Corporate Hygiene

How it Can Help Sell Your Business

by Dave Driscoll

Merriam-Webster defines hygiene as “the things that you do to keep yourself and your surroundings clean in order to maintain good health.”

Apply that definition to your business and you will build greater value for it when you are eventually ready to exit.

What is business or corporate hygiene?

There are three main components:

1. Clean, accurate financials that tell the true story of the business.

2. Documented processes and procedures that define the “how-to” of your operations.

3. Well-defined human resources policies and management.

These components should be a priority at any stage of your business life cycle; good corporate hygiene means you will have easy access to current information and processes at all times to make the best decisions for your business and your employees.

In addition, someday you will exit your business, one way or another. Place yourself in the shoes of a potential buyer and ask, “If I were investigating a company, how would corporate hygiene influence my confidence in deciding whether to acquire?” Let’s face it: Buyers want to minimize risk whenever possible, and a seller’s business hygiene can make a big statement in relation to risk.

Clean and accurate financials reduce risk for a buyer.

If what you see is what you get, without a bunch of complex explanations required for the buyer to see the true financial operations of the business, buyer confidence is enhanced.

Documented processes and procedures reduce risk for a buyer.

A “company playbook” describing what to do when and how to do it step by step helps buyers understand how the company works on a daily basis. The playbook also shows that the organization can cover personnel vacancies without a decline in productivity or quality. One of the biggest threats to quality is the variability created by employees. If there is a short- or long-term vacancy, the job or process can be repeated per company standards by another person thanks to the instructions in the playbook. Even if you aren’t planning to sell your business anytime soon, the playbook will increase productivity and consistency for your company.

Well-defined human resources policies and job descriptions reduce risk for a buyer.

Documented policies for workforce management, including an employee handbook detailing rules and progressive management of employee issues, are essential. This demonstrates to a buyer that the organization is already accustomed to operating under a set of rules and procedures, and the buyer will not need to be the bad guy who puts rules in place. The last thing a buyer wants is to disrupt the workforce too quickly after an acquisition.

All in all, the clearer and more detailed the company’s processes, the greater the value that can be achieved to support the seller’s Life Beyond Business.
 
Dave Driscoll is president of Metro Business Advisors, a mergers and acquisitions business broker, business valuation and exit/succession planning firm helping owners of companies with revenue up to $20 million sell their most valuable asset. Reach Dave at DDriscoll@MetroBusinessAdvisors.com or 314-303-5600. For more information, visit www.MetroBusinessAdvisors.com.