Boost Your Company’s Value By Establishing Professional Processes And Procedures

May 10, 2015

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In How Small Business Can Replicate the Big Business Seller’s Advantage in Today’s Market, we talked about eight of the most important characteristics or value drivers that prospective buyers look for in their acquisition candidates, one of them being establishing sound processes and procedures that will ensure help that the business can run smoothly without the owner. Why is this important? While for many business 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 a product or service, which generate revenue. So, when they’re looking a potential acquisition targets, they want to make sure that everything is running smoothly and efficiently and will continue to do so going forward.

As an owner, you need to develop airtight processes and procedures that enable the company to function effectively without your involvement. You need to professionalize your business, by having written policies and procedures in place that you adhere to. These processes should be well documented so the new owner has a guide to running the business. Things like having job descriptions, employee goal programs, and regular employee performance review processes that determine pay increases are important. Don’t grant exceptions or provide special treatment to family members or others who may feel entitled.

Business procedures can also include the computerized and manual procedures used in the business to generate its revenue, control expenses, track customers, manage employees, and develop products or services. Here are examples of business processes that should be in place to increase business value:

  • Employee recruitment, training, and retention
  • Human resource management
  • Employee manuals
  • Customer acquisition
  • Product or service development and improvement
  • 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, business owners have to prove the business value to their successors. The value of your business is based on numerous factors – some of which are beyond your control such as market forces – however, there are many things that you can do to help boost the value of your business in the eyes of a potential buyer. 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.

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