Early warning sign your business will trap you

From the outside, the business looks successful – multi-million sales, decent profits, loyal customers and team. On paper, it’s doing exactly what it’s supposed to do. And if you’d asked the owner five or ten years earlier what they were trying to build, this is probably very close to what they had in mind. 

Most owners would expect, at that point, for things to start to feel easier, less stressful, more freeing. 

Because, as the business grows, as the team improves, as the processes mature, and you break through the £10m mark, you’d expect the weight to come off. You’d expect to be less involved in the day-to-day. Less pulled into problems that shouldn’t need you anymore. 

That’s the expectation. And in a small number of cases, that is what happens. 

But for many owners, it doesn’t feel like that at all. Yes, they’re making good money. They’ve got the lifestyle and toys to go with it. From the outside, everything looks fine and people envy them for it. But alongside that, there’s something else running underneath it.

Transcript

SPEAKER_00 0:02

From the outside, the business looks successful. Multi-million pound sales, decent profits, loyal customers and team on paper is doing exactly what it's supposed to do. And if you'd asked the owner five or ten years earlier what they were trying to build, this is probably very close to what they had in mind. Most owners would expect at that point for things to start to feel less stressful, more freeing, easier. Because as the business grows, as the team improves, as the processes mature, and you break through that 10 million mark, you'd expect the weight to come off. You'd expect to be less involved in the day-to-day, less pulled into problems that shouldn't need you anymore. That's the expectation. And in a small number of cases, that's what happens. But for many owners, it doesn't feel like that at all. Yes, they're making good money. They've got the lifestyle and the toys to go with it, and from the outside, everything looks fine and people envy them for it. But alongside that success, if you will, there's something else running underneath it. An irritation, a frustration, a niggling sense that the business is not sure, is not where it should be, given its size and performance. And they spend their spare time wondering, what the hell's happening to sales? Why is that bloody project not finished yet? Why is our biggest client calling me about something that should never have reached me? Why have we stopped following our own flipping processes? Why are our margins starting to slip? And how did debtors get to that amount? Which all leads to a deeper question that doesn't always get spoken out loud. Am I the only person who actually gets this? More often than not, the honest the honest answer to that is yes. Hi, I'm Richard McMullen, creator of the Catalyst Operating System, a framework for helping you for helping owners design, run and the businesses they can happily own forever or easily sell tomorrow. And today I want to explore why so many businesses trap their owners no matter how big they get. So when you go inside those businesses where the owner feels stuck despite the growth, what you find is not a lack of effort and it's not usually a lack of capability in the obvious sense. You often have good people in the business, people who are committed, they're working hard, they're putting in the hours, they're doing what they believe is the right thing. But the critical analysis, the thinking and the judgment, the part that determines where the business goes and how it responds when things aren't quite right, that still sits with the owner. They're the one interpreting what's happening in the wider market. They're the one diagnosing what's going wrong internally. They're the one shaping the response and deciding what happens next. And that creates a very specific pattern which I hinted at earlier. Projects don't quite land on time. And don't quite land in the way the owner expects. Growth starts to flatten without an obvious reason. Issues hang around for longer than they should or keep coming back in slightly different forms. At the same time, everyone is busy, very busy, and the business is still making good money. And that that combination makes the true underlying problems difficult to spot because nothing looks obviously broken. But when you stand back and look hard, things aren't quite right. In my experience, there are always a number of contributing factors, one or more contributing factors like customer concentration, so one or two accounts that matter more than they should, which distorts behavior in the business and creates underlying risk. Supplier dependency, a relationship you don't fully control, but has a disproportionate impact on your decision making and on your operations. Operational complexity, too many products, too much variation, too many moving parts for the system to handle easily. And me to ness.

SPEAKER_01 4:27

Value creation, long-term thinking, and decision-making authority still sat with the owner.

