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Can Your Business Live Without You?

Can Your Business Live Without You?

Business processes are key to increased growth and enterprise value

Can Your Business Live Without You?

John Holobinko, Managing Director, Business Reimagined, LLC

Small business owners must wear multiple hats at the same time out of necessity.  In contrast with large businesses, there is simply not the ability to have a dedicated employee for each business function. 

One of the greatest challenges of a growing small business is the challenge that some of the same things that enabled the business owner to succeed begin to be bottlenecks that stand in the way of growth and further business success.  The business owner typically has made every decision on the business and approved every operation.  Commonly as the business continues to grow, the owner gradually becomes overwhelmed by the scale of decisions that s/he must make every day, leading to fatigue and frustration.  Despite this, often the business owner has great difficulty letting go of making every decision and empowering specific employees to make these decisions.

In many cases, it is more than simply an emotional issue for the owner to “let go”.  More often than not, many of the procedures and processes of the business are only known to the business owner, i.e. “in their head”.  They are not written down, and in many cases a standard operating procedure doesn’t even exist.  For example, there may not be a procedure for developing quotes, following up on them, measuring quote to sales conversion rates, and similar data.  Similarly, to capture information on prospects, customers, deals, suppliers, and other information may be an ad hoc process and some data may reside in multiple places at the same time, resulting in confusion, duplicate effort, mismatched records, and other inefficiencies.

Even more serious, there may not be established criteria for making decisions on what opportunities make sense for the business, versus which ones to reject, or how to quantify costs and establish customer pricing.  The list goes on.

Without establishing processes for the most core functions of the business, the business owner will remain trapped by the very business s/he worked so hard to build.  The ability to delegate tasks to others and have confidence that they are executed upon is severely restricted.  There will always be the question of how the employee does the task versus how the owner would do it her/himself. Putting processes in place starts with ranking the importance of the functions in the company, then creating the processes and documentation one process at a time.  By doing this, the business owner can delegate, and free up her/his time for more strategic thinking on how to improve the business further while better leveraging the talents of employees.

However there is even a greater impact of not having documented processes in place.  Sooner or later, every business owner is faced with the thought of whether or not s/he should continue the business or sell it to another individual or a firm.  Without processes that are easily understood by others, the buyer is highly dependent on the current business owner to transfer knowledge.  For a buyer this represents high risk.  Therefore, based on this risk businesses without formal documented processes tend to be valued by the buyer as only worth the value of the current assets, or at most the value of one year’s profits.

In contrast, businesses with documented processes and systems are much easier for a potential buyer to evaluate, and represent vastly reduced risk to the buyer because they are much easier to evaluate and integrate into their other businesses. These businesses aren’t dependent solely on the knowledge and expertise of the owner. Therefore, businesses with disciplined business processes and measures typically sell for at least three times more than businesses that don’t have processes in place. 

So, with this knowledge in hand, ask yourself: “Can Your Business Live Without You?”

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