Picture the founder of a $15 million civil and structural engineering firm outside Valparaiso. He's 63. He still reviews and stamps the big drawings. Every municipal client and developer has his cell number, and they use it. Ask him how the firm is doing and he'll say, with real pride, 'They can't do it without me.' He means it as a compliment to himself. A buyer would hear it as a warning, because owner dependence reduces business value more quietly, and more often, than almost anything else I see.
I'm Dan Delaney, Founder & CEO of Seek & Find Financial. I work with owners who've spent decades becoming the go-to person in their company. That's how most good businesses get built. But at some point, the trait that built the company starts to cap what it's worth. Let's follow our engineering founder and see how that happens.
Investing involves risk, including possible loss of principal. No investment strategy can ensure financial success or guarantee against losses. Past performance may not be used to predict future results. Provided content is for overview and informational purposes only, reflect the opinions of the author, and is not intended and should not be relied upon as individualized tax, legal, fiduciary, or investment advice.
This information is being provided only as a general source of information. These views may change as market or other conditions change. This information is not intended and should not be used to provide financial advice and does not address or account for an individual’s circumstances. Past performance does not guarantee future results and no forecast should be considered a guarantee. Please seek the guidance of a financial professional regarding your particular financial concerns.
Investment advisory services offered by duly registered individuals through Seek & Find Financial LLC, a Registered Investment Adviser. Licensed Insurance Professional.
Strength or risk? It depends on who's looking
Christopher Snider's Walking to Destiny has a chapter called 'Changing Your Paradigm,' and it opens with Stephen Covey's observation that the way we see the problem is the problem. I can't think of a better description of owner dependence.
From the inside, being needed looks like strength. Clients trust you. Staff come to you with tough calls. Nothing important happens without your eye on it. Our engineering founder sees every late-night phone call as proof that the firm is in good hands.
From the outside, a buyer sees the same facts and draws the opposite conclusion. If the founder is the reason clients stay, what happens when he leaves? If he's the final reviewer on every major project, who's qualified to replace him? If the relationships live on his phone, what exactly is the buyer paying for?
Same company. Same facts. Two completely different ways of seeing them.
How owner dependence reduces business value in a real deal
Let's say a larger regional engineering group approaches our founder about an acquisition. Here's what their team would likely notice in the first few weeks of diligence.
- Most new work comes in through the founder's personal relationships, not through a business development process.
- He's the senior licensed engineer on the largest public contracts, and no one else has run those clients start to finish.
- Project managers make technical decisions, but pricing and scope changes still wait for him.
- The firm's processes are solid, but many of the judgment calls live in his head.
None of that means the firm isn't valuable. It means the buyer can't be confident the value stays once he walks out. Buyers tend to respond to that uncertainty in predictable ways: a lower price, more of the price tied to future performance through an earnout, or a requirement that the founder stay on for years after closing. Sometimes all three.
Why it's so hard to see from the founder's chair
Here's the tricky part. Being indispensable is rewarding. It feels like leadership. It keeps quality high. And for years, it's probably been the right call.
So when someone suggests stepping back, it can sound like a criticism of how you've run the company. It's not. It's a recognition that what a business needs to grow and what it needs to transfer are different. Our founder doesn't need to care less. He needs to make his care show up in other people, systems and habits, not just in himself.
Changing how the founder sees his role
What would a shift look like for our engineering founder? Not a sudden handoff. A deliberate rebuild of his role, maybe over three to five years.
First, he'd pick two senior engineers and start bringing them to every important client meeting. Not as note-takers, but as the people clients will call next. Second, he'd give project managers real authority over scope and pricing within clear limits. Third, he'd start writing down how he makes the calls he makes, so the firm's judgment isn't stored in one person. And fourth, he'd measure progress by a new question: how many weeks could I be completely unreachable before something important broke?
That kind of shift isn't only about a sale. It's also about resilience. Our post on business continuity solutions covers how owners protect the company if they're suddenly out of the picture, for any reason.
What owner dependence means for your family
There's a side of this that owners don't always think about. If the business depends on you, your family's wealth depends on your health. If our engineering founder had a stroke tomorrow, his wife wouldn't just be dealing with a medical crisis. She'd be trying to hold together a firm whose biggest relationships just went silent, while its value dropped by the week.
Reducing dependence protects her as much as it protects any future sale. It's one of the most practical forms of family planning an owner can do.
Three years later
Now picture our founder three years down the road. He's 66. He still loves the work, and he still shows up most days. But the largest municipal clients now call one of the two senior engineers he developed. Project managers price their own change orders. He took three straight weeks off last summer, and the firm barely noticed.
When a regional group comes calling this time, the conversation is different. They see a firm with depth, not a firm built around one person. The offer reflects that. And he gets to decide whether he wants to stay on for a short transition or a longer one, rather than having the buyer decide for him. If you're starting to think about a handoff like this, here's how a business transition advisor can help you plan the steps.
Frequently asked questions
How can I tell how dependent my business is on me?
Try a simple test. List your ten biggest clients and ask who they'd call first with a problem. Then list your ten most important weekly decisions and ask who could make them without you. The more often your name comes up, the more dependence you have.
Will stepping back hurt quality or client relationships?
It can if it's rushed. Done gradually, with you still involved, most clients adjust well, especially when they've already worked with the people taking over. Many owners find the business gets stronger, not weaker.
What if my industry requires a license or credential that I hold?
That's common in engineering, accounting, healthcare and other licensed fields. In those cases, developing other credentialed leaders inside the firm is usually a priority. Talk with your attorney about any licensing or ownership rules that apply to a transfer in your field.
Find out how much your business leans on you
Owner dependence touches all three legs of the stool: the value of your company, whether your personal finances are ready for life after it, and whether you've thought through what you'll actually do when it no longer needs you every day. I offer a private one-on-one Three-Legs Check that looks at each leg. Send the word STOOL through our contact page and we'll find a time. If you're a reader of The Long View, a one-word reply of STOOL is all it takes. Seek & Find partners with owners, typically ages 45 to 70, whose companies are valued at around $10 million to $20 million, in Valparaiso, Chesterton and throughout Northwest Indiana and the Chicago region.
Investing involves risk, including possible loss of principal. No investment strategy can ensure financial success or guarantee against losses. Past performance may not be used to predict future results. Provided content is for overview and informational purposes only, reflect the opinions of the author, and is not intended and should not be relied upon as individualized tax, legal, fiduciary, or investment advice.
This information is being provided only as a general source of information. These views may change as market or other conditions change. This information is not intended and should not be used to provide financial advice and does not address or account for an individual’s circumstances. Past performance does not guarantee future results and no forecast should be considered a guarantee. Please seek the guidance of a financial professional regarding your particular financial concerns.
Investment advisory services offered by duly registered individuals through Seek & Find Financial LLC, a Registered Investment Adviser. Licensed Insurance Professional.
