It’s an entrepreneurial dream. Owning a business run by a trusted management team that allows you to spend your days sipping drinks in a beach chair. It would be nice, right?
The problems come when a prospective business buyer thinks this goal could be realistic with any business or that all you have to do is pay for a business and then sit back, relax and let the checks come in. Nothing could be further from the truth.
While it is possible to get your new business to a point where you can be a semi-absentee owner, you will never be able to completely abandon your responsibility and it will take a while to get there.
What if you buy a business that is currently run as an absentee-owner business? Can’t you just walk in the door and take over this already existing arrangement? The short answer is no.
There are a few reasons. First, the seller’s trusted management system is theirs, not yours. Although it is sometimes possible to maintain management loyalty when a business passes to a new owner – it is not guaranteed that the management in place will have the same amount of loyalty to you.
This can also be a precarious position for a new owner. If you don’t understand the ins and outs of the business, the details of the business that are needed to keep it profitable can go unchecked because you may not know they are (or aren’t) happening. Let this go on for too long and what you will be left with is no business at all.
Is it possible to have an absentee-owner business? Yes, but you have to realize two things.
One, you will never be able to completely ignore your business. Two, there are a few things that need to happen before you can move to an absentee-situation.
First you need to find a good business to buy, and you need to run it yourself for a while (like at least a year) so you know all of the ins and outs. Then you will need to find a good management team (or a single manager if it is a small business) that you are able to trust. Have this management team work alongside you for about the next 6 months so you can be sure they are properly trained. As you begin to relinquish power and responsibilities to your management team, it is incredibly important that you enable this management team to do their job by giving them the power to hire and fire, the power to change inventory, etc. If you’re going to trust them to handle the reins, you have to give them the power to do so. You will also need to come up with a system that will keep you informed of everything going on within the business. Lastly, keep a close eye on your business, even if you aren’t there everyday. Make frequent unannounced visits, go over the financial records regularly, etc.
While it is possible to be an absentee owner in some types of businesses, the majority of business situations are going to require a much larger time commitment from you.
If absentee-ownership is your ultimate goal, bring this up in your initial discussion with your business broker so they can help you to find businesses where this system has the potential to work.
Have you ever considered owning a business, but would ultimately like to be fairly hands-off with the day-to-day operations? Do you have questions about the types of businesses that can be run successfully this way? Ask us! Please feel free to leave us a comment or question here, and we would be happy to help you find a business that fits your goals.