In a previous article, we discussed eight of the most important characteristics or value drivers that prospective buyers look for in their acquisition candidates.
One of them is establishing sound processes and procedures that will ensure the business can run smoothly without the owner. But why is this so important?
A Buyer’s Perspective
While for many owners, their business is a way of life and part of their family and lifestyle, the view is very different for a prospective buyer. From a buyer’s perspective, your business is a group of processes and procedures that produce products and/or services, which generate revenue. When they’re looking at potential acquisition targets, they want to make sure that everything is running smoothly and efficiently and will continue to do so going forward.
Professionalize Your Business
As an owner, you need to develop airtight processes and procedures that enable the company to function effectively without your involvement. You should have written policies and procedures in place that you adhere to so the new owner has a guide to running the business. Examples include:
- Job descriptions
- Employee goal programs
- Regular employee performance reviews that determine pay increases
Computerized procedures should also be used to:
- Control expenses
- Track customers
- Manage employees
- Develop products or services
Other examples of business processes that increase business value:
- Employee recruitment, training, and retention
- Human resource management
- Employee manuals
- Customer acquisition
- Inventory and asset control
- Quality control
- Communication policies for employees, vendors, and customers
- Vendor relationship management
- Business performance reports
To ensure continuity and receive what they deserve for their companies, owners have to prove the business value to their successors, which is based on numerous factors. With enough time and planning, you can improve your business processes and procedures and help increase the value of your business in the eyes of potential buyers.