Excellent standard operating procedures can help sell a business.
In today’s rapidly evolving business world, a clear roadmap for success is essential. One pivotal tool in this journey is the meticulous crafting and implementation of standard operating procedures (SOPs). As we delve further into the role of SOPs, it becomes evident that to truly add HUGE value to a business, one must wholeheartedly embrace the guidance of standard operating procedures.
Standard Operating Procedures Demystified
SOPs aren’t mere documents; they’re the reflection of a company’s dedication to achieving consistent excellence. Standard operating procedures offer detailed guidelines on how to carry out specific tasks or operations. From the hospitality sector to the tech industry, the significance of SOPs in upholding quality, promoting consistency, and ensuring safety cannot be overstated.
For those aiming to sell a business, a solid set of SOPs can dramatically boost the business’s value. It demonstrates that the enterprise operates with streamlined processes, mitigates inefficiencies, and prioritizes the safety of its stakeholders.
Diving Deeper into the Value Proposition of SOPs
1. Consistency: A hallmark of successful businesses is the delivery of consistent outcomes, whether in product offerings or internal functions. For example, a bakery chain that ensures a consistent flavor and design of its cakes across various outlets likely relies on its SOPs. Such uniformity cultivates customer trust and reinforces brand credibility.
2. Efficiency: Imagine a tech firm releasing periodic software patches. By adhering to their standard operating procedures, the developers can sidestep redundant tasks, make faster decisions, and expedite the release process. This efficiency translates to a quicker response time and heightened user contentment.
3. Training: For an expanding retail conglomerate, SOPs play a pivotal role in ensuring that all employees, even in new regions, undergo consistent training. Instead of navigating through diverse training modules, the standardized procedures offer a unified training framework in line with the company’s core values.
4. Safety: In high-stakes sectors like nuclear energy, deviations, however minor, can have significant ramifications. SOPs, detailing precise steps for reactor maintenance, for instance, ensure each operation upholds the safety and efficiency standards.
5. Regulatory Compliance: Financial firms, which operate under tight regulatory scrutiny, can use their standard operating procedures to showcase adherence to mandated guidelines. From transactional accuracy to customer data handling, SOPs can serve as a benchmark during regulatory evaluations.
6. Accountability: If a food processing company faces quality issues, having SOPs enables them to swiftly trace the production batch, the ingredient sources, and even the personnel responsible, ensuring timely rectification.
7. Continuous Improvement: An e-commerce platform, based on customer feedback, can revisit its SOPs to include enhanced user interface designs or better security protocols, driving progressive enhancement and adaptation.
8. Scalability: For a global fashion brand, as it branches out into new territories, standard operating procedures ensure that customers in Paris experience the same shopping ambiance as those in Los Angeles. Such homogeneity, steered by SOPs, facilitates global expansion while retaining brand essence.
For businesses of all sizes, standard operating procedures aren’t just about documentation; they’re strategic keystones. Whether the objective is to augment operational prowess, guarantee safety, or sell a business at an optimum rate, SOPs bear witness to an organization’s unwavering commitment to progress, excellence, and long-term viability.
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The Full Transcript of This Video is Below. Standard Operating Procedures Help Sell A Business.
Nicola Gelormino:
Hey, entrepreneurs, do you want to increase the value when you want to sell a business? Today, we are talking about key value driver number three, to find out what it is, join us on this edition of the Inside BS Show. Hey, now I’m Nicki G. This is the Inside BS Show. I’m here with my partner, Dave Lorenzo. Dave, how are you?
Dave Lorenzo:
Hi, Nicki G I love doing these shows with you every day. There’s a surprise in the package, what’s going on today?
Nicola Gelormino:
Today we’re talking about driving value when you want to sell a business. Now, this is the number three way to do it in our 10 key drivers series. Number three way to drive the value of your business is your standard operating procedures. So what are those? Those are a guide to every aspect of your business so that it operates the same way no matter who is there running it, especially if you as a business owner are out for a day. So your standard operating procedures are ranging from everything from the keys to unlock the front door to knowing the code, to turn off the alarm, to get all the lights on in the building down to the exact service you’re providing, the way that it’s provided, how it’s delivered, making sure that you ensuring that there is continuity, quality at every step of the business so that it’s always operating the same and it’s operating well. So Dave, why is it important to have standard operating procedures and really what’s the value of them when you want to sell a business?
