From a distance, the business buyer seeks to understand at a high level what you do and how you do it. Below is a structured approach you can follow to communicate what your business does and how it operates effectively:
- Outline the Operational Processes - Describe the key stages or steps to deliver your product(s) or service(s) to your customers; if you have any unique technologies, methodologies, or proprietary processes that contribute to operational efficiency or differentiation that should be highlighted.
- Operational Structure: Describe the organizational structure of your business, including the hierarchy, departments, and key personnel. Outline who reports to whom and how decisions are typically made
- Inventory Management. If you have inventory, explain how you manage inventory, including your ordering and restocking procedures. Discuss any technology or systems in place (or could be in place) to optimize inventory turnover and reduce carrying costs.
- Supplier Relationships. Discuss your relationships with suppliers, including the number of suppliers, any long-term agreements, and how you manage the supply chain. Highlight any cost-saving measures or exclusive supplier partnerships. If you only have a few suppliers, this concentration will be a problem for a buyer. You will want to identify alternatives to mitigate this risk.
- Quality Control. Describe your quality control processes and measures to ensure your products’ or services’ consistency and quality. Discuss any certifications or quality standards your business adheres to. A buyer will want to identify if any efficiencies could be immediately implemented to improve cash flow margins.
- Cost Controls. Provide an overview of your cost management strategies, including controlling operating expenses and optimizing resource allocation. The buyer will spend a great deal of time with your financial statements. Identifying your optimization strategies will demonstrate command of the business and lower the chance of a value penalty.
- Key Performance Indicators (KPIs). Highlight the key performance indicators you track to assess the efficiency and effectiveness of your operations. This might include production output, quality, and cost control metrics. Don’t worry if you don’t have this in place. Most businesses don’t, or at least they don’t realize it. Most business owners who have owned businesses for an extended period know where the company is operationally.
- Highlight Scalability and Growth Potential - Discuss how your business is positioned for growth and scalability. Without giving away your growth secrets, share (without giving away the farm) any plans, strategies, or untapped opportunities that could drive expansion.
- Address Competitive Advantages -? Explain any competitive advantages your operations hold—whether it's through cost efficiencies, superior technology, unique capabilities, or strong relationships within the industry.
- Operational Challenges. The buyer will always find out, so be transparent about any challenges or obstacles your business has faced in its operations and how you've addressed them.
When discussing these operational aspects with prospective buyers, it's important to provide concrete examples and data whenever possible. The goal is to demonstrate your business operations' efficiency, reliability, and scalability and any potential areas for improvement or growth. The greater command of this, the more business value you will recognize.
