Over my summer break, when I should have been clearing my mind and relaxing, I found myself pondering some deep stuff. Sometimes you just can’t help yourself, and this time the subject matter for the vacation rumination was the destructive aspects of the human ego. The thought process started out with some introspective analysis and moved eventually to the world at large.
Management consultants are not perfect creatures.
‘No!’ I hear you roar inwardly. Yep. Sorry, but we’re not averse to shooting ourselves in the foot and I’m no exception. Sometimes we’re like the motor mechanic who drives a bomb of a car. There are periods when you get so sick of working with other peoples’ businesses that you forego working on your own. Guilty, M’lord!
In my particular case the offence started by being vain many years ago and naming my business after myself. In retrospect this was not a good move, but at the time it seemed like a great idea. Hey, jump into business and get your name out there; get money trickling in as soon as possible. What could be wrong with that?
Some years later it started to dawn on me that I had created a potentially expensive problem for myself. Business was doing quite well and I was making a good living (unlike 90% of my compatriots), so I had overcome the big hurdle that trips-up most entrants into this line of work. It’s only after 15 years or so that I started to think about an exit strategy. What am I going to do when I want out? Sell and move on?
How do you sell a business that is irrevocably associated with the skills of a particular person; especially if that particular person is the one who is leaving? The same issue is faced by many restaurateurs and other hospitality operators who name their businesses after themselves. In the minds of the public they are the business. There is no separation between the business entity and the entity of the owner. Public recognition and status are nice, but will they fund your retirement?
To a lesser degree you have the same problem when you make a public legend out of your Chef, or employ a ‘name’. Short term, this might be an effective marketing ploy, but long term it kills the goodwill component of a business sale. This has become self evident as we gain more and more experience in the business broking side of my business. Name a business after yourself or cultivate a celebrity chef who is not locked-in to your business and you can kiss up to three years profit goodbye at the point of sale.
It’s an insidious trap. Once your business has become associated with a particular personality it can be horribly difficult, time consuming and expensive to reinvent yourself under another impersonal business name — and not many business owners attempt this. The normal course of action is to face the bitter truth at the point of sale, forego the pot of gold you have been dreaming about for years and move on, sadder but wiser.
If you’re lucky you will learn this lesson at a relatively early age and have a chance to start again and get it right next time. Unfortunately, we see quite a few people who have finally become self employed during their middle age and who limp along in an undercapitalised business that makes very little, and who find out that due to blissful ignorance at the time of establishing or buying their business, they fell right in to this hidden trap and threw away their nest egg.
At the root of this whole issue is the fact that our rampant egos often drive us to place the short term pleasure of public recognition and industry status way ahead of our long term good. Worse, some of us assume that our name is so powerful that we couldn’t possibly survive without shouting it from the rooftops. Yes folks, deluded thinking is alive and well, and thriving in this industry.
Reassuringly, I have also seen a number of very good examples of up-market hospitality businesses that benefit from both public recognition and industry status without being strongly associated with any particular person. This flies in the face of conventional practice but is quite clever. Provided a purchaser of the business maintained service and food standards, the public would never know there had been a change of ownership. They would have to pay the full enchilada for these businesses, because they would not be able to claim that the business would be crippled when the figurehead or celebrity associated with it left.
So, I have been thinking about this in relation to my own business. The wisdom of hindsight is a wonderful thing, and like a lot of other advice I give people, this particular insight comes from expensive personal experience. The longer you leave your name on a business the bigger the problem becomes, and the more expensive it is to resolve. This is a clear case of don’t do as I do; do as I say.
This is how you screw up your holidays .