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Eight Key Drivers of Company Value: Hub & Spoke

Hub & Spoke

Hub & Spoke measures the extent to which your business can thrive without you. To be valuable to an acquirer, your business must be able to succeed and grow without you at the hub of all activities, as your employees are mere spokes that cannot operate independently of you.

Business owners often score low on this attribute because they remain involved in serving customers directly. It feels good to solve people’s problems. Happy customers shower you with praise, you get the satisfaction of feeling needed, and you know your customers are getting the best care in your hands. After all, you know your business better than anybody, and training others to do the equivalent job without your accumulated knowledge takes a lot of time and can cost a lot of money.

However, the more your customers need you and ask for you personally, the harder it is to grow your business, and, in the long run, the less valuable your company will be.

To Start Letting Go, Consider Taking Three Steps:

Get out of the “break/fix” business

It’s a lot easier to train people how to prevent a problem than it is to show them how to fix something once it’s broken. For example, a swimming pool company can teach a summer employee to scoop debris out of a pool each week, but it needs an expert, often the company owner, to replace a pump that overheated due to a clogged drain.

Go on vacation

Start slowly by taking evenings and weekends off completely. Leave your cellphone at the office, and do not reply to any messages. Then take a day off midweek and do the same. Build up to where you can take a week off without checking in. At first, employees won’t believe you’re serious . . . until they see that you’re really not replying to them. Once they realize they’re on their own, the best ones will start to make more decisions independently. It’s amazing how smart most people are if you give them a chance to show it. You’ll also expose your weakest employees and know who you have to train up or move out.

Ask employees what they would do in your shoes

To get employees to start thinking like an owner, encourage them to solve their own problems. When an employee comes to you with a situation, before jumping in with a solution, ask, “If it were your business, what would you do?” This simple question forces employees to think things through for the good of the business and triggers a decision-making habit that, when cultivated, will have them acting like owners.

Consider the following:

  • How do you currently spend your business day? Create a pie chart representing the time you spend at work and assign a slice for each of the activities you do. What observations can you make about how you spend your time?
  • Is there a current employee who could be promoted to head up either your sales and marketing or your product/service quality and
  • innovation?
  • How does your long-term incentive plan need to evolve to be an asset in potentially selling your company?
  • How does your long-term incentive plan need to evolve in order to increase the value of your company and ultimately make it more sellable?
  • What recurring problems in your company could be fixed with a formal process or instruction manual? The documentation of processes can go a long way toward coaching employees to follow in your footsteps.
  • Why do customers request that you serve them? If you don’t have an answer at the ready, ask your best customers the question.

Hub & Spoke is one of eight drivers of your company’s value. Get your score on all eight by completing your Value Builder Questionnaire.

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