9 Warning Signs You’re a Hub-and-Spoke Business Owner
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 a traditional Christmas-tree-like organizational chart, or are you stuck in the middle of your business, like a hub in a bicycle wheel?
Pitfalls of Being the Hub in Your Business
A hub-and-spoke model is only as strong as the hub. The moment the hub is overwhelmed, the entire system fails. Acquirers generally avoid hub-and-spoke managed businesses because they understand the dangers of buying a company too dependent on the owner. Below we describe nine warning signs of being a hub-and-spoke owner and some suggestions for pulling out of the middle of your business.
1. You sign all of the checks
Most business owners sign the checks, 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 checks up to an amount you’re comfortable with, and consider changing the mailing address on your bank statements so they are mailed to a P.O. Box, not the office. That way, you can review all signed checks and make sure the privilege isn’t being abused.
2. Your cell phone minutes are heavily weighted to employees
If your employees constantly need your assistance, it will show up in your cell phone activity because staff will be calling you to coach them through problems. Ask yourself if you’re hiring too many junior employees. Sometimes people with a couple of years of industry experience will be a lot more self-sufficient and only slightly more expensive than the greenhorns.
3. 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.
4. Your vacations are spent working
If you spend your vacations dispatching orders or answering emails from your cell phone, 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.
5. You spend more time negotiating than a union boss
If you find yourself constantly having to get involved in approving discount requests from your customers, you are a hub. Consider giving front-line, customer-facing employees a band within which they have your approval to negotiate. You may also want to tie salespeople’s bonuses to gross margin for sales they generate so you’re rewarding their contribution to profit, not just chasing skinny margin deals.
6. You close up every night
If you’re the only one who knows the close-up routine in your business, such as counting the cash, locking the doors, setting the alarm, then you are very much a hub. Write an employee manual of basic procedures for your business and give it to new employees on their first day on the job.
7. You know all of your customers by 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.
8. You get the tickets
Suppliers wooing you by sending you free tickets to sports events can be a sign that they see you as the key decision maker in your business for their offering. If you are the key contact for any of your suppliers, you will find yourself in the hub of your business when it comes time to negotiate terms. Consider appointing one of your trusted employees as the key contact for a major supplier and give that employee spending authority up to a limit you’re comfortable with.
9. You’re constantly Cc’ed on emails
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.
Getting yourself out of the day to day business processes can be tricky. The Anders Business Transition Planning Services Group can work with you on a personalized plan to help make transitioning your business easier when the time comes. Contact an Anders advisor to start the process.