08/ 02/ 2005
by Joe John Durant
Making yourself dispensable makes good business sense
If you want something done right, do it yourself. That’s the motto for many entrepreneurs brave enough to start a business. But could that sage advice cost you a fortune? America is an entrepreneurial hotbed. Most of the 1 million new companies formed every year are started by entrepreneurs willing to put it all on the line for a shot at secure financial freedom under their control. But that magical word, “control,” comes at a price.
After interviewing dozens of entrepreneurs in a range of industries, I found that business owners all share one trait: conviction. They believe in themselves or their business ideas enough to put their wealth, reputations and resources on the line to build a company. And, after risking so much, they are reluctant to trust other people to take over. Yet, one of the most important traits all successful entrepreneurs had to learn to grow their companies was the art of letting go.
Most successful business owners have, at some point, developed a keen ability to delegate. All admitted that learning to let go was tough, but it was a crucial component in building their companies. After my own experience building a multi-billion-dollar investment firm, I wholeheartedly agree. Had my partners and I not let others come in to contribute, we would have been stuck at one-tenth the size we eventually reached before selling our company to General Electric’s GE Financial. Here are the most important reasons why entrepreneurs win when they let go:
1. Increased focus brings better results. Many entrepreneurs think that no one can do certain things in their company as well as they can. Business owners often discount how important and beneficial dedicated focus can be. For example, Werner thought that no one could sell his investment products as well as he could. Nonetheless, he brought in a salesman whom he liked, but believed was only half as good at sales as he was. Sales still increased significantly. This worked out because Werner spent less than a third of his time selling while the new salesman spent all of his time selling. Though the salesman might have only been half as good as Werner, the fact that he spent more time at it meant more sales occurred. The benefits of having someone focus on one area of business apply to every area, from accounting to operations.
2. Spend your time on more important decisions, and you’ll make more money. Since there are a finite number of hours in a day, knowing what your time is worth is crucial. Giving the $5-an-hour work to someone else frees you up to focus on more important facets of the business. For example, before Dave hired an associate to help him take care of the small stuff at his recruiting firm, he spent half of his day making copies, printing documents and taking care of routine follow-up. Once he had an assistant, he spent so much more time closing business that, within six months, his revenue doubled.
3. The less important you are, the more valuable your business. This is counterintuitive for most people. After all, most entrepreneurs built a business by their sheer willpower. Yet if the business is still completely dependent on its founder, it’s not transferable to a new buyer and, thus, is not very valuable. The opposite is also true. If a business can continue to operate on a day-to-day basis without the owner’s direct participation, it will be far more attractive to a wider array of buyers and will increase in value.
Imagine owning a barbershop with hundreds of loyal customers. If they love getting their hair cut by you, what is the business worth to someone else? Not much. However, if a couple of barbers worked for you, your departure would probably not stop the clients from coming in. This gives your business value.
Letting go of some of daily tasks might be challenging, but as long as you keep an eye on things and make sure that your standards and values are maintained, you will benefit immensely.
As one successful entrepreneur said: “When I learned to let go, I spent more time doing what I loved, I grew my business faster, and eventually, it became a lot more valuable when I sold it.” That’s reason enough to learn the art of letting go.
Joe John Duran, CFA, is author of Start It, Sell It & Make a Mint (John Wiley & Sons, June 2004). He is based in Los Angeles.
