4 keys to increase the ultimate value of a firm

Executive summary

• Running a startup firm or have an established practice you want to sell? You need to scale your operations, and that all starts and ends with a systems mindset.
• As an advisor, you should guide your client to create a step-by-step process for every facet of their business, from onboarding, AP, AR, financials, and every service they offer.
• Ensure everyone is on the same page; document all of your processes in writing or video.

In my previous post, I discussed the importance of having the vision to create a firm you can sell—if that is the path you choose in the tax and accounting profession. If you are just starting out and building a firm from scratch, it is definitely hard work. However, when it comes to scaling your firm for profitable growth and, ultimately, to a size that is attractive to potential purchasers, you can have a distinct advantage over established firms because you can start with the end in mind without having to “turn the ship,” so to speak.

Regardless of whether you are running a startup firm or have an established practice you want to sell, you need to scale your operations, and that all starts and ends with a systems mindset. This requires a repeatable system that can be replicated and preferably done so without your involvement.

If this seems overwhelming, be aware that you are not alone! The majority of business owners struggle when they get to the stage where they want to scale. However, from my experience in the tax and accounting space, the way to clear this hurdle is to focus on creating and refining standardized forms, checklists, and other documents that you probably already have. The real work lies in laying out the steps in each process, and then training your team to use them consistently.

Another potential roadblock to smooth scaling is creating a discipline around treating all clients the same. This means that no matter who it is or what the structure of their business is, you need to hold steady on the repeatable client onboarding, services, and off-boarding processes you put in place.

When I coach clients who want to sell their firms, I perform a six-point assessment to learn how far along the continuum they are in creating a saleable business. There are four keys I look at, each of which is key for determining the likelihood of their success for selling their business for an attractive price.

1. Implement standardized operational processes

Without a standardized system for every area of the business, from accounting and human resources, to marketing, sales, and client service, it is unlikely a firm or company can be sold at a reasonable or a premium price.

This is because any buyer is looking for an asset they can easily take ownership of, and leverage immediately, to their benefit. If they have to spend time building a system, that will cut into their profits. If they can buy a turnkey operation, a buyer is much more likely to offer top dollar.

As an advisor, you should guide your clients to create a step-by-step process for every facet of their business, from onboarding, AP, AR, financials, and every service they offer. These processes and procedures should also be documented.

2. Diligent documentation of all the processes described above

A process won’t help anyone if it is in your head or your clients’ heads. While documenting processes can seem arduous, I always encourage my clients to write them down—even at a high level—as soon as you can. Better yet, use technology to make a Loom video, and then transcribe it using an app like Otter to save time in the process of documentation.

I also encourage business owners to be confident in their processes. They need to own it and follow it. However, if you need to make changes based on additional education and new experiences, do it, but you should still be able to replicate these processes across the board. Remember: deviation is money lost.

3. Replicate in a “rinse and repeat” fashion

Selling for a premium (or at all) is much more likely if you adopt an “over and over” mindset. The goal is to replicate your processes and procedures to the point that they become annoyingly second nature. They should become something you can (almost) do in your sleep.

4. Maintain a well-trained team

A team that works well together is critical for creating a salable business. People can often make or break the sale of a company, so keeping everyone on the same page is vital.

The reason so many larger companies scale and succeed is the process, replication, and training. Think of a company that is a well-oiled machine, such as your favorite fast food franchise. No matter which of these restaurants you go to, the team is all trained the same, systems are the same, and the quality is the same. When you have the goal of selling, you need to create this type of uniform experience in your company, too. 

As you scale toward a sale using the four keys above, focus on the areas unique to you and your methods that are integral to the structure of your business. If you can implement, document, replicate, and train in each operational area of your business, it is much more likely that you can set yourself apart from lower value firms when it is time to sell.