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There has been much recent talk of the aging population and with it naturally comes the aging of business owners. This has led to a dramatic increase in those seeking to exit their businesses both now and over the next 12 years. What is important to realize for business owners is that business succession planning is not about leaving it until the last possible moment and then determining the most suitable exit. I had a great discussion at a meeting last week about the fact that professional investors (private equity firms, angel investors, and venture capital firms) all require detailed information about the exit strategy before they enter the investment. As amateur investors (small business owners) we are often so concerned about the entry – funding, IT, personnel, premises, set up, marketing, etc. that we don’t have time or give thought to properly planning for the exit. What is vitally important therefore is that as we start to prepare for an exit we allow sufficient planning time to design the most suitable strategy and more importantly to allow us time to implement the succession plan properly. I am seeing a number of business owners where the amount of money they require for retirement is dramatically more than the real value of their business either because they’ve never had the business value determined or because their own expectations of value are quite different. The solution is simple – time. I am currently working with a number of clients where we have a 5-to-7-year exit horizon. This allows us to strategically design the most appropriate exit strategy and more importantly introduce a succession planning coach who will manage the implementation of that strategy over an extended period to ensure the owner can exit the business extracting the value they actually need and deserve. Business owners who wait until they are 64 years and 9 months old and simply list the business for sale through a business broker will never extract the value they potentially should or could if the exit had been strategically planned properly. To ensure you maximize your exit value as part of any business succession or exit plan – ensure you start the process at least five years before you expect to exit.
A recent Harvard Business Review article reported the following alarming facts: A Fortune 50 company estimates losses in excess of $75 million per year due to poor meetings 25% of meetings are spent discussing irrelevant issues 73% of employees do other work in meetings – employee disengagement issue 9 out of 10 people daydream in meetings If you're familiar with the Entrepreneurial Operating System (EOS), you know the importance of rocks, scorecards, and meeting pulses to help drive growth and accountability in your business. One of the most impactful EOS tools is the L10 - a weekly 90-minute meeting focused on identifying issues, getting team input, and leaving with clear ownership of next steps. The magic of the L10 lies in its ability to dramatically increase employee engagement by making every team member feel heard and invested in the success of the company. Here's how it works: Setting the Stage for Psychological Safety Before diving into the agenda, the L10 starts with a check-in where each person shares a personal win and a business win from the past week. The personal win can be something as simple as finally getting a good night's sleep or taking their kid to a cool event. The business win should relate to an accomplishment, metric hit, or major task completed for the company that week. This casual sharing of wins serves two main purposes. First, it gets the positive vibes and energy flowing by having people reflect on and celebrate their recent successes. Starting the meeting in a peak state rather than just diving into problem-solving tends to breed more creative thinking and collaborative discussion. Secondly, the cross-pollination of hearing about personal lives and work achievements helps build trust, empathy and psychological safety amongst the team members. When people feel comfortable being vulnerable and sharing their human side, it enables much more openness for when issues get discussed later. A team with high psychological safety tends to have higher engagement, more risk-taking, and better problem-solving. Reporting & Analytics Each team lead then reports on their Scorecard Measurables, which are the core metrics and "rock" progress over the last week. The Scorecard Measurables provide visibility into the key numbers and priorities that each team is responsible for driving. By reporting on these metrics and quarterly goals (called "rocks") each week in the L10, it drives focus and accountability. Teams have to be transparent about their progress, successes, and shortcomings. This weekly exercise reinforces ownership and results-driven behavior as no one wants to show up to the L10 empty-handed or having missed their marks. Identify the Issues The heart of the L10 is the cascading discipline of getting issues out on the table. As one issue is resolved, the lead will "take a jackhammer" to it by asking "What's the real, root issue here?" This dynamite questioning technique consistently drives teams to unearth and face into core challenges rather than treating symptoms. Team Input As each issue gets discussed, the lead makes sure to get input and perspective from every single team member. This simple act of intentionally having every voice heard breeds incredibly high levels of engagement, creativity, and collective brainpower. Resolve & Assign For every issue raised, the team aims to identify next steps and assign out clear owners and due dates before moving on. This leaves no bottlenecks and gives the team clear line of sight into who is responsible for driving what forward. Wrap & Rate At the end, the lead offers a quick recap of the meeting making sure everyone is on the same page, and the team rates the effectiveness and value of the meeting itself. This promotes an environment of continual improvement. While just 90 minutes long, the L10 is one of the highest impact meetings a leadership team can run each week. By driving focus, accountability, team problem-solving, and clear ownership of next steps, it dramatically improves execution while increasing employee morale, engagement, and productivity. Teams who embrace the L10 constantly report feeling heard, empowered, and unified in driving real company progress.
