, Dan Holstein here helping your business take flight.

This is episode three in our ten part series on driving your business value.

And what I'm going to be talking about today is how to identify the players on your team that are holding your business valuation back.

00:18
So who are the folks on your team that are diminishing your business valuation?  Well, it's not the A and B players on the team, the folks that are generally doing a good job and you're not
really worried about, it's the folks that are on your radar for all the wrong reasons.

00:28
It's your C and D players.  It's the ones that they might be good at what they do but they have
an attitude issue.

It could be your D players where they're not that good at what they do, you're trying to get
their performance up and it's just not happening.  And they might have an attitude issue too.

Right those C's and D's, so the ones that create friction, interpersonal issues, complaints, drama, chaos, politics, these folks that are generally just slowing the business down.  They're not that pleasant to be around.

00:52
Now you might not have that many of them on your team and that's a good thing.  But if we have any of them, we have to recognize that they're going to also be impacting your A and B players.  They're going to be dragging their performance down and could even cause
your A and B players to want to look elsewhere.

01:05
The reason that your business valuation is going to be diminished if you've got these C's and D's on your team is two-fold.

The one is that to get a good valuation for your business, one of the key metrics that a buyer is going to look at is a proven track record of high performance.

If you've got low performers on the team, your performance is not where it could be.

They're going to be slowing down the performance that you're going to be developing right now.

01:24
The second is that when they do their due diligence and analyze the team, they're going to 
see how many A and B players you have, and how many C and D players you have.

And if you have too many C and D players, they're just not going to value the business 
as highly because they're going to have to deal with those C and D problem children.

We want to make sure that we diminish the number of C's and D's we have on the team, and continue to grow the quantity of A's and B's on the team.

We have to recognize that those A's and B's, they're our lifeblood for the business.  They don't cause any drama, they do a great job, and it's the C's and D's that are keeping us distracted and having to deal with all the little firefights that they create.

Imagine what your business would be like if you were staffed with all A's and B's, and you didn't have to deal with the drama of the C's and D's.

Well it's possible!

02:03
You don't have to have C's and D's on your team.  It's just that sometimes we accept
it, we don't notice it.  Sometimes someone goes from being an A or a B down to a C or a D over time.  The business outgrows them.  

So over time we've got to make sure that we're upgrading our team, we're making sure that we've got the C's and D's moved on, the A's and B's are being well rewarded, looked after, because they're the ones that are going to take your business forward, grow the valuation, and help you have a successful business and a successful exit.

So this week your job is to identify who are those C's and D's in your business, and if you're not sure what to do about it I'm happy to have a conversation with you how to help them find success elsewhere.

So if you're seeing this on LinkedIn, please connect with me.  If this is on YouTube hit subscribe, like, share, hit the notification bell so you can get upcoming videos as well.

And look forward to seeing you next week for part four in our business
value growth series.