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Value Creation Blog

5 Reasons You Need To Be Operationally Irrelevant

Posted by Josh Patrick

Operationally Irrelevant cat resized 600One my favorite terms is operationally irrelevant.  This is the stage in your business where you are completely out of the day-to-day operation of your business.

My friend, Barbara Taylor, wrote an interesting post on Protecting Your Re-Sale Value In Your Business.  In this post she talks about getting out of the office more and allowing your people to run the business.  She even used one of my very favorite terms to describe getting out of your office: Operationally Irrelevant.

I often think about the significance of Stage 2.  Fifteen years ago one of my first ah ha’s was moving into Stage 2 meant you had to become operationally irrelevant in your business.  If you don’t do this, you can’t become strategically excellent.  Strategic excellence is what Stage 2 is all about.

Fifteen years after starting Stage 2 here are five reasons you want to become operationally irrelevant:

Before becoming operationally irrelevant your business needs to become tactically excellent.  You’ll never get the confidence to let others run your business until you have achieved a consistent level of excellence your customers can depend on.

Operational irrelevance increases the value of your business.  At some point you will likely want to leave your business.  If your participation is not needed for any of the tactical parts of your business buyers will become more interested in what you’ve built.

Operational irrelevance allows you to have capacity to act strategically.  The key word in the preceding sentence is act.  Most business owners I know can think at least a little strategically, but most don’t have the time or energy to act strategically.  Becoming operationally irrelevant will give you some extra time to do things to make your business better.

Operational irrelevance will allow you to build enterprise value in your business.  The vast majority of businesses don’t have any enterprise value.  This is because you as an owner are tied down in the weeds of the business.  If you ever want to build enterprise value (meaning your business creates significant excess cash) you’ll have to become irrelevant so you have time to look at items like return on equity, investment and assets.

You’ll have time to make small experiments that will provide big changes.  You need to regularly re-invent your business.  If you don’t, you’ll become commoditized out of business.  To re-invent and use a regular program of innovation you need to have time.  When you make yourself irrelevant you can lead a team of innovators in your company.  At some point, you’ll want others to take this job over but at first, it becomes your job.

Thanks Barbara for reminding how important operational irrelevance is for an owner of a private business.  It really is the first step in creating a business that has true economic value.

We’ve partnered with John Warrillow on providing our friends with an opportunity to see how saleable their business is.  I invite you to click on the button below to learn more about this fifteen-minute process.


Securities and Investment Advisory Services offered through NFP Securities, Inc. (NFPSI), Member FINRA/SIPC. Stage 2 Planning Partners and NFPSI are not affiliated.

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Topics: operational irrelevance, enterprise value, Tactical Excellence, passive ownership

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