The Power of Data in EOS: Leveraging Leading Indicators to Win As an EOS Implementer, I often emphasize the importance of the Data Component in the Entrepreneurial Operating System (EOS). This critical component, embodied by the Scorecard, serves as a vital tool for business owners and leadership teams. It helps them monitor performance, anticipate issues, and drive success. Today, I want to delve into the nuances of the Scorecard, focusing on how it provides early indicators of change, highlights trouble spots, and distinguishes between playing to win and playing not to lose. The Role of the Scorecard in EOS The Scorecard in EOS serves two main purposes: Identifying when you're off course : The Scorecard acts as a business's GPS, alerting you when things are deviating from the planned route. By tracking specific metrics, it signals when corrective actions are needed to steer the company back on track. Showing that the right people are in the right seats : It helps ensure that your team members are performing well in their roles, contributing to the overall success of the company. When the Scorecard reflects positive results, it's an indicator that your team is functioning effectively and efficiently. Leading Indicators: Your Early Warning System In the context of the EOS Scorecard, leading indicators are the metrics that predict future performance. Unlike lagging indicators, which reflect past performance, leading indicators provide foresight. They alert you to potential issues before they become full-blown problems, allowing you to take proactive measures. Examples of Leading Indicators: Sales Pipeline Volume : A dip in the number of new leads or opportunities can signal future revenue challenges. Employee Engagement : A drop in engagement levels can indicate potential morale or productivity issues, and can be an early warning of future turnover or decreased performance. Customer Feedback Scores : Declining customer satisfaction scores can forecast future retention problems and lost sales. Recognizing Trouble Spots: What the Scorecard Tells You A well-designed Scorecard helps you identify areas of concern quickly. Here are a few key indicators that might suggest your business is in trouble: Consistent Missing of Targets : If you notice that specific metrics are consistently below target, it’s a sign that something is amiss. For instance, if your sales team is regularly falling short of their goals, it could indicate a need for better training or more resources. Negative Trends : Look for patterns. Are your customer satisfaction scores declining month over month? Are operational costs steadily increasing? These trends can be early warnings of deeper issues. Anomalies in Leading Indicators : Sudden changes in leading indicators, such as a spike in employee turnover or a sudden drop in new customer inquiries, can alert you to potential problems that need immediate attention. Playing to Win vs. Playing Not to Lose In the world of business, mindset matters. The Scorecard can help you distinguish between a team that is playing to win and one that is merely playing not to lose. Playing to Win : This mindset is about being proactive, innovative, and growth-oriented. Teams that play to win use their Scorecard to identify opportunities for improvement and expansion. They set ambitious goals and are always looking for ways to exceed expectations. Playing Not to Lose : Conversely, this mindset is more defensive. Teams that play not to lose are primarily focused on avoiding mistakes and maintaining the status quo. Their Scorecard might reflect a more conservative approach, with targets set just to avoid failure rather than to achieve excellence. Using the Scorecard to Foster a Winning Culture To cultivate a winning culture within your organization, leverage your Scorecard to: Set Ambitious, Yet Achievable Goals : Encourage your team to aim high and push beyond their comfort zones. Celebrate Wins : Recognize and celebrate when team members meet or exceed their targets. This boosts morale and reinforces a culture of success. Foster Accountability : Use the Scorecard to hold everyone accountable for their performance. When metrics are transparent and regularly reviewed, it creates a sense of ownership, responsibility and employee engagement. Conclusion The Data Component of EOS, exemplified by the Scorecard, is an indispensable tool for any business aiming to thrive. By focusing on leading indicators and understanding the early signs of trouble, you can steer your company towards success. Remember, the key is to use the Scorecard not just as a means of tracking performance, but as a strategic tool to inspire a mindset of playing to win. This proactive approach will help ensure your business continues to grow, scale, and succeed in an ever-changing landscape.
In our experience, one of the biggest obstacles faced by owner-managers looking to plan strategic exit from their company is that of a leaving a well-managed organization capable not only of carrying on without them but of growing and developing in the future. THE RISKS OF NOT HAVING YOUR STAFF ENGAGED We’ve often touched on the subject of employee engagement and how a lack of engagement can have a negative impact on the profitability of your business. But the fact is that poor employee engagement can also make your company less attractive to investment from potential buyers. Business owners are often puzzled by the lack of commitment shown by their staff but it’s easy to understand if you take a closer look at the potential mismatch between the employer’s and employees’ concerns. Typically, owners are losing sleep over business issues like sales, cash flow, profits, and competition, whereas employees have concerns of their own – their paycheck, job security, getting work finished and asking for time off. ENCOURAGING EMPLOYEES TO THINK AND ACT LIKE BUSINESS OWNERS Organizational change expert, Brad Hams, sees this issue of divergent thinking as one of the biggest barriers to business success. His formula for growth is simple – get employees to think like business owners. We’ve advised plenty of clients to employ our Ownership Mindset strategy over the years,usually with great success. By giving employees the incentive to achieve results, educating them to understand more about how the business works and offering them the tools to monitorprogress,we’ve seen some impressive results. According to Brad Hams, ‘When employees are given the right tools, information and training to become more involved in the business, the business becomes more profitable-guaranteed.‘ A POSITIVE MOVE FOR SUCCESSION PLANNING It’s easy to see how pursuing this approach could be a particularly canny move when positioning your business for sale. Not only could you anticipate a level of business growth that is likely to have a positive impact on the company’s value during the succession planning process, but by empowering staff to become more involved, you’re automatically building a strong team that will enable you to gradually take a back seat, freeing up the business for change. And we think you’ll also find there are more buyers who are attracted to businesses run by incentivized, motivated teams rather than those who are overly reliant on their owners. GETTING REAL RESULTS We recently worked with a company whose owner wanted to begin downscaling their commitment while still receiving a solid income from the business. They were frustrated by their inability to engage staff in thinking about the company’s well-being in any meaningful way. By implementing the Entrepreneurial Operating System® (EOS), the owner was able to move closer to their goal of delegating managerial responsibility. As soon as staff began to understand the vision and strategy of the business, it started to become more cohesive and productive. A large part of succession planning is maximizing the value of your company to prepare it for the market. By creating a healthy workplace where efforts and goals are aligned at every level, business owners have the best opportunity to present the very best value proposition to prospective buyers.