One way to increase the value of your business
by Dave Kauppi, CBI, principal at MidMarket Capital Advisors, LLC
At one point or another all business owners face the question how to transition ownership of their business to another party. It’s what we call Exit Planning and Strategies. This process can involve turning over the reins to a relative, merging the business with a larger company or perhaps selling the company to a new owner, to name a few options. Whatever you decide to do, having good people and systems in place that enable the company to run smoothly and with less direct activity from you, the owner, will dramatically impact the value of your business.
Investors are not looking to buy a job; they certainly don’t want to spend money for a company that requires their full attention to day-to-day operations. Instead they are looking to invest money in companies that have internal, systemic control over their operations and that function well without the owner present. Investors are looking for businesses that are profitable, organized, and with proven systems in place to all but guarantee a positive cash flow and an acceptable return on their investment.
What are you doing in your company that someone else can do? For example, are there key customers you can turn over to a trusted employee?
A good idea to improve the value of your company is to develop an Operations Manual that details processes, procedures, key responsibilities, and proves you are not needed for a buyer to get the requisite return. The Operations Manual would consist of three parts:
- A current Organizational Chart
- Job Descriptions for all exempt positions
- Process Manuals.
The Org Chart will show the basic structure of the business by listing all the exempt positions within the company.
Job Descriptions list all the responsibilities for each position on the Org Chart.
Process Manuals list all the processes and procedures assigned to and performed by each position. Once an Operations Manual is in place, you have achieved a major milestone to building a business that can run without you.