SPEAKER_00 4:38

For the owners, there's the obvious personal cost from that extra pressure and stress, you know, that never-off mentality, the emails and calls when you're on holiday and when you're supposed to be spending quality time with the family. A bit like holding a glass of water for hours on end. It's okay at first, but over time builds up to be an almost unbearable load that can put you in hospital. For many owners, though, there is no obvious financial penalty because the business is profitable and on paper doing well. But last year, 2025, comprehensive research by Stratford Analytics based on deal stats from the US showed a huge impact on profitability, business value, and transferability, as you can see from this table. Their analysis of thousands of deals over a 10-year period shows that if your business depends on you to make decisions, to be the driving force, to be the critical thinker, then your profits are 7.5% points lower. You're facing a discount of 47% on what your firm is worth, and it will take nearly four months longer to complete the sale. That's quite a high price to pay, I'd suggest. And in Stratford Analytics' own words, the valuation discount amplifies in certain contexts. Firms under 10 million in revenue experience the deepest penalties while contract manufacturing operations with tacit knowledge face greater skepticism from buyers. Conversely, machinery and precision components manufacturers with cross-trained teams and documented processes close faster at premium values, and these patterns hold across economic cycles, suggesting structural rather than cyclical causes. So you being the man or woman making the decisions, running the business is a massive discount in value and reduced profits versus when you're not, when they call it professionally run. But what I mean is you have a senior leadership team who can step up, take ownership, take responsibility. Now, whilst the analysis is based on US firms, the problem is the same worldwide. Lower profitability, lower valuations, harder to sell businesses. So how do you know if you're on that trajectory or not? In my experience, you can usually see this long before it becomes fully problematic if you know what to look for. And one of the things I do with my clients is implement a weekly focus workshop. It's a it's a working session where the senior team meet at the same time on the same day with the same agenda each week to deal with the real issues in their business, not just report an activity.

SPEAKER_01 7:34

And the early warning indicator that things will eventually stall is very simple. Who is doing most of the talking?

SPEAKER_00 7:44

If the owner is consistently the one speaking the most, driving the conversation and answering the questions, that tells me something very specific. It tells me where the thinking sits, it tells me where control sits, and that the leadership team's experience, knowledge, and insight aren't being used to their full potential. I also see the same thing in board meetings at larger companies. If the owner's still the central voice, even if they've got non-exective directors, if they're still shaping every line of thinking, then structurally the business hasn't moved on, regardless of what the numbers say. And they're going to get stuck eventually if things continue that way. Anyhow, the question becomes less about performance and more about behavior. Who is asking the questions? Who is structuring the thinking? And who is actually doing the work of figuring things out?

SPEAKER_01 8:43

And a lot of this comes back to something quite simple.

