Q: The last few years have been frenetic setting up my own business. There have been a lot of long hours and stress. Now I’ve got my business to the point where it’s doing quite well, and I’d like to take a step back from the company and appoint a managing director.

In order to do this, I need someone to take on a large part of my role. I’ve identified a potential candidate among my staff, but I worry that choosing not to bring in someone from outside the company is a mistake. Are there any benefits to bringing in someone from outside?


A: Deciding to take a step back from your business can be a difficult decision, so it’s understandable that you want to make sure that you’re handing over the reins to someone capable.


There are pluses to bringing new blood into an organisation. They can bring different skillsets to the table, which can be extra important if you’re looking to expand the scope of your business or move into new markets. A fresh perspective can do wonders for a business, as the right candidate can see areas for improvement that are easier for an outsider to pinpoint.


But there are downsides to external hires. Looking outside of the company can damage morale, especially in small companies. Recruiting externally can be an expensive undertaking. Training an outsider is going to take longer than training an individual who has a working knowledge of your business.  Also, with all external hires there is the risk that the candidate will not fit within the company structure, or that they won’t like the company.


If you can promote from within it can lead to a better working atmosphere within the company, which can have a positive effect on productivity. Existing staff already know the ropes, so you don’t need to spend as much time training them in. There are other potential financial benefits. In-house staff may be happy with a salary raise, which may not be as high as the salary you may have to offer an external candidate. Promotion from within can help foster a good atmosphere, giving staff the message that hard work is rewarded with career advancement.


External candidates are excellent when looking to expand your business, but the motivation behind this promotion/hire is for you to take a step back from the business. In those circumstances it seems like an in-house promotion would be the most straight-forward option, particularly as you’ve identified a potential candidate from your existing staff. It is important, however, to make sure that you are evaluating their skills correctly. A diligent worker does not necessarily make a good managing director, and it’s worth making a list of the key skills involved in the role and trying to see how their competencies measure up. If there is nobody in your business with the requisite skillset, then the obvious next step is to look outside the company.


Declan Dolan


Do you have a question for DCA’s experts? Contact us or connect with us on Twitter.


Have you created a saleable business, or just a job for yourself? And how do you change that?


‘Lifestyle business’ is a term that, understandably, gets up many entrepreneurial noses. When used in certain circles, it can sound patronising, or as if the speaker is seeking to diminish a business’ achievement in getting started.


So firstly, we’d like to make one thing clear: there’s nothing wrong with having a ‘lifestle business’, one that can’t really be sold easily or grow exponentially. Creating a sustainable job for yourself and others is a real achievement. However, many entrepreneurs do want an exit strategy for their business – whether they want a big payday, or simply to do other things later in their working life. In that case, having a business that they can’t walk away from is a problem.


How do you tell if you’re running a lifestyle business? There’s one easy litmus test. Imagine the business if you weren’t working in it, and with another employee drawing down your salary: could it work? If you can foresee it humming along under a competent manager, you have a business that you can sell. If you instead see the whole thing coming apart within a few months, then you’re working in a lifestyle business – one that you just can’t sell and walk away from.


Some business just can’t advance beyond this dependence on the founding entrepreneur – but some can, even well after the start-up stage. If you want to shift away from running a lifestyle business to operating a more independent (and saleable) company, there are a few key steps to take.


Delegate and Replicate

Many businesses are dependent on an entrepreneur who works punishing hours for comparatively little financial reward. However, does this have to be the case? If you look at your team, they may well be able to take some of your workload, especially if this is presented in the right way: most good employees will welcome added responsibility, for example, if this means that they’re being groomed for management positions as the company grows. Taking some of this day-to-day work away will let you work on the business rather than in it. In time, your goal should be to replicate your own role within the company – this will allow you to adopt a strategic position, identifying opportunities, trouble-shooting and stepping back from day-to-day minutiae.


Maximise Profit

Growing a business can be expensive, especially when you’re looking to take on new employees and manage the cash-flow ‘lag’ that comes with new clients. In order to do this, you’ll need to maximise the profitability of current and future clients – this takes discipline and nerve. You can find some useful advice here on getting through the process.


Tie Down Clients

Many businesses could operate without their owner doing the day-to-day work, but are dependent on them because of client relationships. If your customers work with you because of you (rather than the advantages of your company), then that’s an issue you need to address.

Getting customers to feel that they’re working with a company rather than the entrepreneur requires a deft touch, and patience. Introduce them to members of your team, and gradually get them used to dealing with those people rather than yourself. In the early stages, of course, you will probably need to reassure them that you’re just a phonecall away if an issue requires your input. Also, tie clients down to long-term contracts if possible – if you’re looking to sell the business, this will reassure a potential buyer that the customers won’t just vanish when you leave yourself.


Do you have a question for DCA’s experts? Contact us or connect with us on Twitter.