One of the biggest problems that business owners have in selling their business is working out exactly what it is they are really selling. This is especially true of smaller businesses where so much of the business knowledge can be kept in the owner’s head.
The common excuse for this is something like the owner is a ‘control freak’, or a ‘perfectionist’ – the owners will even say such things about themselves. The truth is usually much more prosaic in that the reason is often more about self preservation than anything else. Get a bunch of small business men, or women in a room at a networking event, or similar, and you will find that just about everyone has a war story that involves being ripped off by a colleague, a partner, a customer, a supplier, or (very often) a trusted employee.
Not committing anything to writing really does have a lot going for it when the last time you did something similar, one of your employees took a copy and went off to set up a competing business using the contacts they made, and knowledge they acquired, while working for you. Why make it easy for someone else to do something similar?
The problem is, of course, that if the owner has too much expert knowledge in his or her head, when the business comes to be sold there can very little to sell. If the business will collapse as soon as the current owner exits then it has no sale value whatsoever. Most savvy business buyers will spot this situation a country mile away, so some way has to be found to deal with it.
The answer is to systemise the business: allowing it run with the minimum of owner intervention, but at the same minimising the risk that goes with sharing too much operational and commercial information with too many people.
This is all so much easier said than done of course and, in writing this, I do not profess to have all of the answers, but below are a few pointers that may help some readers.
To begin with, we should have a working definition of what systemisation really means. It means the business should be able to run day-to-day autonomously – without the boss being there. Yes – of course there will always be exceptional circumstances that require executive intervention and decision making, but the purpose of the system should also be to minimise the effect of surprise situations and reduce the frequency of their occurrence.
It does not mean giving everyone in the business all of the information they need to go off and setup their own competing business. However, it does mean that roles and boundaries are clearly defined and that there is an overarching framework that everyone understands as broadly how the business works and, within that, their own role.
The systemisation may be paper driven, however it is much more likely these days to be IT driven. But beware, it is often a mistake to leap in to an IT driven systemisation too quickly. Often a paper driven system in the early stages is a good way to debug the system and simplify it. Taking a chaotic and overly complex process and trying to drive it using IT means you just get a computerised chaotic and overly complex process instead of a manual one.
The full system will be comprised of many processes ranging from initial sales prospect engagement through production and/or service delivery to customer service and after-sales. While each process needs to be defined and the interfaces between the different processes understood by all concerned, there is no need to disclose everything to everyone. It is in this segmented aspect that IT can be most useful as access rights can be easily centrally controlled and monitored as needs be.
Equally, databases (customer and other) can be centralised and configured to restrict access on a need-to-know basis. A centralised control is a good way of extracting information from informal spreadsheets and local records all of which represent huge risks to the business on a number of levels. Implemented well and the ‘control freak’ may find that he or she has more information and control than before, but fewer operational responsibilities.
Of course there is always a danger of overdoing this and creating a system that constrains rather than enables. It would also be a mistake to think it will be right first time. Systemisation is an iterative process that will need to be worked at over time to perfect. This is why a paperwork exercise before moving to the final IT solution can be so useful.
Often the trick is to use the concept of a framework when defining a process. If you hire a sales person because you think they will do a great job it will be a mistake to start defining detailed processes that will dictate exactly how they will sell. It will be much better to have a process that picks up critical information at key stages and perhaps assists by invoking reminders for follow ups. The sales person will then operate within the framework without excessive restrictions on how they do their job.
The defined processes should therefore allow experts to operate within their sphere of expertise – capturing and regulating key information that needs to be passed on to subsequent processes. The IT should make capturing information and operating the process easier: facilitating in other words. If this is not the case then either the defined process or the IT has failed.
As you can see there is a book to be written here, but there is a very specific approach you can take to make this easier, improve your sales and make the business more saleable – it is called ISO 9000. For many, ISO 9000 cannot be talked of without spitting, but applied well it can be a great help. Applied badly it can also be a disaster.
ISO 9000 is known as a standard for a Quality Management System, but really it is a standard that dictates how a well ordered business runs. In that sense it is more management that quality.
Many business owners avoid ISO 9000 with a common objection being the administrative overhead and the cost of registration. However, a simple system can be relatively easily computerised and who said anything about being registered? It is possible to adopt the standard and use it to your own ends without taking the final step to being fully certified. Of course the certification can be used to test the efficacy of the system and the certificate will provide independent assurance to a potential buyer that the business is run with some degree of control. You will have to make a judgement on that.
You will find, in adopting centralised IT controls, that ISO 9000 certification is much less painful than you think. A good IT system will control the processes and automatically establish the audit trails essential for independent external checks. This approach is often referred to as a ‘black box’ system and can be a very useful shortcut.
If you are thinking of selling your business, but are still working long hours in the business on operational rather strategic matters, it is likely you will have a long way to go, but systemisation is the right approach. It will be hard work to get there, but once in place your hours will gradually reduce and, much like teaching a child to ride a bike, you will eventually be able take off the stabilisers, let go, stand back and watch it glide along.
It is at that point you will truly have a saleable business.