Implement Efficient Operating Systems And Get More For Your Business
Ideally, you should plan and prepare for the sale of your business for years—for as long as 3 to 5 years if you didn’t start the day you launched—before you take the steps to sell. That plan should include looking at business value drivers, as we’ve been discussing. One of the most important value drivers you may overlook is your operating systems.
When you have entrenched and recorded operating systems, potential purchasers can see at a glance that you have business procedures in place that show your business can sustain, and even improve, its profitability after the business has changed hands.
Businesses that see the greatest success and get the best price upon selling are those that have streamlined operating systems for marketing, hiring and training, operations, IT, accounting, order fulfillment, and more. Think of it the way Patrick O’Keefe, principal at Excellere Partners does:
“…implementing repeatable and standardized processes enables a company to scale without significant additional investment or overreliance on anyone or a group of individuals.”
Because what you eventually get for your business hinges on maximizing a purchaser’s return and minimizing their risk, implementing systems and ensuring they’re efficient and effective is crucial to both assuaging a buyer’s fears the business can continue to run without you and will still generate revenue and grow.
Effective Operating Systems Allow an Owner to be Removed from the Business
One of the most important steps you can take to ensure that not only can you focus on the business of growing your business during your tenure as owner, but that you can sell your business for top dollar when that day comes is to remove yourself from the day-to-day operations of your business. It is integral to guarantee that your business can continue to operate, grow, and thrive without you.
Don’t let your business become overreliant on you. Create superior, top-of-the-line systems in every aspect of your business, and let your management team run those systems. Once you’ve implemented those systems, make sure you document them so successive owners have a guide or manual for each, so they too can continue to profit. That will go a long way to minimizing their risk, making them more likely to pay more for your business.
Being able to offer a buyer effective operating systems gives the buyer the confidence that the business is—and will continue to be—under control with or without you at the helm. So, if you don’t have efficient systems in place already, take the time to implement or improve these systems at a minimum:
- Accounting Systems
- Key Performance Indicators
- Good Customer Management Systems
- Clear Procedures for Staff Laid Out in Operating Manuals
To mitigate the risk even more for potential purchasers and ensure continued scalability, take yourself, as the owner, even further out of the equation by creating or updating these systems:
- Personnel Recruitment, Training, and Retention
- Human Resource Management (an Employee Manual)
- New Customer Identification, Solicitation, and Acquisition
- Product or Service Development and Improvement
- Inventory and Fixed Asset Control
- Product or Service Quality Control
- Customer, Vendor, and Employee Communication
- Selection and Maintenance of Vendor Relationships
- Business Performance Reports for Management
A business that operates effectively by virtue of its infrastructure rather than one individual is far more attractive to buyers, so heed this advice from Michael Gerber, author of The E-Myth Revisited:
“Let systems run the business and people run the systems. People come and go, but the systems remain constant."
Superb Operating Systems and Documentation Generate, and Will Continue to Generate, Revenue
All the integral operating systems already mentioned work together to prove to a buyer that the business will retain the capacity to generate revenue and control expenses once they’ve taken ownership. Documentation of these systems—such as standard policies, employee records, procedures, and controls—serves to highlight that staff can continue to maintain the existing, successful processes that made the business what it was at the time of purchase.
“Having great processes means your customers, vendors, and employees enjoy the same experience each time they interact with your company.”
Streamlined systems create that positive experience, resulting in customer, vendor, and employee loyalty and the ability to continue providing that same experience once the buyer takes control. That equals sustained revenue generation. As an added bonus, when you have up-to-date operating systems, staff can gather the data for each interaction and measure, interpret, and mine it. The buyer can use that information later to determine how they could potentially make their own changes to further refine those systems and increase profitability, so having the systems and records already in place will entice a purchaser to perhaps shell out more than they would have otherwise.
It’s this continuous revenue generation that increases the transferable value of your company. Savvy buyers will discover during their due diligence that your incredible operating systems even give your business a competitive edge against your larger competitors who don’t have such systems and manuals in place. This edge could excite an otherwise lukewarm buyer, knowing that could result in additional revenue.
Seamless, documented operating systems allow your business to function and thrive without you, encouraging potential purchasers to pay more for your business because they can focus on the business of running the business rather than being mired in the day-to-day work of the business. The buyer wants assurance that the business they take a chance on will continue to chug along successfully once you’ve gone on your merry way.
They also need to know they won’t run the risk of losing revenue upon your departure. Showing off your optimized operating systems will help with this too in that it illustrates the how-to’s of your company’s revenue generation and future growth possibilities, having buyers envisioning dollar signs.
The message here is if you want to move on to the next phase of your personal or business life knowing the funds you received from the sale of your business were first-class, spend some time optimizing and/or implementing top-notch operating systems and documentation, even if that means putting out the money for consultants. Buyers will pay handsomely for a business that operates smoothly without you, continues to generate revenue, and shows growth potential.
Above all, consider working with a professional to help you increase the value of your business. A broker can help you achieve an ideal outcome and get top dollar for your business. Muise Mergers & Acquisitions Inc. can give you the guidance or advice you need.