As we navigate the hurdles of business, we continually build in key employees to help execute our mission. These lynchpins save your business from the fire time and time again. They are the salesperson at the helm for twenty years clinching contracts at key moments, the operations manager that seems to anticipate challenges ahead of time and the old school estimator who does everything perfectly by hand. Some days it seems like magic how everything comes together, with the business humming along thanks to their work.
Over time, these lynchpins become liabilities.
Buyers Don’t Want Magic Systems
If you can’t articulate exactly how every single process in your business works, how things are documented and check and balances, anticipate a skittish buyer. Any veil of mystery increases risk within a business.
Buyers want tangible processes that outline how the “magic” happens. It mitigates the risk of, “What if?”
What if your salesman that has every single client contact ends up in the hospital? What if the estimator retires the moment the new owner takes the keys? What if the operations manager quits and takes his understanding of inventory chains with him?
Without the key employee’s “magic,” the business dies. Any buyer can see the risk of putting too many eggs into one employee’s hands.
Process Over People
One key aspect of sprucing up your business hinges on implementing processes that don’t rely on a single person. You need to embrace the mentality of Henry Ford’s assembly line. Roles need to operate independently of key employees.
That means sitting down with all your lynchpins and writing down the process behind the magic. It needs to be well documented. How do they do what they do? Where are their contacts? If they weren’t here, how would you get their job done?
Often, businesses we work with at Exit Consulting Group (ECG) wrote down the process ages ago, but it’s accumulated decades of dust since it was last reviewed. Other times, it’s a CRM scattered across ten different systems or built into an ancient Rolodex. Occasionally, we encounter businesses solely reliant on a key employee to execute their roles completely removed from established processes.
Your business needs to operate completely independent from the individuals you have in it. It needs to be built to continue to operate in ten to twenty years from today, outliving the individuals currently running it.
At ECG, we help owners update, refine, streamline and modernize their systems to appeal to buyers.
Checks and Balances
Once you implement your processes, removing the reliance on people, it’s time to establish checks and balances within the system. Many times this is a system or designated person to ensure that your processes are working, as well as to ensure that different departments or individuals are working together to achieve larger goals.
For example, what checks do you have implemented to ensure your reporting is correct? While you may have an entire team of individuals to manage your financials, you need some sort of accountability system or individual to ensure that the different areas are talking to each other. Is the person overseeing accounts payable working in unison with the individual closing the books each month? Are the important reports being published in a timely manner? If one financial manger notices that the business loses money in March, but the report doesn’t get published until June, the business has a problem.
Oftentimes this section focuses heavily on the financial aspects, although it’s important throughout the entire business.
Polished Look and Feel
If you haven’t noticed, all of the areas we’ve touched on are designed to give your business that nice polished feel. You want a potential buyer to be confident in their purchase, not hesitant about how it operates.
One area that builds confidence is seeing that you invest in key, yet often overlooked, areas. The two biggest areas we see skipped are investing into high quality accounting and marketing. When you have healthy high functioning accounting and marketing divisions, a potential buyer sees a company with a strong foundation built for sustainability and future growth.
Identifying Areas of Concern
Typically, we as business owners are too close to these types of situations to truly give an honest assessment of our own business. It’s not the only area of our lives we need to step back and get a professional’s opinion on.
For example, we run into the same challenge when we go to sell our house. A realtor comes in and points out a squeaky door, loose siding or curbing issues in the yard. Our first instinct is to point out how those don’t detract from the value of the house. The foundation is good, and we’ve lived with the squeaky door for a decade.
That mentality doesn’t move a house faster.
You’re too close to your business to give an honest evaluation through the lens of a buyer. That’s where Exit Consulting Group comes in. We identify squeaky wheels, questionable systems and areas needing refinement before it gives that polished look buyers crave.
Contact us today to inquire about assessments, as well as to chart out your exit strategy.