Your Business as a Machine: Exit Planning Is Not Just for Exiting
I’d like to take a few minutes to talk to you about systems (*cue bored yawn*). Systems may not be the most exciting part of owning your business, but they may be the most important. Many business owners don’t think about systems until they are getting ready to retire or sell, but it is important that this changes. Whether a business owner intends to retire in 5 years or 25 years, they should always be aware of what systems they use in their business and whether those systems could run without them.
Often business owners spend all their time focused on working IN their business rather than working ON it. This approach can make a business profitable, but it can also hurt the business and make it harder to sell later on.
Imagine you were looking to buy a restaurant and you find out about two opportunities in your town:
- A local craft burger joint known for making delicious burgers. The owner runs the kitchen and is responsible for creating new and creative menu items every week. The restaurant has three employees who help in the kitchen and front-of-house, but the owner oversees every aspect of the restaurant.
- A franchise for a chain of burger joints. The franchisor will teach the owner how to operate the business effectively, and they also provide step-by-step instructions for all of the operations so any new employee could easily perform the necessary job functions.
All things being equal, I imagine most people would pick option two. While the artisanal burger restaurant sounds like a great place to eat, the business revolves around the owner and any new buyer would need to be skilled in the kitchen to take over. In contrast, anyone could take over the franchise and, so long as they follow instructions, make it profitable. This is the key to the success of business franchises: systems. The franchisor spends the time and money to systematize their business and break everything into manageable, easy-to-follow steps. Then they package that knowledge and sell it to anyone who wants to own their own business. In many ways the franchise model is like a “do-it-yourself kit” for owning a business. That is the power of franchises, and it is a lesson that more business owners should take to heart.
Every business owner should be constantly thinking about systematizing their business and improving that system so, one day, the owner can retire and hand the money-making machine to someone new. This process takes time and does not happen all at once, but the earlier you get started, the better off you will be.
Try following these simple steps:
- Pick a business task
- Figure out the best way to complete that task
- Break the task into step-by-step instructions and write them down
- Update and streamline the process as needed.
Once you’ve systematized one function, you can move on to the next, rinse, and repeat.
This process is invaluable whether you are planning to retire, or you just want to take a vacation. Once you start thinking about your business as a machine, you will be able to better tune that machine and keep it running after you leave.
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