Selling Your Business – Processes and Procedures as Tangible Assets
“It’s clear you need systems and processes that will continually push the organization … (and signal when this is not happening)…” – Steve Denning, contributor, Forbes.
When the time comes to sell your business, the buyer will want to thoroughly examine the company. Documented process and procedures protect you from liability and will increase the value of your business. Formal process and procedures, codified in manuals, is critical to grow your business.
The procedure for selling your business
There are 4 transactional phases when selling your business:
- Letter of Intent spelling out price and general terms
- Purchase Agreement agreeing to the price and definitive terms of the sale
- Due Diligence Review of the Business that can take up to 3 months to ensure that the value is real and not at risk
- Closing the transaction with the final price adjusted upward (though usually downward) to account for risk factors uncovered in Due Diligence.
Now, imagine that during Due Diligence – Phase 3 – you are selling your business and have all of your processes and procedures in clean, accurate binders that detail exactly how you operate, and by providing those manuals, you show the buyers that your company is strong, and valuable.
When a buyer examines a business for sale, they review 10 areas of the business to determine the value and risks of buying the business. The more documentation, the less risk, the higher the value.
Take a look at these 5 questions, can you answer YES to each of them? If so, you are in good shape. If not, those are the areas that need some work to protect your company and increase its value:
- Are all your processes and procedures for each area of the business recorded in writing, in step-by-step manuals that are followed by all employees, including the owners? ______
- Do you have regular meetings to track and communicate progress via the process and procedures toward stated company goals, or is it just “understood”? _____
- Do you have a formal training system infused in the company utilizing the manuals? ______
- Do the processes and procedures run your company or heroic, top dog personalities? ______
- Do you conduct, routine written reviews of each employee each year at the same time? ______
A business leader’s primary responsibility is to focus on the future, look over the horizon and see opportunities to pursue and pitfalls to avoid.
As the Chief Operating Officer, I instituted regular meetings with fixed agendas to review results and make sure we were getting things done the right way – not just the right result. This is critical for short and long-term success. Give us a call to discuss your answers and grade the quiz.
We review these 10 areas of business with our clients regularly to help establish – and DEFEND – the value. Offers from Buyers in the sale of a business will usually be reduced during a due diligence review as issues are uncovered. The better you control and document your processes and procedures, the more valuable your company will become.
Operating a business is stressful and lonely and it’s easy to get lost in the day-to-day challenges. General Counsel, P.C., knows this well and our team can help you build and realize its value.
Decide what you want your business future to be and call General Counsel, P.C. for a free consultation and legal checkup on your company’s operations, stress points, structure, HR as a strategic element of your business and team needs so you can grow a great business – a living company that can survive and thrive in the future.
When it comes to selling your business, General Counsel P.C. has the expertise, skill and – the real key – unique experience of running companies as C Level Executives that makes a difference when advising our clients on: (i) structuring operations for efficiency and legal protection (which means more value); (ii) administration (not just overhead but value added elements); and (iii) Sales/Marketing (proper incentive based compensation causing the behavior that drives results without getting you caught in a lawsuit).