Richard Pierce Thomas

Leadership and Small Business Consultant

What is your biggest challenge?” I asked a business owner recently. 

“Finding skilled talent,” she replied without hesitation.              

This is a common refrain among business owners and as I have researched the issue, it is not unique to our area. Whether they are replacing an aging knowledge base or simply growing, adding skilled talent is becoming more increasingly difficult as growth returns to the economy. Further, this problem is not unique to any particular industry, business offering or SIC code. According to a ManpowerGroup survey of the talent gap in the US in 2012, skilled trades topped the survey as the most difficult positions to fill, followed by engineers, IT staff and sales representatives (for the complete survey results, you can find the results online at http://press.manpower.com/press/2012/talent-shortage/). 

The reasons for the shortage are many, however in my opinion the blame lay primarily on the lack of long-term thinking and willingness to invest in the future by business and political leaders. Business leaders have become increasingly myopic, focusing on short-term results and ignoring the demographic realities of an aging knowledge base, further made worse by the recession. Political leaders have largely failed to cross the divide between ideologies to recognize that a healthy education system that emphasizes both collegiate and vocational paths is vital to a globally competitive economy, and in everyone’s interest. 

And yet there is another implication I believe is as profound as the skilled labor shortage that has yet to be felt; how your business is valued and its affect on your exit strategy. I contend that the standard equations for a multiple of cash flow or EBITDA are less of a deciding factor than the longer term sustainability and viability of your business, of which the depth and age of your talent pool is central. If this is not a concern for you now, it will be eventually. 

Many business owners are beginning to realize that exiting the business with anything to show for it is a taller mountain to climb than anything they’ve attempted before. And it isn’t getting any easier. As I’ve discussed in the past (What legacy are you leaving? SRG March 2013), there is a tsunami of baby boom business owners hoping to monetize their investment and years of hard work in their businesses in the coming years. Increasingly, business owners are having to double down on their infrastructure (investing not only in skill development but in systems, technology, and new equipment) to create the sustainability in the business such that it can produce return over the long haul. Concurrent to this, they are recruiting the future owners, selling the businesses on contract and praying that they don’t screw it up. This scenario is becoming so prevalent that we have structured the services of Pilot Wealth Management to address these needs.

Regardless, the implications are significant and most notably, that there are no quick fixes. Action must be swift if this describes your situation and following are how we are advising our clients:

1. Begin by addressing the skill gap issue. Create apprenticeship and internship programs, drawing from the local high school and community colleges. The Manufacturing Extension Partnership in your state (http://www.nist.gov/mep/) may also offer assistance in how to start a program. 

2. Develop a vision and direction for the business and create ongoing conversations around it. Without this engagement no matter how much you invest in their development they will eventually gravitate towards those leaders who put them into the larger business conversations. Those leaders just might be your competitors. 

3. If you are hoping for a profitable exit and are wondering what strategy is going to enable this to happen, the time to start planning is now. Begin interviewing business advisors in your area that have the planning experience and resources to help you plan your exit. 

If you are uncertain how to start with any of this, just start. As a Chinese proverb states, “he who deliberates fully before taking a step will spend his entire life on one leg.” As you might imagine, one-legged strategies are ineffective; it is too easy to get pushed over and you may not have the luxury of time to get back on your feet.

Rick Thomas is a Principal and Director of Human Capital at Pilot Wealth Management, a registered investment advisor in Oregon state. Leading their focus on the human component of building wealth, he consults and speaks to organizations across the country, focusing on individual and organizational achievement.