How can a company achieve a higher valuation?
How does a company position itself as a more attractive acquisition target?
How can a family business avoid transition pains when passing from one generation to the next?
It should document its processes. When a business owner is looking to sell their business, whether for retirement or other reasons, they can achieve a higher valuation if their processes are documented. This enables the new owner to replace any employees who may exit with the original owner or move/replicate the operations in another location. In fact, an attorney friend (http://chrisclark.law/) has a client whose business sold for an additional $1 million due to this type of documentation.
Would you rather buy a car without any documentation or one that comes with an owner’s manual? The same is true for a business. All else being equal, a company is more attractive when it’s easy to transition post-acquisition. It also helps better integrate the new acquisition into the acquiring company and align both entities to the same mission and goals. Also, the new acquisition might be doing things more efficiently than the acquiring company and will be able to train all employees on the processes faster.
If your family business has been around for a while and will be transitioning day-to-day leadership to the next generation, it’s best to have documentation to ease that change. With documentation, your customers will not feel any difference from new leadership continuing operations. It will also allow the new leadership to have faith that the business will perform as expected as they look to expand and improve operations going forward.
I strongly encourage businesses to document their internal processes. The benefits are endless and can only enhance your brand, quality, and value. And when the time comes to change strategy or focus on growth, process documentation is an integral part of adapting quickly to change.
Does your company have change that needs to be implemented but lacks internal capacity and/or resources? Would your company benefit from a consultation to unlock its full potential? Contact Beck Insights (www.beckinsights.com) and we'll work together to determine the right solution for your business.