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Dave Lorenzo:
Yeah, that’s a great question and you really described it perfectly, and there’s two places where you really learn to value standard operating procedures, and in my case, it comes from having a career at Marriott in the hotel industry. Marriott is a company that was built on a foundation of standard operating procedures for everything from making coffee to taking out the trash, to cleaning the dumpster, to making a bed, you name it. Marriott had a standard operating procedure for everything, and I’ve worked with entrepreneurs who’ve had a career or been in the military, and they will tell you that the value of standard operating procedures in the military is incredible because you’ve got people from all walks of life, people with different levels of education, people with different types of innate intelligence, and in the military they need to perform a specific job to the exact specifications or people die, right?
In Marriott, if the bed isn’t made appropriately, somebody’s a little uncomfortable, but in the military, if you don’t load the weapon effectively, you will get shot before you shoot the enemy. So there has to be a standard operating procedure for loading the weapon in the military, and there’s a standard operating procedure for making the bed at Marriott. Now, why are these so important? They’re important because if your business has these for everything, particularly in the operations space, you can onboard new employees quickly because they can take a book of standard operating procedures and sit there and leaf through them and with some hands-on training and the standard operating procedures as a guide, they can learn to do everything from replacing the toner in the copier all the way through to sophisticated tasks if they’re broken down in step-by-step guides in the standard operating procedures. Think of it this way, Nicole, think of it as your standard operating procedures are like the checklist that the pilots use before they fly the plane.
The pilots have thousands of hours of experience in flying the planes that they’re in in commercial aircraft. A commercial aircraft pilot was a pilot in the military before they became a pilot in a commercial aircraft or they were a private pilot and they have hundreds and hundreds of hours before they join an airline. They join the airline, then they have hundreds of hours in the airline in flying the plane and taking off and landing, but they still, every single flight after thousands of hours refer to a checklist and go through the checklist for their pre-flight activities. When there’s a crisis and the buzzer is going off and the cockpit, they go to their checklist for that buzzer for that light, and they work through their checklist of standard operating procedures to diagnose the problem. Why do they have that so they don’t miss any steps, and so that there’s a consistent response and a consistent experience every single time.
This is such a huge value driver when it is time to sell a business. I can’t stress it enough, and when I teach entrepreneurs about this, I come in and I say, listen, you don’t have any standard operating procedures. We got to start in the operations of your business, and we got to create them. They go, oh my God, I don’t have time to sit down and write all this crap down. You don’t have to do that. Here’s the beauty of creating standard operating procedures today. You have the expert, the person who’s doing the task, create the standard operating procedure, and years ago when we would do this, we would have them take a pen and a pad and write down, okay, what did I do? I sat in my chair. Step one, sit down in the chair. Step number two, turn on the machines. Okay, step number two, turn on the machine.
These days, you don’t have to do it because what do we do? We take out the phone and we create a voice note and we say, step one, sit in the chair. Boom. They sit in the chair. Step two, turn on the machine. Boom. They turn on the machine. Step three, program the machine, push button a, button B, button C. All they need to do is record into their phone or a recording device that you give them the different steps that they’re following that’s transcribed. Somebody stands next to them the next day as they perform that task and they make sure they didn’t miss anything. Then you clean it all up and you got your standard operating procedure. You do this for every task, every single task, and it’ll take you six months to make sure you’ve captured everything in every segment of your company.
But these are so valuable because when you sell a business and the people transition into the roles in the business or the owner of the business says, what happens when there’s turnover in a key position? You can say, we’ve got the 30 standard operating procedures right there. We’ve also got, by the way, videos that show this, and we have certified trainers in each role who will compare the video and the text of the standard operating procedure to the actual person performing the job. That’s why these things add so much value when you want to sell a business because it serves as a turnkey model for somebody to come in and pick up right where the business left off. So it’s a seamless transition when you sell a business. Does that make sense, Nicola?
Nicola Gelormino:
It does. So I don’t like hearing that the process of putting standard operating procedures in place takes too much of your time. It doesn’t. It’s actually a small amount of time that you will put into that, and frankly, you can use a point person to help you do that. It’ll be a small amount of time for the value that it’s going to bring to your organization. I mean, a great example of a company I can think of that we all are familiar with that has excellent standard operating procedures in place is Chick-fil-A. Think about it, I think I’ve read that they can get a new location up and running in something like four months. The only way you can do that and allow your customers to come in and have the exact same experience they have at that new location that they have at any location across the country, and there are thousands of them, is by having excellent standard operating procedures in place.
