If you look under the hood of any business, any long-running family operation, you’d be surprised at the number of incompetent people in the space. These people make too much money for not doing enough work, and they don’t add real value to the business. You find it all over the place, which is evidence that even bad owners are making a lot of money in these businesses.
So what does this mean? If you buy a business, the first thing you’re up against is that 50% of your employees will be low-value drains on the business. If you don’t fire these people right away you’re going to be in a world of hurt. I had a friend buy a business for $10M, and even there half of the employees were total deadweight. These are often friends and family of the past owners.
When an owner sells the company, they’ll pull your heartstrings and try to put it on you to keep these employees around. But it’s not your job to keep them around. If they really wanted to take care of these people, they could pay them with money from the deal.
Nothing will create a crappy culture more than the top 20% of producers pulling along the deadweight 50% of the company. That’s why I preach to hire fast and fire fast, which has helped drive my success in my businesses. If you spend time on your A players and get rid of your C players you’ll build a company of people who absolutely kick ass.
Business is not that hard, and I wish the people who tried to go out and change the world looked at these basic small businesses that can do really well. Because there are companies in that space that are wasting time and money on employees who don’t add value, and they’re still doing well.
You can’t avoid all low-value employees, especially as you grow and scale. But you should do what you can as a business owner to minimize it, especially when buying a business from an owner who was afraid to fire.
This episode is a cross-post from my other podcast about self-storage and real estate! Follow my other podcast!
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