In a world where efficiency in business is highly valued, a business that has clearly defined processes has a definite advantage. But what if there were more benefits to documenting business processes than just efficiency? Sure, efficiency saves a company time and money in the day-to-day, but what about the future? Does documenting processes increase revenue or even value down the line?
In a recent conversation, I spoke with a small business owner who was beginning to think about retirement. She confided that selling the business had been on her mind and she wanted to make sure she did what was best for her future. Since my experience in selling businesses is limited, my mind immediately jumped to what I know — defining and documenting business processes.
When it comes to selling a business, I know that obtaining an accurate valuation of a business is key. In this article, I’ll share the importance of documenting business processes and how this contributes significantly to a higher business valuation.
The Role of Clear Process Documentation
There are clear benefits to creating business documentation for every business — an improved customer experience, increased profitability, and a more cohesive and collaborative culture, to name a few. The list of benefits could fill a book, but most business owners are well aware of the need. The bigger question for you is where should this fall on your priority list?
To answer the priority question, you have to ask yourself what parts of your business you want to be able to remove yourself from sooner rather than later. Michael E. Gerber, in his best-selling book The E-Myth Revisited, says that creating well-defined systems and processes enables you to build a scalable business that can be easily replicated and managed by others, reducing reliance on your constant involvement.
He goes on to encourage business owners to treat their business as if it were a franchise, regardless of its size. This approach involves creating clear and well-documented processes for every aspect of the business, including operations, marketing, and customer service.
How Documenting Business Processes Boosts Valuation
By investing in documenting and optimizing their processes, you can potentially attract higher valuations when seeking a sale. How, you ask? Let’s look at 6 key ways.
Operational Efficiency
Documented processes demonstrate that a company has established efficient and effective ways of conducting its operations.
Risk Mitigation
By clearly outlining processes, businesses can reduce the potential for errors and inconsistencies. This, in turn, reduces the risk exposure for potential buyers.
Scalability and Replicability
Buyers often seek opportunities with growth potential. Well-documented processes provide reassurance that the business can be expanded without losing operational effectiveness.
Knowledge Transfer
When selling a business, the buyer needs to understand how various tasks and activities are performed. Well-documented processes facilitate smooth knowledge transfer, allowing the buyer to continue operations seamlessly.
Brand Value
Documented processes demonstrate professionalism, consistency, and a commitment to quality, which can enhance the perception of the brand in the eyes of potential buyers.
Due Diligence Process
During the due diligence process, potential buyers assess the risks, financials, and operations of a business. Well-documented processes facilitate, and even shorten this process by providing clear visibility into how the business operates.
Steps to Create Clearly Documented Processes
To begin documenting business processes, first, choose someone in your organization or an outside expert in process creation to become what David Jenyns calls your Systems Champion. This person will walk alongside you and your team while you get the most critical processes documented.
Next, decide what container will hold this documentation. There are many opinions as to what this should look like, so you have plenty of options.
For the most basic processes, you can simply use well-organized Google Docs and folders. For a more integrated solution, choose to house — or at least link — your documentation inside your current work management system, such as Asana. Finally, you can choose to keep your documentation in dedicated software like SystemHub, Trainual, or Process Street.
Once you have chosen your Systems Champion and the home for all of your written processes, in the words of Jon Acuff, you just have to start.
You have options when documenting business processes
If you are ready to DIY your process documentation, start simply. Resist the urge to make every document perfect. Done is better than perfect at this point. The individuals who use the process now should be the ones who create the process. Another team member can then work from the documentation to complete the process. This is an easy way to make improvements on the written documentation as you go.
If you are ready to hire a Systems Champion from outside your organization, contact Tessera Virtual Business Solutions to see how we can help. Whether you want to simply consult with an expert or hire someone to document the processes for you, you have options with Tessera.
Documenting business processes adds value to your business both now and further down the road when you are ready to sell. The earlier you can get the processes down, the faster you will see growth, both in revenue and value.
So what are you waiting for?
