Are You A Hub-And-Spoke Owner?

brown carriage wheel

Here’s Nine Warning Signs To Find Out and How to Fix Them 

Think for a minute about your role in your business. Are you at the top of the pyramid in an organizational chart that looks like a Christmas tree? Or, maybe you’re stuck somewhere in the middle like a hub in a wagon wheel? If you were to draw an image to visually represent your role in your business, what would it look like?

As anyone who has tried to fly out of Chicago O’Hare Airport during a snowstorm knows, a hub-and-spoke model is only as strong as the hub. The moment the hub is overwhelmed, the entire system fails.

Acquirers generally avoid hub-and-spoke managed businesses because they understand the dangers of buying a company too dependent on the owner. So, if you want to make your business more valuable, one factor to address is the hub-and-spoke model. Here’s a list of nine warning signs you’re a hub-and-spoke owner and some suggestions for pulling yourself out of the middle of your business: 

1. You sign all of the checks 

Most business owners sign the checks for a number of reasons including cash flow management and to avoid misappropriation of your valuable cash. But what happens if you’re away for a couple of days and an important supplier needs to be paid?

How to fix it: Consider giving an employee signing authority for checks up to an amount you’re comfortable with, and then change the mailing address on your bank statements so they are mailed to your home rather than the office. That way, you can review all signed checks and make sure the privilege isn’t being abused. 

2. Your cell phone bill is over 20 pages long 

When your employees are out over their skis a lot, it shows up in your cell phone bill because staff are calling you to coach them through problems. Often it’s because you’ve hired too many junior employees.

How to fix it: Sometimes people with a couple of years of industry experience are a lot more self-sufficient and only slightly more expensive than the newbies. Also consider getting a virtual assistant who can act as a first line of defense in protecting your time and taking a lot of administrative tasks off your hands. There are a plethora of gig employees that are able to support you. You can also find a virtual assistant by filling out a request for proposal at http://www.ivaa.org/. 

3. Your revenue is flat when compared to last year’s 

In a normal, non-pandemic year flat revenue from one year to the next can be a sign you’re the hub in a hub-and-spoke model. Like forcing water through a hose, you have only so much capacity. No matter how efficient you are, every business dependent on its owner reaches capacity at some point. Think about the funnel: the diameter of the funnel determines how much money comes out of the bottom.

How to fix it: Consider narrowing your product and/or service offerings by eliminating technically complex offers that require your personal involvement, and instead focusing on selling fewer things to more people. Standardization helps here.

4. Your vacations suck 

If you spend your vacations dispatching orders and solving problems from your cell phone, it’s time to cut the tether. Is your family always pestering you to close your laptop and come to the beach?

How to fix it: Start by taking one day off and seeing how your company does without you. Build systems for failure points, but otherwise let things run their course and resist the urge to jump in. Work up to a point where you can take a few weeks off without affecting your business. 

5. You spend more time negotiating than a union boss 

If you find yourself constantly having to get involved in approving discount requests from your customers, you are a hub. Same is true for vendor agreements. And, employee matters.

How to fix it: Consider giving front-line, customer-facing employees a band within which they have your approval to negotiate. You may also consider aligning your salespeople’s bonuses to the gross margin for sales they generate. That way, you’re rewarding their contributions to profitability rather than chasing skinny margin deals. 

6. You know all your customers by first name 

It’s good to have the pulse of your market, but knowing every single customer by first name can be a sign that you’re relying too heavily on your personal relationships being the glue that holds your business together rather than the quality and consistency of your products or services.

How to fix it: Consider replacing yourself as the rainmaker by hiring a sales team, and as inefficient as it seems, have a trusted employee shadow you when you meet customers so over time your customers get comfortable dealing with someone else. 

7. You close up shop every night 

If you’re the only one who knows the close-up routine in your business (i.e., counting the cash, locking the doors, and setting the alarm), then you’re very much a hub.

How to fix it: Write an employee manual of basic procedures (close-up routine, e-mail signature to use, voice mail protocol) for your business and give it to new employees on their first day on the job. Even in a B2B business, basic policies can be a big help in getting you out of the middle.

8. You get cc’d on more than five e-mails a day 

Employees, customers and suppliers constantly cc’ing you on e-mails can be a sign that they are looking for your tacit approval or that you have not made it clear when you want to be involved in their work and when you don’t need to be.

How to fix it: Start by asking your employees to stop using the cc line in an e-mail; ask them to add you to the “to” line if you really must be made aware of something – and only if they need a specific action from you. Otherwise, they can leave you out of the e-mail chain. (Bonus, we all get too many e-mails, so this helps free up some of your time too!)

9. You get the tickets 

Suppliers wooing you by sending you free tickets to events can be a sign that they see you as the key decision maker in your business. And, if you’re the key contact for any of your suppliers, you’ll find yourself in the hub of your business when it comes time to negotiate terms.

How to fix it: Consider appointing one of your trusted employees as the key contact for a major supplier and give that employee spending authority up to a limit you’re comfortable with. 

Any of these ring true with you? In our experience, the most valuable companies are those that can run effectively on their own. Each time you fix one of these hub-and-spoke attributes, you create more value and a company that’s more fun to own. After all, your goal is to run your business rather than having it run you!

Interested to learn more? Join a community of entrepreneurs and business owners like you:

Processing…
Success! You're on the list.

Leave a Reply