Republished with permission from Built to Sell Inc.

If you were to draw a picture that visually represents your role in your business, what would it look like? Are you at the top of an organizational chart, or stuck in the middle of your business like a hub in a bicycle wheel?

The Hub & Spoke model is a drive that shows how dependent your business is on you for survival. The Hub & Spoke model can only as strong as the hub. The moment the hub is overwhelmed, the entire system fails. Acquirers generally avoid these types of managed businesses because they understand the dangers of buying a company too dependent on the owner.

Here’s a list of the 5 top warning signs that show your business could be too dependent on you.

1. You are the only signing authority

Most business owners give themselves final authority… all the time. But what happens if you’re away for a couple of days and an important supplier needs to be paid? Consider giving an employee signing authority for an amount you’re comfortable with, and then change the mailing address on your bank statements so they are mailed to your home (not the office). That way, you can review everything coming out of your account and make sure the privilege isn’t being abused.

2. Your revenue is flat when compared to last year’s

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 narrowing your product and service line by eliminating technically complex offers that require your personal involvement, and instead focus on selling fewer things to more people.

3. Your vacations… don’t feel like vacations

If you spend your vacations dispatching orders from your mobile, 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.

4. You know all of your customers by first name

It’s good to have the pulse of your market, but knowing every single customer by first name can be a sign that you’re relying too heavily on your personal relationships being the glue that holds your business together. Consider replacing yourself as a rain maker by hiring a sales team, and as inefficient as it seems, have a trusted employee shadow you when you meet customers so over time your customers get used to dealing with someone else.

5. You get cc’d on more than five e-mails a day

Employees, customers and suppliers constantly cc’ing you on e-mails can be a sign that they are looking for your tacit approval or that you have not made clear when you want to be involved in their work. Start by asking your employees to stop using the cc line in an e-mail; ask them to add you to the “to” line if you really must be made aware of something – and only if they need a specific action from you.

For more free information on Creating A Business Owner’s Dream Financial Plan, you can listen to a free, eight part series we did exclusively for business owners. The show is also available to subscribe to for free via iTunes.

Republished with permission from Built to Sell Inc.

If you’re a service provider, it can be difficult to separate the service from the provider. Your customers might demand you, which means you can’t scale your business beyond the number of hours you’re willing to work.

In the absence of a point of differentiation, offering generic services leads consumers to evaluate the people doing the work. Referring to your service in a generic way e.g. “graphic design services”, or “lawn care services”, means you’re lumping yourself in with the other providers of the same service.  A quick scan of your LinkedIn profile will reveal that you are likely an expert in your industry which means prospective customers will often demand you, rather than your underlings.

The secret to overcoming this dilemma is to “productize” your service. This involves marketing your service as is if it were a thing. When people start buying the thing, rather than the people providing it, you can grow well beyond the hours in your day.

Proctor & Gamble is the granddaddy of product marketing, so grab a tube of Crest toothpaste and follow their process for productizing your service:

1. Name it

Crest is the brand name and it is always written in the same font. Having a consistent name avoids the generic, commoditized category label of “toothpaste.” Do you have a catchy name for your service?

2. Write instructions for use

Crest gives customers instructions for best teeth cleaning results. If you want your service to feel more like a product, include instructions for getting the most out of your service.

3. Provide a caution

The Crest bottle tells you that the product is “harmful if swallowed.” Provide a caution label or a set of “terms and conditions” to explain things to avoid when using your service.

4. Barcode it

The barcode includes pricing information. Publishing a price and being consistent will make your service seem more like a product.

5. Copyright it

P&G includes a very small symbol on its bottle to make it clear the company is protecting its ideas. Do you Trademark the terms you use to describe your service?

Productizing your service is the first step to separating your service from its provider and the key to getting your service company to run without you.

For more free information on Creating A Business Owner’s Dream Financial Plan, you can listen to a free, eight part series we did exclusively for business owners. The show is also available to subscribe to for free via iTunes.

Republished with permission from Built to Sell Inc.

Volvo recently announced they will make their cars available on a subscription model where consumers will pay one fixed fee per month for access to a car which includes insurance and maintenance.

Everything from tooth brushes to flowers are now available with subscription billing.

Could you offer some sort of recurring plan to your customers? Here are six reasons to consider offering your customers a subscription:

1. Predictability: When you have subscribers, you can plan what your business needs in the future. For example, the average flower store in America throws out more than half of its inventory each month because it’s too rotten to sell.At H.Bloom, a subscription-based flower company that sells flowers to hotels and spas, say they throw out less than 2% of their flowers because they can perfectly predict how many flowers are needed to fulfill their orders.

2. Eliminate Seasonality: Many businesses suffer through seasonal highs and lows. In fact, a whopping thirty percent of a typical flower store’s revenue comes on Mother’s Day and Valentine’s Day – ultimately leaving them to scramble and make a sale in November.By contrast, H.Bloom has a steady stream of subscribers that pay each month. At Mister Car Wash – where they offer a subscription for unlimited car washes – they receive revenue from customers in November and April even though very few people in the Northern east wash their cars in rainy months.
3. Improved Valuation:Recurring revenue boosts the value of your business. Whereas most small companies trade on a multiple of profit, subscription-based businesses often trade on a similar multiple of revenue.
4. The Trojan Horse Effect: Once you subscribe to a service, you become much more likely to buy other things from the same company. That’s one reason Amazon is so keen to get you to buy subscriptions to things like Prime or Subscribe & Save. Amazon knows that once you become a subscriber, you are much more likely to buy additional products.
5. The Sale That Keeps On Giving: Unlike the transaction business model where you have to stimulate demand through advertising to get customers to buy, with a subscription based model, you sell one subscription and it keeps giving month after month.

