The Business Owner’s Dilemma – Managing vs. Thinking

By Jack Ellsworth

There’s a steady breeze from the northwest, which cools the warm Caribbean afternoon. Framed between a palm tree and the turquoise water, you notice a man reading. He appears to be working, which seems strange given his appearance: shaggy blonde hair, linen shirt, surf shorts and flip-flops.

You squint and realize the man is Richard Branson and he just happens to be running Virgin Group Ltd., a multibillion-dollar conglomerate. He is working where he usually does, at Necker Island, a 74-acre retreat he owns in the British Virgin Islands.

Branson, of course, is far from a negligent owner; he has managers running the various businesses that make up the Virgin Group. He visits his companies regularly, but he does not manage the day-to-day operations of any of his businesses, which frees up his time to think.

Your role as an owner can be divided into two buckets: one for managing and the other for thinking.

The managing bucket is where, metaphorically speaking, you are the “train conductor”, ensuring that the trains  get to all the right places and get there on time. In this role, you’re establishing goals for your employees and holding them accountable for achieving their targets. You’re making sure your products and services are of a high quality and that your biggest customers are happy. When you’re wearing your manager hat, you’re scouring your company looking for small operational enhancements every day to improve your company. 

The other bucket is reserved for thinking.  This is where you create the future of your company. In this visionary time, you get to design new products, imagine new ways of serving customers, or contemplate where you could take your business in the years ahead.  Your visionary hours are spent dreaming and imaging what your business could be in the future, instead of worrying about what it is today.

The question is, how much of your time should you devote to each role? If your goal is to create a more valuable business—one that someone might like to buy one day — data reveals that you should start gradually increasing the time you spend on thinking and develop someone else to do the managing.

For example, after analyzing more than 20,000 businesses, Built to Sell, Inc. discovered that companies with owners who know each of their customers by first name receive offers at approximately 2.9 times their pre-tax profit.  These owners are the “managers”.  On the other hand, this same study showed that companies with owners who do not know their customers’ first names (i.e., “thinkers”) receive offers at closer to 5 times pre-tax profit.

Further, companies that would suffer if their owners were unable to come to work for three months, receive significantly lower offers when compared to companies that would not feel the absence of the owner for a month or two.

Finally, in a recent survey of merger and acquisition (M&A) professionals, they were asked who they would like to see an owner hire if they could only afford one “C-level” executive. The M&A professionals overwhelmingly identified a general manager/second-in-command as the most important role an owner/founder can fill ahead of a chief revenue, marketing or financial officer.

Summary

In short, the owners of the most valuable businesses have found managers to ensure the trains run on time while they spend an increasing amount of their energy thinking about what’s next for their business.

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