Ask yourself, if you could find out the secret to adding 15 to 25% to the valuation of your company would you want to know the secret? Would you follow the steps even if it might take some time? If you could do one thing that would make your company more stable and resilient during periods of high growth or great change, would you do it?
The truth is that your business operations either encourage growth or discourage it. The secret to encouraging growth is so apparent it is often overlooked. The answer is simple and when done right easy.
Constant Process Improvement
Accurate and Useful Documentation
This is as true for startups as for global corporations. Bankers, venture capitalists, and potential purchasers know that documented businesses who focus on constant process improvement are worth more than businesses that do not. I am not talking about manuals that are written and never looked at again. I am talking about businesses that use regular operational audits, well drawn workflows, and step-by-step procedures as a way of managing.
Documentation has been used for years as a way of increasing value and managing change and is a part of constant process improvement. Constant process improvement is based on the theory that things change and as a result we change. If we are paying attention we can change for the better.
There are many benefits to processes. Here are just a few.
Bankers and venture capitalists hate risk. When your operations are carefully documented your business is at less risk from loss of a key person. A key person is someone that would be hard to replace and that if suddenly lost because of illness, injury, job change, or life change your business would be harmed and would need time to recover. Key people include business owners like you and I, who are notorious for keeping knowledge in our heads. When everyone has documented what they do every day you greatly increase the probability that your business will be able to replace a key person and keep going without the loss becoming a crisis.
When your team has agreed that your documentation is correct, they can more easily be held accountable if they deviate. Conversations about performance become easier. There can be only two reasons someone does not follow procedure. Your employee either did not follow the procedure or the procedure is wrong, and it needs to be updated. There is no room for debate. Less debate equals more harmony.
Benefit from Experts Experience:
People who have done a task for a while have developed little tricks to be more effective and efficient. Many times, people doing the same task will eventually discover those steps that make them better at their job. Many times, but not always. If you ask the best people in your company why they are the best, they will tell you. If you do not ask, they will often keep it to themselves. When you or your employee write down the steps that make them the best you shorten the learning curve for everyone who comes along later.
The very act of committing to a process by documenting it in a workflow with step-by-step procedures helps you find the gaps in your processes that are inhibiting efficiency and discouraging growth. Workflows will especially help to identify where handoffs could be tighter and communication better so that every team gets the opportunity to show up at their best. Improving procedures so that team members know how to prepare and when to start can lower overall frustration and reduce costs associated with late delivery and mistakes.
Make Positive Change Easier:
Change happens. When you are in charge of change it is more likely to be beneficial to you. Many businesses that have survived the Pandemic so far were able to pivot quickly. Those who used workflows and procedures could explore how their new operations would work and uncover gaps in their pivot plans BEFORE they became costly mistakes. They were positioned to explore multiple options and then pick the one most likely to meet their needs with less stress. Teams that operated using the concept of continuous improvement could look at the Pandemic pivot as just another opportunity to do better in changing circumstances. Those kinds of teams are the most resilient.
Bankers, investors, and purchasers, especially venture capitalists, know that small businesses often have team members and especially team leaders and owners who wear many hats and have little back up. They know that it is likely that business owner(s) and team leaders may walk away during a transition. More and more they discount the value of companies that cannot prove that they are well run by the documentation they keep. In fact, it is a well-known strategy used by venture capitalists to find an under documented company and purchase it for a discount. They know they can spend a year documenting the processes which will lead to improving them. When the business is efficient, effective, and well documented they can sell it and take the added value as profit for themselves.
Here is one entrepreneur’s experience with processes in his business. Successful serial entrepreneur SaaS (Software as a Service) builder and investor, Charlie Alsmiller, currently CEO of Enspir SaaS Ventures, has become an expert in exit strategy. He said, “In my last venture, we tried to sell three times. The first time, basic processes, documents, and personnel files were not in the proper order. We failed to receive one offer. The second time, we didn’t have our core KPIs managed, and we received a LOW offer. The third time, we received an offer within a month. Preparation, process, and documentation increased our valuation and our attractiveness to a buyer exponentially.”
Thanks to our guest blogger, process expert, Sheryl Hardin! She is the owner of Business Solutions Consulting. Sheryl is a passionate Organizational Change Management (OCM) professional who enjoys assisting companies large and small as they create a business strategy, solidify operations, improve processes, manage change, and prepare for and initiate rapid growth. She uses carefully planned operational analysis and process improvement strategies that inspire operational best practices to guide her clients as an advisory board member, consultant, or fractional leader. Sheryl is also an author and speaker. She can often be found speaking as a national facilitator, seminar leader, or adjunct faculty instructor. Sheryl’s books, articles, and speaking engagements are informed by real business experience that includes organization-impacting activities that help businesses of all sizes from global corporations to small businesses operate efficiently and effectively. This blog will become part of a chapter in her upcoming book Capacity2 : Exponentially Growing Small Business Capacity.