Systems Create Value when Selling your Business
/It's important to have well-crafted, documented systems and procedures in place for your business well before the time comes to sell. Systems lessen the reliance on the owner for the business to operate successfully, which gives a potential buyer confidence that they can take over the role. This increases the marketability of your company, and can help achieve a higher price.
As a business owner and manager, you probably know all too well the challenges that arise when a long time employee leaves the company and takes with them years of valuable insight into their job; daily procedures, methods and contacts, not to mention the tips and tricks they discovered over time on how to get their job done easier.
Now, imagine this same scenario; however it's you that's leaving your business in the hands of a new owner or manager. If you're considering the sale of your business, think about what tremendous value a well-documented set of systems and procedures on your day-to-day operations would be to a new owner.
Details like this increase the transferable value of your business and, consequently, the final sale price.
Do you drive your business? Or does it drive itself?
When considering the sale of your business one of the initial aspects to consider is the role that you, the owner, play in the daily operations of your company. Are you a real "hands-on" owner, who takes control of a number of roles in the company and plays a large part in critical operations, or do you delegate these important tasks to your staff and management?
A potential buyer is going to be attracted to a company where the owner is more easily replaced – in other words a business where the success or failure of the company doesn't hinge on the owner's unique contributions.
A business that is highly appealing to purchase, and worth more to a potential buyer, tends to have well documented and easy to communicate systems, methods, and procedures in place well before the sale of the company ever takes place. This gives a buyer confidence that they can continue on with the success of the business despite losing the original owner's direct contributions.
What systems are important?
If you already have great systems in place, now is the time to ensure that they are well documented in order to facilitate a smooth transition. As mentioned, a potential buyer will be more comfortable and more confident when they feel they can successfully move into the ownership role quickly and efficiently.
Providing documentation of your business systems to potential buyers as part of the sale of your business can greatly increase this confidence. But, what kinds of systems to document are important?
Consider the following:
Outline of the sales cycle – how new clients or jobs are sourced and who is responsible for each step from initial contact to final deliverable
Inventory control systems (computerized and manual)
Key relationship contacts with customers, vendors, suppliers, service providers, etc.
Human resources – management structure, employee manuals, up to date job descriptions, and compensation methods
Performance reports and evaluations
Training methods and ongoing educational cycles
Customer service methods and procedures
Marketing Plans
Most companies have a business plan these days, but do you also have a well written and documented marketing plan? Many businesses operate with a loose marketing "plan" often developed by the owner but never written down to communicate to others.
A well-organized marketing plan demonstrates to potential buyers how you currently, and plan to in the future, generate revenue for the business. This helps a new owner understand how they will be able to repay the funds borrowed to purchase the business.
Consider these important aspects of a marketing plan:
What your competitive advantages is in the market that competitors cannot duplicate easily
The sales cycle or process from beginning to closing
Advertising and promotional budget and activities, and also the effectiveness of those activities
Competitor analysis of their marketing methods
What the costs are to acquire a new customer
Calendar of upcoming promotional events (trade shows, advertising, sales, etc.)
Summary
When it comes to your business, nobody knows your company as well as you do. But if you are planning to sell and want to maximize the value of the sale, you'll have to demonstrate that these important details are well documented and straightforward to follow. This will allow you to remove yourself from your business and give your buyer confidence that they can successfully fill your shoes in your absence.
