The owner-operator business model makes sense for entrepreneurs who value hands-on experience. But the model is waning in popularity — and effectiveness — especially now that it’s a bit easier to run a business remotely.
That also means the owner-operator model may not improve your value when selling your business. Here’s how the model is changing and what it means for your business.
What Is an Owner-Operator Business?
An owner-operator business model is one in which the business owner is directly involved in the day-to-day affairs of the business. Common examples include:
- Pool routes
- Pressure cleaning
- Maintenance/repair shops
- Landscaping businesses
The model is on the decline in the U.S., with just over half a million business owners classifying themselves as “owner-operators.” That’s a much smaller number compared to years past.
During a time of entrepreneurs buying and selling businesses as investments, an owner operated business may not be appealing. Owner-run businesses are profitable when the business is profitable. Day-to-day operations generally require the groundwork for experienced managers and employees staying in place to make selling their business appealing. In fact, key employees will often be part of the sales negotiations.
The Transition to Absent Owners
Taking the place of owner-operator businesses are situations where the owner is absent, often delegating remotely. The reasons why this business model is taking root are because modern technology allows for it and institutions are changing to accommodate this model.
SBA Loans Available to Absent Owners
Historically, the U.S. small business administration (SBA) preferred to make loans to owner-operators. But now, it’s common to run a business from afar, meaning SBA loans are becoming available to a wider variety of business models. This means businesses can now be based in any state, regardless of where the owner or principal resides.
Absent Owner Advantages
As a remote business owner, you have several advantages over your owner run business counterparts. Perhaps the most obvious advantage is that you can operate your business from anywhere in the world. This gives you tremendous flexibility and freedom regarding where you live and work.
An absent entrepreneur can focus on strategy and business expansion, which can add value if you’re considering selling your business. The ability to consider growth past an immediate local is often a big consideration when looking at this business model. In fact, outsourcing services like accounting and even customer service can help a business run more efficiently. Employees can be remote as well.
Selling Your Business and the Owner-Operator Model
The leadership model you embrace matters a lot when selling your business. If you’ve historically been more hands-on, you’ll need to devise a succession plan that helps you transition away from the central leadership role. This may mean staying with the company on a part-time basis or retiring altogether following the sale.
That’s why negotiation is critical during the sales process, as it ensures a smooth transition that benefits both buyer and seller.
While owner-operator businesses can be great for those who appreciate the direct approach, an absent owner company can create standard procedures and other structures that improve the company’s value and guarantee a smooth transition.
How Much Is Your Business Worth?
Have you thought about selling your business? Use Sunbelt Business Brokers’ free business valuation calculator to determine how much it’s worth.
When you’re ready to take the next step, contact our experienced team, who can walk you through the details and get you the price you and your business deserve.