The value of your business is not just based on the tangible assets – the equipment, the buildings, the accounts receivable – but is also based on intangible assets or “goodwill”.
Goodwill is the “extra” value of your business that is caused by all the intangible things that you do in your business to make it a profitable business that can continue beyond your ownership or stewardship. These include things like your customer relationships, your reputation, the efficiency of the business processes, marketing quality and resources, staff behaviours and culture, and your systems that create a great product and service.
Imagine two similar businesses.
In Business A, whenever a customer walks in, they are greeted with the same customer service and engagement. They are offered a product or services that is always described and looks the same. When they walk out they are certain that the quality of the product or service, and the quality of their experience is the same as it has always been. The customer is not even sure who is the owner of this business – everyone behaves the same and everyone knows what he needs and how to give it to him.
In Business B, a customer walks in and on one day he is greeted and welcomed. On another day he is made to wait for a greeting or service. When he asks for the product the person serving is not sure which one he means. When he gets the product, on one day it is as he expected, on another, it is not as good quality, or sometimes, even better. He cannot predict what he gets from Business B. When he complains, the owner comes out and finally the customer gets what he wants and in the way that he thinks it should be provided. Clearly, only the owner can do this.
If you were a buyer of a business, which one would you say is more valuable? Business A where everything just works? Or Business B which is unpredictable and only the owner can do it right?
Valuable, sellable goodwill rests in a set of systems that produce the product, in the same way, every time, that does not need the intervention of the owner to serve the customer in the right way, that is scalable to a larger operation or to more stores, that is repeatable and predictable like a machine.
If you implement systems in your business that takes away the need for your involvement every time, that are consistent, repeatable and predictable in outcomes – even to the extent of prepared scripts and customer-oriented responses – you will build an efficient business, great customer relationships, and a sensational business reputation. Every member of your team will know, within their roles and responsibilities, exactly what to do and when to do it, as well as how to do it.
If these systems are documented so that any new recruit can be trained in them, they will last forever – and any business purchaser will know exactly what they can walk into and just carry on.
So think about, and build the appropriate systems in your business. Make sure you document them, train your staff. It will repay you in efficiency, improved customer service and profitability. And, when you do want to sell your business, you’ll get a higher price!
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