Owner Transition

As you grow, what transitions are useful and even expected? Let’s look at a few that you’ll almost certainly encounter and help you see what might be on the other side of the transition.

One: Hiring for Expertise vs. Money

The first good transition to make is to begin hiring people for their expertise rather than for what they cost you. In the early days, you have a budget and you hire accordingly. You aim for whatever you can get for that price, and that’s the best you can do. There simply isn’t any more money, and expertise takes a back seat to available funds.

Eventually, though, you determine that expertise is more important than money. So you outline what you’re looking for in great detail and you don’t settle for less. You have a budget in mind, but the budget takes a back seat to the requirements for expertise. That means you may bust the budget. But in this scenario, one very qualified person may actually be equally as effective as two less qualified individuals.

Two: From Judging to Shaping

The second good transition to make is to move from judging to shaping the work underneath....

A great client recently asked me to outline my definition of success for their firm. I really enjoyed doing that, and below is a version that you can adapt to your own situation, putting your own stamp on it:

• Partner compensation equals or exceeds industry benchmarks.
• After that is achieved, you still 20% net profit.
• The more entrepreneurial employees are satisfied that their contribution to your gain is recognized and accounted for.
• Partners and employees in key roles will have already tasted competence in the area of your focus, or they will experience it within nine months of joining the firm.
• There will be few or no young employees who value variety over expertise.
• When employees talk about your firm, while still employed, their private comments will be complimentary.
• When partners and employees head out the door to work for the day, they look forward to the challenges, the companionship, and their participation in the overall culture.
• As a firm you will not require extraordinary people....

I'm 51, so I figure I'd better get this right pretty soon. :) I think about this a lot, though. The common thread through the last 25 years, though, is that I've worked for myself. That's a lot of years without a safety net, and it's also a lot of years to learn habits that would make it almost impossible for me to work for someone else.

About 20 years ago, though, I put together this list. At the time, I felt like most of my life was ahead of me and that I wanted as many options as possible. So there's very different from each other, and it was just me dreaming one day:

The reason marketing firms fail is not creativity, location, or the marketplace. It’s management ability. Your firm is a direct reflection of you, and you must take responsibility for it. Here are the most common dozen mistakes we see marketing firms make. If you are managing a firm now, you’ll identify immediately. If you are an employee, this might give you some context for the decisions you may not agree with. If you are considering starting a company, this will help you learn from the mistakes of others.

Some decisions are simple and insignificant, like deciding where your desk should be in the big corner office. Others are difficult, but less significant, like what title to give your “new business” person. Others are watershed decisions because they have far reaching implications.

The notion to write about this comes from the fact that there’s been more merger/acquisition (M/A) activity in this field recently than I’ve ever seen in any six-month period. What’s especially notable is that it’s occurring in a difficult economic climate.

For background, over the last 15+ years I’ve been the lead advisor on nearly 150 transactions, crafting 700+ valuations in the process. (If you’d like to use the valuation formula in your buy/sell agreement, you are welcome to do so for free.)

Are you modelling your activities after the public companies in the news all the time? You might double check those business assumptions occasionally to be sure they are leading you in the right direction. We need to filter the steady messages that inform our actions to discard those that will take us in directions contrary to our own goals.

One example is the distinction between how publicly traded companies are run and how your privately held firm should be run. Not recognizing those differences can create heartache and confusion. Here are four assumptions you might want to avoid when emulating publicly traded companies.

After owning a marketing firm for six years and then advising other principals since 1994, one of the unsolved mysteries that still makes me scratch my head is why the vast majority of people in this field fade away from it in their late forties and early fifties. Not only is that unique in the professional services sector, but it’s also a darn waste because these people are smart, hardworking, and capable of having a significant impact on their employees, their clients, and even the world.