better business blog

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Successful Contracting #3 …Know Your Stakeholders

7 November 2010

When you walk into a business do you ever stop to think who really owns it? I ask this as I was reminded this week of a business buy-out story that came about when I was coaching a senior manager.

The senior manager had built a new factory in Wales, had solved a myriad of technical and logistical problems and was slowly knitting together her operators and charge-hands into a respectable crew. Naturally, she was very pleased at her success and consequently delighted when the owner approached her and said he was thinking of retiring and…

I’ll pause here, because whenever a client tells me one of these stories, and I’ve heard a few over the years, I inwardly shudder, because I know what’s going to happen next and it’s never what the client expects…

…and would she like to buy him out and own the business?

Wow, what an offer! The dream of many senior managers come true. The opportunity to short cut the difficult and risky business of actually building a business from scratch and just parachute in to one already steaming along. The chance to avoid doing grubby things like learning how to sell, how to network, how to manage cashflow (do you have a cashflow forecast to hand?…I bet not) …and just waltz in to the big swivel chair and upgrade your business card from manager to managing director.

You might just catch a whiff of cynicism in that last paragraph because there are few short cuts in business worth taking and this is one of them. Taking short cuts reduces learning and increases the chances of later failure.

In the example above, the senior manager had already started to invest time and money in financial advice, legal advice and business planning advice and had overlooked one crucial factor in any contracting process, for that is what this is all about, once you strip away the businessy veneer.

And that factor was that the owner was married. He owned all the shares, but Mrs Owner owned all the lifestyle options. The ritzy BMW, the cafe and fluffy-shopping weekly rota and most importantly the ‘wife of successful businessman social status’. She was in effect a sleeping shareholder, in that she slept with the owner and had a say in the decision making process.

I suggested to my client that Mrs Owner would soon calculate that the large sum of money gained from selling the business would only last for five years and then it would be gone. What would she do then? And if the owner had made the business his life, would she want him under her feet all day? I think not.

In the end, of course, you know how the story ended…the senior manager spent several thousand pounds researching a sale that was never going to happen, because the owner’s wife vetoed the idea.

When you’re contracting you need to make a map (or a family tree) of all interested parties and how they connect to each other AND you need to make sure each pair of connections has a robust and mutually agreed contract in place (see previous posts).

If the senior manager had done this, she would have immediately realised that Mrs Owner needed to be part of the discussions. A five minute telephone call would have told her all she needed to know and she could have then saved herself time and money.

So, the message for the week ahead is – be careful: businesses are run by owners and their unseen wives, partners, relatives, children and other stakeholders. When you’re contracting it pays to find out who these people are and to make sure you know if they need to be included in the contracting process. If you leave them out, you could easily be heading for the edge of a cliff….

If you want to see this in action, just think about how you organise a family get-together over Christmas time. Who do you need to call to make sure everyone knows who is stuffing the turkey, who is bringing the sherry, and who is running Aged Aunt Agatha home afterwards…???

Have fun!

Have you seen Brian yet?

Los Penguin Productions have posted the  Job Hunting Blues video on YouTube so please click through and enjoy it. It features Brian, our resident stunt man and he was great to work with, a real pro. Do you like his boots? And he was very happy to be able to read his own special, little copy of the book Job Hunting 3.0. If you know someone who is looking for work then please point them at Amazon where they can read reviews and order a copy of the big book.

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Next Week

We will take a look at modern selling skills, which if you’re an owner-manager, or someone looking for a job, could give you an edge over your competition!

Tags: contracting