As a business owner you are the hub of the business. Seems obvious. Maybe it’s something you feel good about – the business needs you.
It’s no surprise that the most common and biggest influence on the life of a business owner is how well they handle the Hub & Spoke aspect of their business. It also can have a big impact on how much they could sell their business for in the future and how much is earn-out related.
What is the Hub & Spoke? Imagine a business is like a bicycle wheel where the employees, customers and suppliers are the spokes and the owner (you) is the hub. Take out the hub and the wheel fails. In business terms, if the business can’t survive without you, it is on the way to be worthless!
To put it very bluntly. The more valuable you are to the business, the less valuable the business will be for you! This message can be tough to swallow. You started the business, took risks and made sacrifices that no employee ever would. Your business is part of your existence and your life.
Yet imagine a time when you could go on holiday whenever you wanted or go to the kid’s school events. To be able to spend time thinking and planning the future of the business, or start up another business? Maybe not work at all. Then you truly have freedom.
Here’s the tester question: You know you’re not a hub in your business if you can go away on holiday for 3 months and the business can carry on without you.
That sounds like Mission Impossible when even your 2-week summer break can be disrupted by emails or phone calls. But if you want a valuable business you should aim for improving your Hub & Spoke score within the Value Builder assessment. From our research, getting yourself out of the Hub role can move your sales multiple from 2.5 times to 4 times. At £100k pre-tax profit that equates to £150k extra value in the business.
If you can’t see yourself selling in the near future, you should still work on being less of the hub. Being less of a hub means more time to work on the business. Or simply more time for your personal life.
Here’s what you should be working on:
Standard operating procedures: yes, that sounds boring and bureaucratic. But if you want your business to be scalable, top quality and efficient then put in the effort to process map and write down basic procedures. Remember, you don’t have to do it all. The more your staff contribute, the more they will follow the procedures. Also don’t forget the obvious: organisation chart and simple job descriptions.
Automation: another way to standardise and also be efficient, which will vary considerably by the type of industry you are in. Regardless of your industry think about improving how your different systems are integrated. Try to automate your workflows.
Clarity & focus: none of us are mind-readers so if you want your staff to do what’s right for the business and think for themselves, then tell them the following:
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a summary of the growth plan for the business;
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what major improvements are planned for the year ahead;
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where they fit into that growth and improvement.
If that sounds scary or you don’t like the idea of giving away secret stuff, then consider the pain of being the Hub. The upside of clarity and focus always beats the pain of the Hub.
Daily management: for many businesses the heartbeat of the business is daily. That means staff and operations have daily tasks to do, customers are in contact most days, etc. When the boss is the hub then they drive the heartbeat. Unfortunately, when the boss is distracted by a host of things the heartbeat can be irregular – not good for the health of the business. The answer is to have daily management led by your managers or supervisors. That means visual KPI boards and action lists plus daily briefing with staff.
Employee engagement: probably the activity that pulls together the other 4 activities. Your staff will never care for the business as much as you. But it’s worth helping them act more like an owner. Employee engagement is always in the news, especially post COVID. You should try to do some form of staff survey, maybe an employee Net Promoter Score. Also look to use the Gallup 12 questions to find out what your staff think. Of course, a survey on its own does very little, you need to take action.
So, working on improving your Hub and Spoke score can add £150k to a £250k valuation. That feels like a worthwhile effort. Before you leap into chasing the money, here are some pieces of advice to help you get there:
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be prepared to put in at least 1 day per month of effort;
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use a method or system to do your improvement work – check out the Value Builder System;
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measure your progress;
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get help, whether that’s a colleague, business coach, peer group or your accountant;
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be open to changing your thinking as you are the one who created the hub
To learn more about how to be less of a hub, read the eBook – Famous or Rich – 9 ways Value Builders prioritise wealth over recognition, especially chapter 6, Value Builders build businesses that run without them.
If you’d like to read more about how to make your business even more valuable than your competitors, take a look at my previous blog – ‘3 ways to make your business more valuable than your industry peers.’