An enduring firm will be worth much more – through an internal or external sale – than one where some of these issues are not addressed.
One of the goals of many of us who start businesses is to create something that will outlast us as the founders. Why is that a common goal so many founders have?
There are many reasons. Maybe we like the idea of a business that creates good jobs and provides so many families with the means to live a good life. Maybe we want our clients to have really great services that help make their organizations more successful. Maybe we like the idea of seeing projects get built that improve the quality of life for all. Maybe we know that this is a key to being able to sell our firms and exit at some point with some kind of a payoff for all of our years of toil and sacrifice. And maybe it is a way to achieve a certain degree of immortality.
I’m sure there are other reasons. But whatever the reason, creating a business that will carry on and thrive after the founders are gone is a common goal – whether or not it is officially stated in a formal business plan somewhere.
So what does it take for an A/E firm to be an enduring enterprise that survives long beyond the tenure of its founders? Here are my thoughts:
- An investment mentality. What I am talking about here is the owners are not just looking to get as much money as possible out of the company each year like typical small business owners are. And they are also geared to make the kinds of investments in marketing, people, and systems that it takes to make the firm grow over time.
- Creation of a brand. Having a strong brand as an A/E firm is possible. And when you do, you will have a never-ending stream of new project opportunities, good people wanting to work for your firm, and higher prices and margins than other competing firms that are less well-known. Of course, doing this takes a consistent and high investment in marketing, as well as consistent performance so the delivery matches up to the implied or stated promise of the brand.
- Investment in the creation and maintenance of databases. I’m talking about client and potential client tracking databases, databases on projects completed, databases on employee experience and qualifications, databases on construction costs and operational costs, and many more. These are all the ways the company can institutionalize its knowledge base and survive the comings and goings of any and all employees and owners.
- Investment in outstanding people. That means you have to do what it takes to get really good people and keep them there. “Doing what it takes” means you are willing to pay the price to hire good people. That means they will not be the cheapest people nor will be they be paid an average salary and benefits. They will need extraordinary compensation and opportunities. If you want an enduring firm, don’t underestimate the importance of this.
- A real sense of purpose. Good people will hang in there for the long haul when the business has a real sense of purpose that makes any of the problems of working there seem minor. That purpose – to be real – has to be reinforced on a daily basis by the owners. Just working for money is not enough.
- Investments in training. An enduring company provides ongoing training and learning opportunities for its employees to develop their skills and be better in their fields. Again – like all investments – it takes time and money to make them real.
- Viable ownership transition. If a firm cannot deal with ownership transition effectively it will not outlast its founders. Too many times, transition schemes are cooked up that are not modeled to see what is likely to occur over time as they are implemented. That results in the firm being a self-liquidating entity, as all of its equity evaporates over time and it becomes paralyzed and unable to make the kinds of investments to do the other things I mentioned above.
- Real leadership transition. Along with the ownership transition, leadership transition, too, needs to happen. That requires owners who are willing to delegate and step back out of the limelight. Not all will do that and the price they pay is they cannot make it to the next generation intact.
So there you have it. A recipe for creating an A/E firm that outlasts its founders is laid out here in basic terms. So, what path are you on with YOUR firm? Are you doing what it takes to survive the long haul? Even if you can only think about yourself and your own wants and needs, an enduring firm like this will be worth much more – be that through an internal or external sale – than one where these issues are not addressed. Remember that!
Mark Zweig is Zweig Group’s chairman and founder. Contact him at firstname.lastname@example.org.To read the rest of this week's issue, click here.