EXIT STRATEGIES: BUILDING A BUSINESS FOR SALE
Part 2: Importance of Plans, Policies & Procedures
Owning and operating a business takes a lot of work. Anyone who has done this at some point in their life will agree. It’s not only time and effort put in, but also sometimes late nights, weekends, holidays, and whatever else the unexpected has brought. In the end, your business is your personal investment. For many, it’s the product of their life savings and will be their retirement plan. Read on for some tips to make your business more marketable for sale in the future
In my last writeup, I share about my personal expertise and experience in creating a data-driven marketing plan. As a quick recap, the plan is centered around having something that someone wants, knowing the types of people that want it, and creating a way for them to get it or learn about it. If marketing is the lifeblood of a company, then what I’m going to share next is the heart of the organization.
You may be surprised (or not so surprised, if you’re decades into this and doing well), to learn that both strategic buyers and private equity firms look for a strong set of policies and procedures. It makes sense, right? They want to know that the business is operating efficiently and reducing unnecessary costs wherever possible. Additionally, we all like to know what we are and are not allowed to do and when.
Writing down and constantly improving procedures comes with a slew of other benefits as well. To start with one of the big ones, they help improve employee retention. Employees like working for organizations that are not chaotic, allow them to easily complete their tasks, have access to important information for task completion, and know what to expect on a daily, weekly, and monthly basis. No one enjoys the surprise that they should have been doing something for months that they were unaware of and haven’t been doing. Secondly, it allows management to lead instead of micro-manage, not to mention the cost reduction and time of minimizing training for new hires. When everyone can work efficiently and interdependently, the whole company wins.
You’ll also find improvement in the customer experience and retention. When transactions run smoothly and quickly, the customer is happy. Typically, they will return and tells others they know about their experience. I won’t go into “net promoter score” in this article, but that is something that can easily be tracked as a KPI if you decide to implement my recommendations. Have no fear, your customers will have no problem telling you what went wrong with their experience in the past.
If you don’t have a clear set of policies and procedures in place, now is the time. Look at what business does on a day-to-day basis. Are tasks completed on time? What should the process look like? What are the bottlenecks? Speaking of bottlenecks for my friends that enjoy reading, there’s an excellent book titled “The Goal” that is centered around improving operating efficiency and is presented in a narrative style that’s easy to read and understand. The author is excellent at teaching how to identify bottlenecks and what to do with them.
From personal experience, the easiest place to start is with an operations manual. As a manager, write down what the role requires on a daily, weekly, and monthly basis. Then, add a set of instructions on how to best do those things. Once that portion has been completed and refined, start to break it down by department and then by employee. Follow the same process of what tasks are done and how they are best completed. Quickly, you’ll have a complete set of exactly who should be doing what and when.
In a perfect world, this set of policies and procedures should be reviewed and revised on a yearly basis. Take a look back at what happened over the past year and focus on what did and did not go well. What could have been done to make it better? What could have been different overall? Was anything unexpected that could have been planned for in advance? The most important step when doing reviews and revisions to policies and procedures is to clearly communicate to employees of what has changed and why.
Not only does this prep the business for sale and ease the overall transition process, it prepares the business owner or manager in the case of emergencies. Should someone fall ill, experience an accident, or need time away to assist with a family member, someone can easily step in and help with their duties by following the procedure manual. This process saves time, keeps the company operating efficiently, and removes unnecessary stress from remaining team members.
Jumping back to the transition process, this can be a stressful time for both parties of the buy and sell sides of a business purchase transaction. It doesn’t have to be that difficult though. With a set of policies and procedures in place that work and are followed by all levels of the organization, new management can easily step into their role with minimal training from current ownership and management. Who wouldn’t want to remove the stress, confusion, anxiety, and time of transitioning their life’s work to someone else? When the fateful day comes, however, do be sure to have the right team of professionals and advisors on your side to effectively walk you through the process for the most amount of gain.
Thank you for taking the time to read Exit Strategies: Building a Business for Sale. As part of that process, you may find that you want or need to improve the value of your business, or at least know what that value is. Click here to learn more about business value or start a conversation about yours… Your Business Value. To take the temperature of your business, start the process, take our 13 minute questionnaire by clicking here to get your Business Valuation Score.
Written by Joseph L. Fleenor, Jr. MBA MSA
As an Acquisitions Associate for Indiana Business Advisors, Joseph assists advisors throughout the entire transaction process. With his formidable experience in M&A, Joseph is able to inform all stages of the process, from initial valuation, estimates, through due diligence documentation and final purchase. When he’s not doing a deep dive into company financials, Joseph is working hard to ensure that IBA finds the right buyers for our client’s businesses by prepping informational materials and creating targeted marketing lists. As a fellow business owner and prior consultant, Joseph understands the intricacies and complexities that come with navigating corporate finance and strategy.
Joseph comes to IBA with a strong educational background. Joseph earned his Bachelor’s degree from Wabash College in 2012, Master of Business Administration in International Business and International Finance from Butler University in 2018, and Master of Science in Accounting from Purdue in 2021. In addition to his degree, he has a Financial Modeling & Valuation Analysis Certification and is working toward CFA level 1. Before becoming involved in the financial and investment industries six years ago, Joseph did a term in the United States Army as a multiple launch rocket system crewmember.