Data & Market Research: When you get a customer to subscribe, you can start to see their spending and consumption habits. This data is the ultimate in market research. It’s how Netflix knows which new shows to produce and which to kibosh.

For more free information on Creating A Business Owner’s Dream Financial Plan, you can listen to a free, eight part series we did exclusively for business owners. The show is also available to subscribe to for free via iTunes.

Republished with permission from Built to Sell Inc. This article has been edited from its original version.

Small businesses stay small either by choice, or because they start chasing growth in the wrong places.

When you strip away the layers, it all comes down to darts.

Imagine a dart board with a bull’s eye, and around it is a series of wider and wider circles. The bull’s eye is where the people just like you hang out. They are the people (or businesses) who feel the problem your company has set out to solve. They are usually your first customers and raving fans.

The further you go outside of your bull’s eye, the less these prospects feel the exact pain you’re addressing.

Why do entrepreneurs go outside their bull’s eye? When you’re a self-funded startup, you’re scrambling — just trying to bootstrap your way to a company. You don’t have a lot of money to invest in formal marketing, so you rely on word-of-mouth and referrals, which also means you’re often talking to people outside your bull’s eye.

These prospects may experience the problem you’re trying to solve, but they are slightly different (that’s why they’re not in the bull’s eye). They like your product or service but want a little tweak to it: a customization or a different version. You don’t see the harm in making a change and start to adjust your offering to accommodate the customers outside your bull’s eye.

Your new (slightly-outside-the-bull’s-eye) customer tells her friends about how great you are, and how willing you are to listen to your customers, and she refers a prospect even further outside your bull’s eye, who again asks you for another tweak.

Making these changes to your original product or service to accommodate customers outside your bull’s eye seems innocent enough at the time, but eventually it undermines your growth.

Why?
To grow a business beyond what you can do individually, you need to hire employees (or build technology) that can do the work. As humans, we are usually lousy at doing something for the first time, but can master most things with enough repetition.

Think about teaching a toddler how to tie his shoes. The first few attempts are usually rough. It’s a new skill and his tiny hands have never had to make bunny ears before. You break it down for the child and show him how to master each step. It can take weeks, but eventually he gets it. As adults, we don’t even think about tying our shoes — we’ve mastered the skill by repetition.

The same is true of your employees. They need time to truly master the delivery or your product or service. Every time you make a tweak for a new customer outside your bull’s eye, it’s like changing the instructions on tying your shoes. It’s disorienting for everyone and leads to substandard products and services, which customers receive and are less than enthusiastic about.

When there are unhappy customers, the owner will often step in to “fix” the problem. While some founders can indeed create a customized product or service for their new, outside-the-bull’s-eye customer, they are making their company reliant on them in the process.

A business reliant on its founder will stall its growth when the founder runs out of hours in the day.

The secret to avoiding this plateau, and continuing to grow, is to be brutally disciplined – to only serve customers in your bull’s eye for much longer than it feels natural. When you want to grow, the temptation is take whatever revenue you can, but the kind of growth that comes from serving customers outside your bull’s eye can be a dead end.

For more free information on Creating A Business Owner’s Dream Financial Plan, you can listen to a free, eight part series we did exclusively for business owners. The show is also available to subscribe to for free via iTunes.

Republished with permission from Built to Sell Inc. This article has been edited from its original version.

Repeat customers are the lifeblood of your business, but customers can be fickle. Here’s how to make them “sticky.”

In a traditional business, customers buy your product or service once, and it is up to you to try to convince them to buy again in the future. However, in a subscription business, you have what is called an “automatic customer” who agrees to purchase from you in the future, as long as you keep providing your service or product.

Feeding Rover Automatically

One of the reasons subscribers are such attractive customers is that, once they subscribe, they become less price-sensitive. To illustrate, imagine that you live in England and own a 100-pound Pyrenean Mountain Dog who eats two hearty bowls of dog food a day. Feeding the love of your life is an expensive proposition, so you’re always on the lookout for a deal on dog food. Once every two weeks, you trudge down to the local pet supply store and cart a case of kibble home. In the meantime, if you see dog food on sale at your local grocery store, you’ll buy it. If you get a coupon for a buy-one-get-one-free offer from another store, you’ll take advantage of it.

Eventually, you get tired of last-minute trips to the store, so you subscribe to petshop.co.uk, which offers a “Bottomless Bowl” subscription service. Now you know you’re going to get a shipment of dog food every two weeks. The part of your brain that scans the flyers for dog food starts to shut down, knowing that the convenience of having dog food shipped automatically far outweighs saving a few dollars on kibble.

Integration Drives Stickiness

Beyond the simple convenience of automatic service, subscribers become even more loyal when they start to integrate their subscriptions into their daily lives. Subscribers knowingly enter into an agreement in which the convenience of uninterrupted, automatic service is exchanged for their future loyalty. Rather than buying once without returning, subscribers stick around—hopefully for years. That’s why subscribers drive up the value of your company so dramatically.

For more free information on Creating A Business Owner’s Dream Financial Plan, you can listen to a free, eight part series we did exclusively for business owners. The show is also available to subscribe to for free via iTunes.