SPEAKER_00 8:46

And it's true for nearly every business that has a sole owner. The owner has worked their proverbial nuts off to get the business to this stage. They've shaped it, they've molded it, they've energized it, they've built the business in a way that works. They make decisions quickly. People come to them, they resolve things, things move on. And because that works, they keep doing it. Because those habits are often what got them from zero to a few million revenue. And sometimes those habits can take the business well beyond that. They also create a huge feel-good factor for the owner. They feel effective, they feel fast, they're decisive, they're adding value. But over time they create a dependency that isn't immediately visible. Because when you give people the answer, it's not their answer. They implement the solution, but they don't own the thinking behind it. They don't develop the judgment required to deal with the next version of the problem. So the same issues keep coming back. Or new ones appear that require the same level of thinking, which again pulls back to the owner. And that creates a real vicious catch-22. The owner has a very real hesitation and fear of letting go. Because when they do step back, the quality of the output doesn't always match what they would expect. So they step back in to fix those issues before it become a major problem. And that creates a feedback loop that reinforces itself over time. And ultimately you end up with what psychologists call learned helplessness. For me, many years ago, uh US Secretary of State Donald Rumsfield nailed it when he said there are unknown unknowns. For many of those owners, they don't know what they don't know. They've never sat at the top table of a larger business that got that's got hundreds of employees that's scaling fast or is a major player in this market. The unknown unknown for them is what it takes to run a business at 10 million, 50 million, at over 100 million. I I've had that advantage of being a senior leader in a large consultancy, about 200 people, and of sitting on the management board and leading the strategy function of a multinational business in the late 90s, and we were doing nearly 400 million turnover them, which is about 850 million today. In the consultancy, I learned about how to scale beyond yourself, how to train people, how to structure projects, how to deliver outcomes and do company valuations. In the two years with the the big function, the big co I learned about uh how those big businesses work and how they can deliver at scale when you don't know any of the frontline staff. But I also learned how they fuck up so badly, forgive my language, but it's the only way I can think of saying it, how they fuck up so badly that a smaller rival can acquire them and massively improve valuation. But as I say, if you've never experienced those things, it's hard to see what you're missing, it's hard to see what's needed to get to that next stage to be able to change how you lead. And even when you do know that, you can still screw it up like I did. Uh my epiphany around this came when I, you know, when I let me take you back a bit, when I stepped out of the big business world to lead Slide Rose, which is a one and a half million pound revenue, luxury-fitted wardrobe design, manufacturing, and installation company, I when I stepped into that top role, I thought as the leader I needed to have all the answers. And basically I ignored and forgot everything I'd learnt that had got me to that point in my career, and I changed my style from collaborative and coaching to command and control. God was that a tarring and foolish thing to do. And the moment it it I got my awakening, my epiphany, when it really clicked for me, it was in a management meeting donkeys years ago. I remember going into that meeting really frustrated. We had a performance issues around installations not meeting our right first-time standards, and in my head, I knew exactly what was going on and how to fix it. So I did what I'd done since I'd joined the company. I came in, I laid out what I thought was wrong, and I pushed the team towards what I believed the solution should be. There's a bit of hesitation, people looking down, not quite looking at me, until Simon, an old uni friend of my ops director, challenged me directly and said, Richard, I really don't think that's the issue. He shared his view. Someone else added another angle, then another, and another. And as I listened, I realized horror struck that I got this wrong. Completely wrong. Not just sort of wrong, but completely fecking wrong. I can tell you it was not a comfortable moment. I I still cringe thinking about it. My imposter screaming was my imposter syndrome was screaming, I've been found out, I've been found out, I'm supposed to be the one with the answers. I'm supposed to see this more clearly than anyone else. Shit, shit, shit, I've been found out. And as I wallowed in my self-pity, the team worked it through themselves. They debated it, challenged each other, built in each other's thinking, and lapped in on something, a solution that was much, much better than anything I'd considered. I managed to pipe up at the end with a few clarifying questions before agreeing with the solution. They walked out of the room energized. Even better, they each had their own actions and and they seemed to own them. A few hours later I was having a coffee with Simon, still feeling sorry for myself. But he hadn't noticed anything wrong. He was gushing with the meeting about what had happened. Best meeting ever. Great to see the team so engaged. Trust me, not pleasant to hear when you've when you think it's all about you failing. Anyhow, uh a couple of weeks later the results were there. The problem was sort of the team were buzzing. And that's when it clicked, or rather, I should say when the knowledge resurfaced from before I became the leader. And it slapped me in the face. You know, when the team created and own the solution, the results are always better. So when I went back to what I've been doing in my consultancy days in the big company, you know, going back to rather than being the person with the answers to being the person who could see where something didn't quite make sense and asking great questions and let the team lead the conversation and solve the issues. I went back to that. And over time the team got better and better. In turn, I got better at asking questions and nudging and not needing to have the final say. They took more ownership and responsibility, and my involvement reduced. So, what what I counsel my clients today is you know, the first thing is letting go is tough. Not being the person with the answers can feel diminishing. But if you don't break the pattern of dependency, you're never going to get the freedom you to you crave. Breaking the pattern of dependency is not about stepping away or dumping on people, it's about actively, consciously, and deliberately changing how thinking happens in the business. And for me, there are three parts to it.

SPEAKER_01 16:04

The first is creating clarity for your team.

SPEAKER_00 16:10

Many organizations lack clarity in where they're going and how they're getting there, which leads to rural confusion and an organization chart that makes no sense. And the bigger the company gets, the worse it is. And the more time and effort it takes to get the simple things done, and the harder that hits profitability. And this little cartoon reminds me of my time at Nat West. To make things worse, most organizations default to defining work as inputs. Do this, do that, complete these tasks. And that feels you know sensible and productive because things are getting done. But maybe you've been lucky and you've never experienced this in your business, those people can still be busy as hell and make not one jot of difference to the results. The really tough questions to answer, and if you don't believe me, you know, try it for a selection of your roles. The really tough questions answer for these roles are why does this role exist? How does it fit with our strategy? What changes because this person is in the business? What outcome are we actually expecting to see as a result of the work they're doing? How will we know precisely if that's been achieved? If those aren't clear, if you haven't got the answers to those questions, people stay in activity focus rather than outcome focus. They stay busy, but the business does not move on in the way you expect it to. The second shift is in how decisions are made. This is really simple to say, but difficult in practice, you know, because the owner must move from being the person with the answers to being the person with the questions, not in some sort of performative coaching guru smart arch sense, just in a very simple, practical way. Instead of telling, um, you're asking things like, you know, what are you seeing here? What do you think is actually going on? What options have you considered? Why do you think that's the right way to go? And initially that can feel slower, it can feel less efficient because you already know the answer. You can see the solution and the pitfalls and the risks more quickly than they can.

