One of the reasons for creating documented processes for your business is portability. Meaning that the day may come when you want to hand off ownership of your business to a third party. It could be that your business is being acquired or that you have decided to bring in a manager to run it for you. Either of these scenarios are going to be a challenge if you do not have your business processes documented.
It’s like going to ikea and buying a brand new entertainment center and having the sale rep say that there is no manual. Can you figure it out without a manual? Some people can others won’t even consider trying. That is exactly how people will view your business if there is no manual and documenting business processes provides that manual.
I’ve seen this scenario play out before. A valuable deal fell apart because the companies founder had never documented any of the task required in the day-to-day operations of his company. 10 years in, he had no idea where to start and when he figured it out, the timeline was lengthy. As a result, the prospective buyer lost interest and moved on.
In fact, I am currently in a the middle of a small deal myself where I am the buyer. The original agreement was to close the deal in two days. We were making good progress toward that end, until I found some documentation to be missing. This documentation is critical to the deal. Ten days later the deal still has not closed, my time planned for other things is now being impacted as well as the sellers. The seller is scrambling through what should be a vacation to get this documentation or I will walk away.
All of this could have been avoided if the owner had documented processes for the business. Very simple if it had been done upfront or overtime and because it was not, it is difficult for him to put together now. So get your business processes documented because you never know when not having them could prevent you from handing your business off to a 3rd party for sale or to be managed.
Spot on Kyle, I would even go so far as to say that creating a sellable business is the core reason for documenting your policies and procedures.
When you can show precisely how and why your business will continue to grow and thrive without you, you will dramatically decrease risk and commensurately increase the multiple of revenue you can sell for.
Thanks Iain,
Agreed. It seems that building a business to be acquired is a sexy topic especially in the startup world. Only a few voices seem to recognize that good process is how you get there.
Great value proposition at http://www.theprocedurepeople.com “Writing Policies & Procedures is boring and difficult …
… but it is the single most important factor in scaling and selling your business!”
Kyle