9 Warning Signs You're a Hub-And-Spoke Owner
Updated: Apr 29, 2022
If you were to draw a picture that visually represents your role in your business what would it look like? Are you stuck in the middle of your business, like a hub #hubandspoke in a bicycle wheel?
As any passenger who has tried to fly into a major airline hub during bad weather, 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.
Here is a list of 9 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 the checks
Most business owners sign the checks, but what happens if you're away a couple days and an important supplier needs to be paid? Consider giving a trusted employee signing authority for checks up to an amount you're comfortable with, and then make sure bank reconciliations are performed and reviewed by a employees who do not have check signing authority.
2. Your mobile phone bill is over $200 a month
If your employees are out of their depth, it will show because staff will be calling you to coach them through problems. Ask yourself if you're hiring too many junior employees. Sometimes people with a couple of years of industry experience will be a lot more self-sufficient and only slightly more expensive than the greenhorns. Also consider getting a virtual assistant (VA) who can act as a first line of defense in protecting your time. You can find a VA by filling out the request for proposal at http://www.ivaa.org.
3. Your revenue is flat when compared to last year's
Flat revenue is a common sign of an owner who is trapped in a hub-and-spoke model. Like forcing water through a hose, you only have so much capacity. No matter how efficient you are, every business dependent on it owner for sales and delivery reaches capacity at some point. Consider narrowing your product and service line by eliminating technically complex offers that require your personal involvement, and instead focus on selling fewer things to more customers.
4. Your vacations suffer
If you spend your vacations dispatching orders from your mobile, its time to cut the tether. Start by taking one day off and seeing how your company does without you. Build systems for failure points. Work up to a point where you can take a few weeks off without adversely affecting your business.
5. You spend more time negotiating than a union boss
If you find yourself constantly having to get involved in customer negotiations, you are a hub. Consider giving front-line, customer-facing employees a band within which they have your approval to negotiate. You may also want to tie salespeople's bonuses to gross margin for sales they generate so you're rewarding their contribution to profit, not just chasing skinny margin deals.
6. You close up every night
If you're the only one who knows the close-up routine in your business (count the cash, lock the doors, set the alarm), then you are very much a hub. Write an employee manual of basic procedures for your business and give it to new employees on their first day.
7. You know all of 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. Consider replacing yourself as a rain maker by hiring a sales team, and inefficient as it seems, have a trusted employee shadow you when you meet customers so over time your customers get used to dealing with someone else.
8. You get the tickets
Suppliers wooing you by sending you free tickets to sports events can be a sign that they see you as the key decision maker in your business for their offering. If you are the key contact for any of your suppliers, you will find yourself in the hub of your business when it comes time to negotiate terms. 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.
9. You get cc'd on more than five emails a day
Employees, customers and suppliers constantly cc'ing you on emails can be a sign that they are looking for your tacit approval or that you have not made clear when you want to be involved in their work. Start by asking your employees to stop using the cc line in an e-mail; as 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.