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Fix These Issues and Watch Your Company’s Value Soar
Picture a bicycle wheel. On the outside is the rubber wheel affixed to the metal frame. Then you have dozens of spokes leading from the frame to the center. The hub is where all the stability and balance comes from. The wheel is nothing without the hub.
This hub-and-spoke image is one of the most popular concepts used in John Warillow’s Value Builder System. For millions of business owners, it’s also the most critical key to improving operations and increasing company value.
The wheel is only as strong as the hub. The moment the hub is overwhelmed, the entire system fails. In business sales, the owner is the hub. Everything else in the company are the spokes and wheel.
You want to do everything in your power NOT to be a hub-and-spoke owner. When daily operations are so completely dependent on the owner, the enterprise value nosedives. You’ve probably heard the phrase “the owner is the business.” Don’t let that be you.
Business buyers have very little faith in these businesses because they understand how dangerous it is. When the owner leaves, so much can go with him – clients and key relationships. Employees. Vendors. Financing sources. You name it.
Most property management companies start small, so there are many pitfalls. It’s easy to become a hub-and-spoke owner and often tough to recognize. But if you want to scale your company and improve its value with an eye toward selling, you need to see the signs. Then do something about it.
Most business owners sign the checks. But what happens if you’re away for a couple of days, or a couple weeks, and an important supplier needs to be paid? Consider giving an employee signing authority for checks up to an amount you’re comfortable with. Then change the mailing address on your bank statements so they are mailed to your home (not the office). That way, you can review all signed checks and make sure the privilege isn’t being abused.Having statements go to your home is also a good anti-theft practice.
If your employees are out of their depth a lot, it will show up in your mobile phone bill. Staff will be calling you to coach them through problems. Ask yourself if you’re hiring too many junior employees. Sometimes people with a couple of years of industry experience will be a lot more self-sufficient and only slightly more expensive than the greenhorns. Also consider getting a virtual assistant (VA), who can act as a first line of defense in protecting your time. I’ve had great luck with offshore VA’s based in the Philippines or Malaysia who have excellent language skills and can perform key accounting, database and marketing functions.
Flat revenue from one year to the next can be a sign you are a hub in a hub-and-spoke model. Like forcing water through a hose, you have only so much capacity. No matter how efficient you are, every business dependent on its owner reaches capacity at some point. Consider how you can reduce the number of time-consuming tasks or technically complex duties. Focus on reducing your personal involvement by 50% in some key areas. You don’t need to give up total control. Just find a happy medium in your daily tasks.
If you spend your vacations dispatching orders from your mobile phone, it’s time to cut the tether. Start by taking one day off and seeing how your company does without you. Build systems for failure points. Work up to a point where you can take a few weeks off without affecting your business. We often refer to the “3-Week Vacation Test.” If your business runs fine while you’re in the Bahamas, you’ve done it right.
If you find yourself constantly having to get involved in negotiating with property owner/clients or vendors, you are a hub. Consider giving at least one staff member a platform where they have your approval to negotiate. You may also want to tie any employee bonuses or leasing commissions to their ability to solve problems and work through complex matters independently.
If the clock strikes 5 every night and you’re the only one behind a computer, then you are very much a hub. If you don’t trust others to close out your management software, lock the doors and set the alarm, you’ve got some work to do. The solution may start with SOP’s. When owners take the time to write out simple-to-follow operating procedures, life gets a lot better. Maybe put together an employee manual of basic procedures. Then get to the ne.
It’s good to have the pulse of your property owner/clients. But you’ve got serious problems if they’re calling you rather than the office for routine matters. It can be a delicate balance for property managers. On the one hand, you want your clients to know you are keeping their needs and issues very top-of-mind. On the other, you don’t want them to think you’re the only solution. Avoid having your personal relationship be the glue that holds your business together.
Clients, vendors and contractors sometimes want to show their appreciation by giving you free tickets to sports events or concerts. That’s great. But if you are the only one at the company they consider, that’s not a good sign. They have pegged you as the only one worthy of their generosity. Try integrating one or two people into more of your.
Employees, clients and vendors constantly cc’ing you on e-mails can be a sign that they are looking for your tacit approval. Or maybe that you have not made clear when you want to be involved in their work. Start by asking your employees to greatly reduce the number of times you’re copied in e-mails. Ask them to add you only if you really must be made aware of something – and only if they need a specific action from you.
Automation is so important in property management companies. Rent collections, maintenance requests, invoicing, accounting, marketing, you name it. The more that gets automated, the less the business is about you. And the less the business is about you, the greater the value to a potential acquirer.