There is a step-by-step guide to every aspect of that business, and that business, as we’ve all seen, runs like a well-oiled machine from that drive-through line that is out onto the street, they have to make sure that everything is operating exactly on time, that is being executed flawlessly, that you are providing the same level of service at every single business. So that’s a great example as to why you need to have these and look at how successful that company is. Way up there absolutely exploded, doing really great job with their business. That’s why it’s so important because taking that little bit of time to put those procedures in place is going to exponentially increase the value when you sell a business, and that is going to put you on track for an excellent exit strategy.
Dave Lorenzo:
Yeah. In our business, we just did this recently. We had, so the producer of this show, MJ Villanueva, is in the Philippines. She also is my assistant. I work with her. I interface with her every day, but because her work schedule is opposite mine, she works when I’m sleeping and I work when she’s sleeping. We tend to exchange email and voice notes and sometimes videos as a way to make sure we get things done. We just put a new process in place at the time of this recording, and we’re two weeks into it where MJ is managing the Inside BS show page on LinkedIn, and she’s posting older episodes on the Inside BS Show page with the thumbnails and links to the shows, and in order to make sure she could do that, I set up the page here and I gave her the step-by-step guide for how you and I wanted the shows posted, who we wanted tagged, and how we wanted them tagged, and how the summaries needed to be done.
So what did I do to create that standard operating procedure? I did a loom video. I did a video on Loom, which is a really cool screen capture software that showed me doing the step-by-step process for posting the video, creating the summary and tagging people, and then putting the link down below, and I wrote it out, but I also sent her the video, and you know what happened? She did it flawlessly from day one, and we never have to do it again, and I want MJ to work with us for the rest of her career. But if she were to leave or if she gets promoted, when she gets promoted and somebody else needs to take over that task, she can send them the video, send them the step-by-step guide I created for her, and then teach them one time how to do it and they can run with it.
That’s just a micro example of the value of standard operating procedures. It took me 15 minutes to record that video. It took me maybe 10 minutes before that to work through the process and make notes. Then it took me another 15 minutes to write down the step-by-step guide. So in arguably 40 minutes, I created that entire standard operating procedure, gave it to her. I will never have to do that again. It’s done. It’s in the bank. As long as we have that practice in our business, it’s all set and ready to go. That’s a great example of a standard operating procedure that we use. You should be able to do this for everything in your business. It will increase the value exponentially when you sell a business because when people take over your business, they will be able to hit the ground running.
Nicola Gelormino:
Absolutely. So my final thoughts on this topic are make sure that you take the time to put standard operating procedures in place. You are not only going to benefit your operations at this point in time, but at every stage of your company’s business and leading up to the time with you sell a business.
This is the third video and article in the Key Drivers of Business Value series. If you’d like to review the other key drivers of business value, you can find them all on this page: Key Drivers of Business Value
You can find the audio podcast of this episode of the show here: Standard Operating Procedures Help Sell a Business
Dave is a renowned business strategist and the co-founder of Exit Success Lab, where he shapes the company's strategic direction and spearheads content creation, and business development initiatives. His responsibilities also include advising clients on capital acquisition and developing and maintaining relationships with family offices and private equity funds.
In addition to his leadership at Exit Success Lab, Dave is a celebrated author and speaker. His expertise and dynamic presentation skills earned him the title of New Speaker of the Year in 2022 by Vistage Worldwide, Inc., a testament to his influence in the field of CEO consulting and peer advisory.
Dave's client roster includes executives from numerous FORTUNE 500 companies like Pfizer, Marriott, Textron, and IBM.
Key Areas of Expertise:
-- Enterprise Value Enhancement: Drawing from his experience, Dave designs growth strategies that set the foundation for maximum value realization.
-- Organic Growth Enablement: Dave facilitates business expansion by understanding market nuances and capitalizing on the team's strengths, solidifying brand presence and market dominance.
-- Client Lifetime Value Augmentation: Emphasizing deep client relationships, Dave Lorenzo devises methods to optimize retention, purchase frequency, and profitability.
-- Strategic Exit Planning: Whether envisioning a sale, merger, or generational transition, Dave offers comprehensive guidance to ensure smooth transitions congruent with your aspirations.
-- Stakeholder Engagement: With a keen focus on relationship-building, Dave Lorenzo creates an environment of transparency, trust, and mutual respect.
-- Professional Network Connections: Dave's well-established circle connects CEOs to industry leaders, subject matter experts, and pioneers, minimizing risk while maximizing opportunity.
-- Family Office and Private Equity Ties: Dave's partnerships with financial professionals provide CEOs with invaluable resources and diverse strategic opportunities.
Dave Lorenzo received his MBA from Pace University. He also holds a Master of Science in Strategic Communications from Columbia University in New York City.
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