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SELLING A BUSINESS

The Hazards of Hiring “Star” Employees

How Jonathan Fields, founder of Sonic Yoga and author of Career Renegades, made sure his customers were loyal to his business and not his workers.
Jonathan Fields, Sonic Yoga

Jonathan Fields of Sonic Yoga rejected the "star growth" strategy.

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One way to grow a business is to hire 'star' employees who join you with their own client base in tow—think of the hairdresser who gets a job at a new salon and brings his or her loyal customers along.

The problem with hiring such stars to jump-start your business is that customers generally remain loyal to their star, not to your business. When the star gets a better offer, he or she will leave you or hold you hostage. With customers loyal to your employees rather than your business, you'll have a tough time getting anyone to buy your company.

This is exactly why Jonathan Fields decided to avoid the star growth strategy in building New York City-based Sonic Yoga. Instead of hiring instructors with a built-in client base, Fields created a 'Teacher Training Institute' to teach brand new instructors how to lead a class the Sonic Yoga way.

Most fitness studios list the instructor's name beside a class on a calendar, but for the first four years, Fields simply listed the class time and format to avoid people becoming loyal to any one instructor and reinforcing the idea that a particular instructor was exceptional.           

Fields, who recently wrote the acclaimed Career Renegades as a battle cry for would-be entrepreneurs, sold Sonic Yoga in December 2008, which was possible because the business was not dependent on him or any one of his instructors.

I asked Fields for his advice for people looking to build a valuable and sellable company. 'First off, decide if you want to build a lifestyle business or a legacy business,' he says. 'A lot of people start lifestyle businesses thinking they will be happy, but if you don't like doing something for someone else, you probably won't like doing the same thing for yourself unless you also have a passion for business-building.'

He adds: 'To build a legacy business, the secret is to build value independent of you. I never put my name on the door of our yoga studio and only taught one or two classes a week once we were fully staffed because I knew I wanted to have the option to sell it one day, and for it to be sellable, it needed to be valuable without me being there.'

Are your customers loyal to your business or your stars?

John Warrillow is a writer, speaker, and angel investor in a number of start-up companies. He writes a blog about building a sellable company at www.BuiltToSell.com/blog.

Last updated: Dec 7, 2010

JOHN WARRILLOW | Columnist | Sellability

John Warrillow is the author of Built to Sell: Creating a Business That Can Thrive Without You and the founder of The Sellability Score, a cloud-based software company that helps business owners improve the value of their company.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.



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