Leadership

#2: Document Everything

From The 30 Best Business Practices of All Time, published by PROFITguide.com: Canada's trusted resource for entrepreneurs and innovative executives

Written by PROFIT staff

Greig Clark is, to say the least, no fan of letting employees make it up as they go along. At College Pro Painters, which Clark founded in 1971, he was famous for compiling fat binders of files that spelled out, step by step, every single repetitive business process at the company.

Clark, a strategic advisor to entrepreneurial firms and longtime PROFIT columnist, says McDonald’s founder Ray Kroc, in his book Grinding It Out, cites documented processes as being central to his firm’s success. “You need to capture the best way to do things, then use continuous process improvement to make them better,” says Clark. “And you have to write things down or you’ll always be starting from scratch.”

It’s easy to see that a franchisor must detail its processes so franchisees can replicate them, but why should other firms bother? Clark says you need documented processes even if you’re doing custom work: “Film directors are creative as hell, but even though every film is different, are they ever frickin’ organized.”

Besides, if most of your key business processes are stored only in your head, you’ll severely limit the potential size of your operations. Michael Gerber, in his influential book, The E-Myth Revisited: Why Most Small Business Don’t Work and What to Do About It, contends that you need to map out how things will get done correctly, over and over, even when you’re not there. This can happen only if you craft standard procedures for everything from sales calls and handling customer complaints to business planning.

True, documenting these processes is a time pig. But you’ll be richly rewarded when you fetch a far higher price down the road when you sell your business. That’s because you’ll have eliminated what Mark Wardell, president of Wardell Professional Development Inc., identifies as the No. 1 factor depressing selling prices: too much of the value is tied up in the owner.

Wardell, whose Vancouver-based advisory group specializes in boosting the value of owner-managed firms, says that prospective buyers are wary of—and, therefore, will offer a much lower price for—a business that is dependent on its owner to run smoothly.

“You can significantly reduce this risk by giving a potential purchaser a well-crafted business manual with the policies and procedures required to run your firm, including all the associated forms, letters and checklists,” says Wardell. If you do this as part of a broader strategy that turns your company into one that runs just fine without you, he says, your selling price should at least double.

Originally appeared on PROFITguide.com
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