By Scott Bushkie
If you are in an industry that has been hit particularly hard by this economy and business is slow right now, take advantage of this time to work on the business, not in it. You know what I mean. When demand is high, we tend to be reactive, responding to customer requests and tackling the essentials.
Now is the time to get proactive. Get organized, develop new plans for the future, and add value to your operation. Think of it as a comprehensive spring cleaning.
For starters, dust off that strategic plan. Some of the best businesses I’ve seen over the years seem to operate with a three to five-year rolling strategic plan of what they’re trying to accomplish. But instead of letting that plan sit on a shelf, leadership updates it every year.
A regular strategic planning habit brings value in a business sale. Buyers aren’t just looking at what you’ve done historically; they’re buying what the future could be.
When you can show accurate forecasts from past strategic plans, your future forecasts are that much more credible. Buyers want a road map to get to the next level and they pay more for companies with a strong growth story.
While you’re at it, document your business processes. Capture that “secret sauce” that makes your business unique, and put it on paper. Detail the sales process, document the bidding system, or create a training manual.
A business is more saleable, and will typically transfer for more money, when there’s less risk involved. And there’s less risk when all systems and procedures are well documented on paper, instead of sequestered away in the owner’s mind.
When these documents aren’t available, a buyer has to go on trust, trust that the owner will stick around long enough to transfer his or her expertise and trust that experienced employees will stay.
Sketch out an org chart so people understand the chain of command in your company. Have team members write out best practices for accomplishing their role.
If you already have these documents, update them. It brings clarity to job responsibilities, allows the company to operate more smoothly, and provides another layer of confidence for a buyer.
Finally, neatness matters for productivity and value. Hold a dumpster day and get your physical space in order. Plan to get rid of any obsolete assets. Organize inventory. Check with your lawyer and shred any unnecessary old records. Get team members to organize the computer files in a consistent manner that supports cross-functional operations.
It’s harsh but true: you could have fewer competitors by the time the economy turns around. Prepare yourself for growth , you’ll set yourself up for a successful future sale at the same time.
When succession planning, remember that the businesses that make it through are that much stronger—and more valuable—on the other side.
Scott Bushkie is President of Cornerstone Business Services, a low-to-middle-market M&A firm. Reach him at 888-608-9138 or [email protected]