Getting the most for your business
Do you run your business or does your business run you? The answer to this question could be the difference between being able to sell your business or not. Are you counting on the selling of your business as a means to fund your retirement?
If so, it is important to put your business in the best position to be sold. One big mistake that business owners make is that their business cannot function without them. Some business owners see their importance to their company as a source of pride, but they shouldn’t.
Instead, they should focus on setting up foolproof systems to automate their company. A company with proven standard operating procedures will help the owner command top dollar when selling.
Most small businesses do not sell because the business owner does not have an exit strategy planned. A smart prospective buyer is looking to buy a business where he/she can receive a reasonable return on their investment. They are not looking to buy a job. If you haven’t done so already, be sure to do the following:
•Write job descriptions for every position in the organization, including the owner operator. Job descriptions help both the employee and the business owner, providing clarity to the worker about what it is they are responsible for doing on a day-to- day basis.
They also provide a guide to the employer to fairly evaluate the work performance of the employee. The best way for an existing business to start the process of writing job descriptions is for each employee to track their time for a week. I recommend the supervisor and employee have a meeting the following week to review the employee’s time log. Where did the employee spend the majority of his/her time? This is a great opportunity for the owner to determine if the employee is doing the “right” work.
Are they spending the majority of their time working on the most important aspects of their job? Are they wasting time on meaningless tasks? This is the time to clarify the job responsibilities. This exercise also allows the owner to evaluate the position itself. Is the job necessary? Would the employee be better suited with a different job description at your company?
I have found many owners overwhelmed by the task of writing job descriptions. Don’t be. There are great resources available online. I personally like the templates available at http://resources.workable.com/job-descriptions.
I recommend reviewing one of their job descriptions that is comparable to a job at your company. I’d then work with the employee to modify the description to match the position at your office. You should then put the job description in writing and forward the document to your business attorney to verify that it is in compliance with state law. The final step is to have each employee sign and date their newly created job description. This document should be retained in your human resources file. It will be helpful if you have to pursue disciplinary action against an employee in the future.
•Have employees create checklists for all of their routine work. The most valuable businesses run themselves. Every team member understands their job responsibilities. They do not need to be micromanaged since their work has been defined. The best way to accomplish automation is to create checklists for every basic task required to run the business. These checklists are the standard operating procedures of your company. Your standard operation procedure manual details how to run your business, with or without you present. This will make your business more valuable and attractive to a prospective buyer.
Have another teammate unfamiliar with the task run the steps of the checklist after it has been written to see if it works. I found it best if the person who writes the checklist is not present when it is being tested. This will prevent the “tester” from recognizing the mistakes. Make adjustments as necessary to finalize the checklist. They come in especially handy when your employee is out sick or on vacation. We make it a point not to bother our teammates when they are out of the office. This was impossible prior to the creation of our checklists.
Checklists are also helpful when mistakes are made. The goal at our office is to minimize mistakes, especially on routine work. Our employees are required to fix mistakes as soon as they are discovered. If they cannot fix the mistake themselves, they are required to alert the person who has the power to solve the problem. The first question the supervisor asks is, “Did you follow the checklist for this task?” If so, does the checklist need to be revised? The checklist should be rewritten immediately to circumvent a future mistake.
Don’t worry about trying to do this for every task in your office. I have found it impossible to write checklists for creative work. It is important for each employee to have a hard copy of the standard operating procedures manual for the company at their workstation. I would also suggest keeping an electric copy of the SOP manual backed up on your computer so that you can easily make changes when required. The final step is to have a teammate in the office test every checklist quarterly to ensure that they remain accurate. As things change, so should the checklists. Be sure to hand out updated checklists to team members so that they can keep their manual current.
• Create a training manual for every position in the company. This will help get new employees up to speed quickly. Think Starbucks. Handling the morning rush looks like a very difficult task yet each location seems to be hiring new people constantly. This success is not by accident. They have developed a simple process to train employees.
Our operations manager is responsible for training new employees at our company. We have worked hand in hand with her to create a training manual that makes sense for trainer and new employee to follow. We let our operations manager prioritize the material. This authority gave her ownership of the training manual process. Our goal is to get every new employee up to speed in less than two weeks. This was impossible prior to the creation of the training manual.
On a new employee’s first day, they are issued a copy of the training manual. They follow along with their training manual as they shadow their trainer. The trainer demonstrates to the new employee that they use checklists regularly, no matter how long they have worked at our company. The trainer emphasizes the importance of our system. Watching the trainer use checklists validates the expectation from day one that use of the manual is a requirement of the job.
There is an ancillary bonus for creating job descriptions, checklists and a training manual for your business. Your business will run better, your investment of time working “on” the business will result in you spending less time working “in” the business, and you’ll spend the majority of your time managing your processes instead of your people.
You’ve worked hard at building your company. Take the time today to make it more valuable to a potential buyer. You deserve top dollar for your hard work.
Jim Marren is a certified financial planner with Reno Wealth Advisors, an independent firm with securities offered through Raymond James Financial Services, Inc. Contact him at 775-321-6200.
Heather Ashbridge, who started with Nevada State Development Corporation in 2008, previously served in several roles with the organization, including assistant vice president and loan officer. She is based in NSDC’s Reno office.