I love to hear stories from entrepreneurs and one such story comes from two guys, let’s call them, Stan and Chuck. These guys had strong accounting and financial backgrounds plus an entrepreneurial streak which they used to start a niche insurance company.
With their skills, connections and expertise, plus a lot of hard work, they started growing their company. As they grew they added people to handle the client support and administrative tasks. Things felt great! The company was growing rapidly and was solidly profitable.
They were working hard, but it was all moving toward their goal: selling the business at a high multiple of earnings and getting a big cash out!
Eventually, the company nudged past $50 million in revenue. What a great milestone!
However, at this point, growth began to slow.
Stan and Chuck were both very hands-on managers and they had never hired or developed any middle managers in their company. Without middle managers to delegate to, the owners ran out of time to supervise the employees, develop new customers and steer the company.
The company’s growth started to slow and running the company was not as fun as it once was.
At this point Stan and Chuck decided to sell the company. However, when they went to market, they discovered that the offers they received were well below what they had hoped.
Not having a middle management team in place was hurting them. Buyers knew the company couldn’t run without day to day management by the owners.
At this point they were so burned out that they didn’t want to take the time to build the team themselves. So, in the end, they sold the company at a price far below what they had hoped for.