A small business owner often views their business as a part of themselves. And why shouldn’t they? They spend nights and weekends away from their family, make financial sacrifices, and work to build a business that is a reflection of themselves. Their values and morals are aligned with the business.
The time will come to hire their first employee. Often, the first employee hired is not your Chief Operating Officer or Vice President of Finance. It might be a salesperson or a front desk clerk. Still, this is a monumental change for the business, it has grown by 100% in its’ headcount. Soon, they will hire a second and then a third, and from there it will take off. Eventually, they will get to a point where they make a key management hire. With Monkey Bizness, it wasn’t until I got to employee #23 that I made my first key hire, my Director of Operations.
Andrew Carnegie once said, “No person will make a great business who wants to do it all himself”. Small business owners have a hard time letting go for all the reasons I just mentioned and more. However, one key to small business success is the team that an owner can build around them.
I look at my Director of Operations as a partner. When I hired her, I even considered how to make her an equity partner in the business. Eventually, the small business owner must build a team to help them grow. Not every team member will be an employee. In my business, I had a real estate and marketing partner who had their own consulting firms. However, I still looked at them as valued members of my team.
One key to successfully building your team is delegation. A small business owner must be able to delegate in order to free up their time so it can be spent on higher value decisions and projects. They also must hire people that are smarter than them. This can be a hit to the ego for some, but that would be the wrong approach. The small business owner should take pride in the team they are building. Hire people smarter than yourself and watch the business take off.
Talent Research Corp.
Talent Research Corp. (TRC) was founded in 1971 by psychologist John Culhane. The Company focused on market research and personnel selection. Culhane and the Company pioneered the use of talent-based structured interviews to conduct their research. They used this research and the methods developed from it to help companies in their hiring and employee training process. They would also help companies with consumer market research through study groups and polling.
By 1978, the Company had grown to a point where it had 20 employees and had close to $3.5 million in annual billings. Culhane could see that the Company was poised for growth and decided to bring in their first accounting and finance hire, Tim Kramer. Tim had worked for a local CPA firm and was young, just 27 years old. The Company’s records were somewhat scrambled as Kramer took over in his new role as Controller. Kramer began to completely restructure the Company’s processes for billing and shortened their collection cycle by 50%.
This was needed because while the Company was profitable, they were constantly short on cash. The type of business required a well-educated workforce, meaning that payroll was the most significant expense. However, because they worked with large companies, receivables often aged out for months. Kramer quickly went to work to remedy this. He also reformatted the financial statements so they could obtain short term financing by way of a line of credit so that sporadic cash shortages could be more easily covered.
Culhane was right about the Company’s growth prospects. From 1978 to 1987, the Company grew to easily eclipse $45 million in revenue and had over 400 employees. Throughout this process, Kramer was instrumental in structuring employee compensation packages so the firm could obtain the top talent needed. Culhane and Kramer (who had assumed the Chief Financial Officer title in 1982) together would come up with complex capital allocation strategies which ultimately led to a healthy cash reserve. While TRC was well known and had been growing, the Company began to look for a strategic acquisition candidate that would get their services into a new market while also increasing their exposure.
Rucker, Inc. was a well-known analytics and advisory company based out of Boston, Massachusetts. Founded in 1937, it became known for their public opinion polling conducted worldwide. The Company was well known because their public opinion polling was strictly independent, with Tom Rucker the founder, refusing to do any private polling for an organization such as the Democratic or Republican party. By the late 1940s, Rucker had established 12 foreign offices to conduct similar polling. Because of all this, the Company was well known to the public and had a distinguished reputation.
Starting in the 1980s, Rucker began to transition its’ business to focus on providing analytics and management consulting to organizations globally. TRC and Rucker would occasionally compete, but for the most part, they held each other in high regard and even collaborated on a few projects. While Rucker was well known, in 1987 it recorded revenue of only $10 million.
In 1987, TRC starting hearing rumors that Rucker was potentially looking for an acquisition partner. While the Rucker was well known, their growth had been stunted somewhat as they tried to transition their business. Further, their employee base was not set up to provide the sort of expertise they were transitioning to and they had a hard time trying to figure out what to do with some of their legacy employees. This resulted in Rucker turning away some potential projects.
In late 1987, Tom Rucker Jr. placed a call to John Culhane and explained his dilemma. Rucker’s father had started the Company and transitioned it to him in the 1960s. The younger Rucker’s two sons also worked for the Company and Rucker Jr. himself had a personal relationship with many of the employees. While the Rucker name and reach held significant value, his concern was more for how the brand and legacy employees would be treated after a transaction. Culhane had a very good reputation and a growing organization.
After the call, Culhane called Kramer into the office to fill him in on the discussion. Culhane, Kramer, and Culhane’s son who was now the Chief Operation Officer boarded a plane for Boston to meet with Tom Rucker Jr.. Despite working together on some projects, the trio knew shockingly little about the finances, processes, and employees of Rucker. During the initial meeting Tom Rucker Jr. explained that in any sale, he and his son’s would like to stay on in some capacity. Further, he wanted to make sure that the work his father started would continue. Culhane put Kramer and his son in charge of due diligence and determining a transaction structure that might work.
The team would go back and forth between Boston and their midwestern office a dozen times in the next 5 months. Kramer was instrumental in not only putting together a deal structure but obtaining the financing from a large regional bank to complete the deal. In the summer of 1988, Kramer and Culhane landed at the airport to a welcoming party of over 300 employees cheering as they got off the plane (this was in a different time, where security wasn’t what it is today). Kramer and Culhane had cemented the acquisition they were looking for. The Rucker name would open doors that TRC had not previously been able to get into.
After the transaction, Culhane would say of Kramer to the local paper, that without his efforts the deal would not have been completed. With his financial acumen, the Company was able to complete due diligence, integrate Rucker, and line up financing in a short amount of time. Culhane would refer to Kramer as a partner who as part of the deal, earned an equity stake in the new combined Company. Years later Culhane would say that making Kramer and others true equity partners in the Company was the best decision he ever made and contributed the Company’s astonishing growth over the next 30 years.
Growth Requires Help
There are many small business growth stories that are all vastly different. There is not one, right way to grow. However, the recipe for growth remains similar for most small businesses. One of the ingredients includes a small business owner must surround the business with talented people.
I equate building a business to how Major League Baseball teams build their bullpens. For those not familiar with baseball, bullpens are the term used for the collection of relief pitchers each team has. Each team mostly tries to fill their bullpen with pitchers that fit certain roles. A team needs a long relief pitcher, someone that specializes with getting left hander out, someone that can close out games, and several other roles.
A business is not much different than building a bullpen. A small business owner needs to build a team of experts to handle marketing, sales, accounting/finance, operations, and more. Every business will be different and use different strategies. This will drive the expertise that a small business needs to procure.
How a business procures this talent is the next question. Using your accounting/financial advisor, a small business owner can build a plan on how to obtain and retain these individuals. Small business owners must be creative and have a long-term plan on how to obtain and keep the individuals they need to grow their business.