Operational Exit Readiness
Despite not having much of a winter, spring is getting closer, and with spring comes thoughts of new beginnings. In the workplace, new beginnings could look like new policies, new employees, or exiting your business to start a new business or to start your retirement. This month’s article is focused on exit readiness.
What is exit readiness when it comes to selling a small business? Exit readiness is the process of preparing a business for sale by ensuring it can operate independently while maximizing its value in alignment with personal financial goals. Key components of an exit plan may include: (1) obtaining a professional valuation; (2) cleaning up financial records; (3) shifting operations from individual expertise to institutional knowledge; (4) documenting processes within Standard Operating Procedures (SOPs); (5) developing a leadership team; and (6) creating a personal post-exit plan to ensure the sale proceeds match your retirement needs. I support small businesses with operational exit readiness - numbers 3, 4, and 5 from this list.
So what do I mean by shifting operations from individual expertise to institutional knowledge? This means getting all of the business knowledge out of founders heads and into systems. Many successful small businesses started with a smart business owner and a notebook and then never evolved from the notebook. How can you sell your business - if you are the only one who knows how to properly operate it? This is where SOPs come into the equation. Standard Operating Procedures (SOPs) are uniformly written procedures with detailed instructions to record routine operations, processes and practices followed within a business organization.
Also, many small businesses still use a paper/folder system regarding their customer information. This can be a big issue from an operational efficiency standpoint as well as negatively impact a purchase price. If your customer data isn’t easily quantifiable for a prospective buyer, then a buyer will likely only pay for your equipment and inventory and not your businesses’ “goodwill” or future earnings. You can make the customer data pipeline more visible by moving it out from a paper system and into a Customer Relationship Management (CRM) system.
Investing in building out leadership teams also ensures that businesses can effectively run without the founder. This could look like appointing a new general manager with the founder shifting to more of an advisory role, or creating cross-training programs that ensure that every technical/expertise role within an organization has a backup who can perform the task at 80% proficiency.
If all of this feels overwhelming, this is where I can support you. I can be the bridge between your brain and the systems within your organization. I can help you extract your individual knowledge and transform it into institutional processes that will support your organization’s efficiency and, in turn, increase its overall value.