SPEAKER_01 18:27

But when you give the answer, it stays with you.

SPEAKER_00 18:31

When they work their way to it, it starts to stay with them. And over time, that changes the nature of the conversations. You're aiming for them to change the way they think. So instead of saying, What should I do? the conversation becomes them saying, Here's the issue, here's what I've evaluated, here's what I'm thinking of doing, and why. And then you'll just need to say things like, Yes, crack on. Or you can dig deeper into their thinking to get a better solution and help them spot what they've missed. But it's all about improving the quality of their thinking. So this isn't just a different way of talking to people, it reflects a very different level of ownership and a different level of thinking. And the third part, the final part, the one that's usually underestimated, is patience.

SPEAKER_01 19:18

Because this does not happen quickly. Occasionally it does, but usually it doesn't.

SPEAKER_00 19:25

More importantly, it does not happen cleanly. There is a period where things feel worse before they'll feel better. When you start asking questions instead of giving answers, the quality of thinking you get back won't be where you want it to be. Decisions will take longer to make. Some of them will just be playing wrong. Some things will come back to you that you thought should have been handled already. And you you find yourself in this uncomfortable, uncomfortable middle. The temptation at that point is to step back in, to take control again because it feels quicker and more certain. But if you do that, you reset the pattern. So patience here is not passive, patience is active. Yeah, it's like active listening. You're looking for active patience, it's holding this position on how decisions are made, that they are going to be making the decisions, even when it will be easier to jump in. It's letting people think through things, even when you can see a better answer more quickly. It's allowing for a period where capability is still catching up with expectation. And it's allowing them to make mistakes and learn from them. But over time you start to see the shift. You know, some people will grow into it, they'll start to think differently, they'll take more ownership, they'll come to you with better form views. Others, however, will not make that transition. And that creates a different decision for you. Do you move them into rules where that level of judgment isn't required? Or do you accept that they're not right for where the business is going and make them available to the market?

SPEAKER_01 21:06

That's never an easy call, but it is an essential part of the transition. So, what does this look like when it works?

SPEAKER_00 21:14

Well, when it does work, the owner's experience of their business changes materially. For example, in my horse supplements manufacturing business, I run a board meeting for a couple of hours each month. We review the financial performance in the KPIs, we check we're on track with our milestones, our 90-day rocks, we sense check the external environment, debate major decisions, and that's largely it. The day to day judgment sits with Alexander, the managing director, and she's brilliant at bringing her team in and involving them with the decision making and judgment. She'll call me when she needs a second view on a big issue, or or she's got a major decision she's making. She owns it. And as an example, last year the team researched our product packaging, you know, how costly it was, how effective it was in terms of brand building and customer usage, and you know, what can be done differently to improve it. My first involvement was when Alex talked me through the results, which you can see here. She showed me the concept designs for the new pad packaging and the profit improvement numbers, and then asked me what I thought. And my comment was, it looks bloody marvelous, Alex. When can we get it rolled out? That was all I had to say. So when I spend time on that business, it's pure thinking time. I'm thinking about longer-term value direction, eventual exit. I'm thinking about how I can support Alex make that journey. I'm not thinking about operational challenges or day-to-day changes or people issues. You know, when you get this right, that's what it looks like. And that and that's what I call a business that's built to keep or sell.

SPEAKER_01 23:04

And that's what it should feel like when it's working. So the real question for any owner is quite simple.

SPEAKER_00 23:16

When things get messy, who does the thinking? Are people still coming to you for the answers, or they come to you with a view, something they've already worked through, something they're prepared to own? Because that difference, as small as it appears on the surface, is what determines whether the business frees you or continues to depend on you, and whether you're facing an 8% drop in profits every year, or facing a 47% valuation discount if you decide to sell one day.