Selling a Business: Start By Developing Management
17 October 2026
Part 1 of our 4-part series: Making Your Business Transferable
Last week, we discussed an important distinction that many business owners overlook: A profitable business isn’t necessarily a transferable business.
A company can generate substantial earnings, enjoy an excellent reputation and have a loyal customer base, yet still be difficult to sell.
Why?
Because the owner is indispensable, a condition we call “owner concentration“.
If every important decision, major customer relationship and operational responsibility depends on the owner, what happens when that owner leaves?
That’s a question every serious buyer will ask.
In last week’s post, we identified four ways to make a business more transferable. This week, we’ll examine the first: Developing management capable of running the business without you.
The Owner-Dependency Problem
Many entrepreneurs build their businesses by doing virtually everything themselves.
They find customers, negotiate contracts, hire employees, manage operations and make the important decisions.
As the company grows, they continue doing many of those things because, frankly, they’re good at them.
But here’s the problem: The business becomes increasingly dependent on one individual.
We offer a comprehensive coaching program – both group and 1:1 options – in The Brokers Roundtable℠, our online support platform tailored for business owners, business brokers, Realtors, buyers and anyone else interested in valuing, buying or selling a business.
Consider a company generating $600,000 in annual discretionary earnings. The owner handles sales, manages several key customer relationships, approves major purchases and supervises the employees.
The company is profitable. But when a buyer asks who will perform those functions after closing, the answer is essentially, “We’ll have to figure that out.”
That’s not an answer that inspires confidence.
Management Has Value
A capable management team is an important business asset, even though it doesn’t appear on the balance sheet.
Buyers want to know that someone understands the day-to-day operations, that employees have competent supervision and that customers will continue receiving the same service after the sale.
Our video, on how the value of a business’ assets might add to the value of a business, is HERE on our YouTube channel.
That means allowing managers to make decisions without constantly seeking your approval.
Will they occasionally make mistakes?
Of course. But if you reverse every decision you disagree with, you’ll never develop independent management.
What If You Can’t Afford Additional Managers?
This is a legitimate concern, particularly in smaller businesses.
But developing management doesn’t necessarily mean hiring an expensive executive team.
It may mean training existing employees, promoting capable people or gradually redistributing responsibilities.
And remember that a buyer will eventually have to account for the cost of replacing the owner’s work.
If the business requires a $150,000 general manager after closing, that expense may reduce the earnings available to the buyer—and consequently the business’s value.
Developing management before the sale allows you to demonstrate that the company can operate successfully with the appropriate staffing and expenses already reflected in its financial performance.
Check out our video series on business valuation, “How Much is My Business Worth“ on our YouTube channel.
Give Yourself the 30-Day Test
Here’s an exercise for you: Take a month away from your business.
Don’t call every morning. Don’t answer routine questions. Let your managers handle the operation.
When you return, examine the results.
Were customers satisfied? Were employees productive? Were problems resolved? Did sales and profitability remain reasonably consistent?
More importantly, what happened that still required your personal involvement? Those are the areas where management development needs additional attention.
The Bottom Line
A buyer isn’t purchasing your ability to run a business.
He’s purchasing a business that must continue operating after you’re gone.
The more dependent the company is on you, the greater the buyer’s risk.
And greater risk generally means a lower valuation, more demanding deal terms or difficulty finding a buyer at all.
Developing capable management takes time. Ideally, you should begin years before putting the business on the market.
Because when the time comes to sell, one of the most reassuring things you can tell a prospective buyer is:
“This business runs just as smoothly whether I’m here or not.”
Next in this series: Documenting Your Systems and Procedures—Why a Business That Runs on What’s in the Owner’s Head Is Harder to Sell.
“Always think outside the box and embrace opportunities that appear, wherever they might be.”
– Lakshmi Mittal, Chairman & CEO of ArcelorMittal
If you have any questions or comments on this topic – or any topic related to business – I’d like to hear from you. Put them in the comments box below. Start the conversation and I’ll get back to you with answers or my own comments. If I get enough on one topic, I’ll address them in a future post or podcast.
I’ll be back with you again next Monday. In the meantime, I hope you have a safe and profitable week.
Joe
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The author is the founder of Worldwide Business Brokers and holds a certification from the International Business Brokers Association (IBBA) as a Certified Business Intermediary (CBI) of which there are fewer than 1,000 in the world. He can be reached at jo*@*******************og.com
