From Successful Cleveland Entrepreneur Bob Titmas
As owner and CEO of ABCO Fire since 1992, Bob Titmas has presided over the fire protection service company’s growth from its Northeast Ohio beginnings into a regional leader in its market across five states. In a recent podcast with Aventure Works’ Jack Beacham, Bob challenges conventional exit strategy wisdom (Sell-Retire-Rest) and shares his personal experience and insights as a business owner for 22+ years.
In the full conversation, Bob and Jack discuss exit strategy topics of interest to any business owner considering should-how-why-when questions around exiting their business. These 5 insights from the conversation are presented here as a mini-interview.
Jack: Most of the marketing messages are that you want to get your company to a point where you can sell it, retire and go do whatever it is you want to do with the rest of your life. However, nowadays, thank goodness advances in technology, health care and just basic education, people are living longer. So the idea of retiring at 65 and maybe having 10 years to go on the big grand tour is just not true any longer. And that’s a problem for anybody thinking about retiring.
Business owners go through a gut-wrenching experience of leaving all of that behind. And if they didn’t structure the business properly, so it could survive without them, they’re also taking their value out the door. So the price of their business is discounted tremendously. They’re not going to get what they thought they’d get out of it. Then, when the check comes in the mail, they turn around and go to their financial advisor and say “go get me 9%”. They are going to live off that and hope for the best.
I know you’ve approached this in a different way and I’ve been interested in this way and business owners who don’t need to sell the business.
Why would a business owner build something up over the course of decades and then sell it at whatever price?
Bob: I think if you look at it from what you described, it sounds silly. Here’s an owner who spent decades, creating something that they have learned how to mitigate risk. And they go and take their wealth and they put it in something that they’re led to believe that has less risk, but they have totally less control.
But the reason why they’ve been good as an entrepreneur is they’ve learned how to tilt the table in their favor. So they’re taking the cards out of their hand and giving them to somebody else. If they’re totally burnt out, and they recognize that they no longer have the capacity, the determination, the desire to handle the pressures of the business, that’s one thing, but to justify it based on the financials is illogical. It’s just not logical for a guy that’s been successful and has captained his own ship to go and turn it over to someone else.
J: What’s wrong with bringing in a team that can do the day to day management? Staying on board, trading on board, becoming the chairman of that board and still shepherding the company being involved as you want to be.
B: I think that’s the ideal way to do it. Why don’t people do it is they’re not willing to delay gratification in the short term. You have to live underneath your means and provide a little extra so you can develop some people underneath you. You have to have some humility and look at yourself as just one link in the chain. That the next guy can probably do it as well or better than you.
I found two guys, and really a whole leadership team that will end being much more dynamic and successful than I’ve been. And so, I look and say the sooner I can get these guys into these positions to have 360 degree scrutiny on it, and let them fix their own mistakes, the better.
I’m there to love them, encourage them, support them. But they know that if I come in, I’m going to be neutering them. I’m going to be really stripping their courage.
It’s not as easy as it looks sitting in chair number two to go into chair number one. What we need to do is to get our people just like our children. I’d rather have my kids in 5th and 6th grade make mistakes and have the chance to fix them and gain independence than wait till they’re 28 years old. The same principle applies to these young leaders.
We need to give them more opportunity, more responsibility. But they need to be mentally coached to know that it is not going to be easy. Just because you’re the best salesman or you’ve got a MBA doesn’t mean you have any clue what’s going to hit you from this leadership position. That’s what we’ve done. The guys had some rocky situations but they lean on each other, they lean on you when they need to and they’re just guys of high character. And I think that that’s a combination and a recipe for success.
J: What advice would you give to business owners to help them turn the corner, change how they’re thinking about their business and what’s next for them and their lives?
B: Try not to do anything dramatically, which includes a big sale, a total liquidation, or some total life change because I think there’s a reason why you’re standing right where you are. Every single person is somewhere for a reason. And to think that you’re not and think that you need some significant rapid change misses the point and the beauty of your whole life. I think you want to slowly turn it to an increased focus on where you are.
In total balance, what is the path of least resistance to you that takes the least amount of energy to you or creates the most positive energy? As a business owner, you want to look down the road and say, how do I put myself and live my whole life in a balanced way? I think that’s a wonderful goal and a vehicle to have. That’s where you can blend your life and your business and your purpose and your touch of other people into something. But it starts with you, and knowing really what yourself is and being aware of where you’re wasting energy.
I like strategic stuff, but you know what? Those guys are already going to be as good or better than me and they’ve heard me talk about this three, four, five, six years in a row.
You look at what resources you’ve got. Where I feel really I’m making a difference. I think that’s what the business owners should do. If you like to be the creator, then work towards really letting the majority of your time and energy in life be in that place.
If you just like the strategic stuff, then let everybody else do the other things, and you really focus on those things.
We want to enhance our strengths but we’re never going to get rid of our weaknesses. All we can do is diminish their impact on our lives by making our strengths feel strong. That’s really the message for the business owner. Make your strengths so strong, and focus your life in a place where you get that energy.
J: What would you say concretely to a business owner? If they want to step out of the day to day business that means that somebody needs to step forward. What would they need to do first?
B: The first is the assessment of self, because the person who is going to mess it up is yourself because you can. So you’ve got to find a way to get yourself out of the way.
The second is you have to have a strong CFO. The bottom line is that the only way you’re going to trust and give up control is that there is some highly trustworthy competent person with their hand on the checkbook, and their hand on the working capital of the business. You can make it all fancy, but the truth is you start from the back room and you work your way forward. It’s like a good sports team, you introduce that defense. I think administration is defense, so you go and build a solid defense.
And if you’re fortunate enough to fill that, then you keep moving forward. I don’t think you go forward, as an owner, until you have your defense in place. The financial controls are what you’re going to worry about. It’s what you’re going to get, meddle in. The thing to solidify is to have that position of strength in your back office.
J: What is the next thing to work on after you have built a solid defense?
B: It’s really those positions where you get a multiplier effect. That’s why I want to spend time in the middle of our business. If one of my technicians out on the road has a bad day, he himself has a bad day and probably the four, five customers who touch him. But if that administrator or coordinator in the office has a bad day, she touches 35 techs a day and the four, five people who are sitting and working with her right in the office. You don’t know what the ripple effect is. It might be 300 people if she has a bad day.
So you really want to affect and try to really love the people that have the most connected touch. The analogy to our team is that the skeletal system is the administration. Our tax and our sales people are the muscular system. But the nerve center is the coordinators, customer service and the administrators. I had a tooth abscess over Christmas, one little tooth. I can’t tell you the pain, it was worse than open heart surgery. That root canal is the nerves of the whole body.
You really want to be thoughtful about how this organism works. I talked about defense, and the next thing to work on is your nerve center. And that’s when you’ll know something’s wrong. Do you want to be an absentee owner? You’d better have a great nerve center, so that the issues are escalated properly and they’re dealt with appropriately, quickly and professionally. If you don’t have that, by the time it gets to your wonderful senior managers, they have very limited choices on how they can remedy those problems. So, a new organization not only has leadership throughout it. It has a really well tuned nerve system.
For the full conversation, including exit strategy topics of interest to any business owner who is considering should-how-why-when questions around exiting their business, click here. Or, go to http://aventureworks.com/podcasts and scroll to the episode Purpose: the Moment of Power in Business.