Owners: The BDO Stoy Hayward Guide for Growing Businesses

By Rupert Merson

The essential guide for anyone running a small or medium-sized business who wants to make it grow, avoiding the pitfalls which bring so many companies down. There are hundreds - no, thousands - of books for managers in large corporations or multi-nationals. And there are a handful of guides to running small businesses. Amazingly, there are no books on medium sized enterprises - despite the fact that they are the most vibrant and successful part of the economy. This is the third in a series of four books on the key functions in running any growing business (along with Finance Directors, Managing Directors and Non-executive Directors), written specifically to help small and medium-sized enterprises grow successfully and avoid the mistakes that ruin so many. The problems vary from personality clashes (horribly common), to running out of cash, ill-thought out expansion plans and misconceived acquisitions. Short, concisely written, and with clear, helpful advice, this is the essential guide - born from great experience - to help businesses grow successfully.

• Language: English
• Publisher: Profile Books
• Release date: Sep 3, 2010
• ISBN: 9781847651112

Rupert Merson

Rupert Merson teaches new venture development and managing growth at London Business School. Formerly a partner of BDO he now runs his own consultancy advising firms on how to manage growth. His has written several books on management, including Rules are Not Enough.

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Owners

BDO Stoy Hayward specialises in helping businesses, whether start-ups or multinationals, to grow. By working directly with fast-track organisations – and the entrepreneurs behind them – we’ve developed a robust understanding of the factors that govern business growth. BDO Stoy Hayward is a member of the BDO International network, the world’s fifth largest accountancy organisation, with representation in more than ninety countries.

Rupert Merson is a partner in BDO Stoy Hayward, where he specialises in helping growing businesses with their people and organisational development problems. Rupert took first-class honours and a university prize in English from Oxford University.

He is a chartered accountant and a Fellow of the Chartered Institute of Personnel and Development. He teaches a course on the management of the growing business at London Business School and writes frequently in the national press. He lives in south London with his wife and four children. He’s a musician on the side.

Owners

A BDO Stoy Hayward Guide for Growing

Businesses

Rupert Merson

111411547

First published in Great Britain in 2004 by

PROFILE BOOKS LTD

58A Hatton Garden

London EC1N 8LX

www.profilebooks.co.uk

Copyright © BDO Stoy Hayward LLP 2004

8 Baker Street

London W1U 3LL

www.bdo.co.uk

All rights reserved. Without limiting the rights under copyright reserved

above, no part of this publication may be reproduced, stored or introduced

into a retrieval system, or transmitted, in any form or by any means

(electronic, mechanical, photocopying, recording or otherwise), without the

prior written permission of both the copyright owner and the publisher of this book.

A CIP catalogue record for this book is available from the British Library.

eISBN 9-781-847-65111-2

Typeset in Galliard by MacGuru Ltd

[e-mail]

Printed in Great Britain by

Bookmarque, Croydon, Surrey

While care has been taken to ensure the accuracy of the contents of this book,

it is intended to provide general guidance only and does not constitute

professional advice.

Contents

1 Introduction

2 Types of ownership

3 Growth stages

4 Sharing ownership with others

5 Getting out

6 Useful information

7 Acknowledgements

8 Notes

1

Introduction

THIS IS THE fourth in a series of books on the key roles in the owner-managed business with ambitions to grow. The first three in the series focused on active management or director roles – the finance director, the managing director and the non-executive director. The role of the owner is different from these, but at the same time includes elements of them all.

Owning a business is a very different activity from running a business. The fact that owner-managers have to master both owning and managing doesn’t make the activities one and the same. Indeed, one of the reasons why the role of owner-manager is so difficult is that the two activities that are thrown together as owner-and-manager get in each other’s way. An owner-manager struggling to sort out his own agenda and priorities is in a weak position compared to someone determined to just be an owner – or indeed just a manager. The fact that business financiers are often happy to be just owners (and then only nominally) helps explain why owner-managers and financiers rarely see eye to eye once the signing ceremony is over. Unlike an owner-manager, a financier has only one thing on his mind.

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‘If the owner is seriously ambitious for growth he will have to fit his own agenda to the business’s – and not the other way round.’

Entrepreneurs often go into business driven by a determination to do their own thing – but this is not the same thing as a determination to own a business. A business-ownership mentality is something that develops. An entrepreneur will turn into a business owner once the business starts to develop a life of its own. Rather than controlling the business directly, the business will be run by managers to whom the owner will be struggling to delegate responsibility and authority. The business will have a culture and a set of values that may well echo and reflect the owner’s own personality – but will nevertheless now be separately identifiable from her. The owner may wake up in a cold sweat some nights and convince herself that if a job needs doing properly in her business it had best be done by herself – but if she’s wise, by the morning she will have remembered the importance of (and not just the difficulties inherent in) delegation. She will pay herself a dividend as an owner, rather than the salary or bonus that might be paid to her when she is wearing her manager’s hat (although her tax accountant might encourage her to confuse the two). Other than that, her reward as owner will be the satisfaction derived from seeing the business grow in value, and the slug of cash she receives once the business is eventually sold – if that is the route she chooses to follow.

Compared to a manager, an owner will tend to have a longer-term view – longer even than a lifetime. It’s ownership that passes down the generations in a family business, for example, not management (something that even family businesses are inclined to forget, as Grandpa insists on interfering in the day-to-day management of the business he founded, long after he’s left). The owner will see the relationship between her own agenda and the agenda of her business evolve as the business develops. At the outset the business’s agenda will be her agenda; but as the business develops a life and agenda of its own,