Home > Services > Business Owner Solutions > Business Overhead Expense

Business Overhead Expense


If your objective is to sell your company for the highest possible price, you would be well served by building reliable systems that can sustain the growth of the business. Before we get started on discussing this important value driver, here are a few quick definitions:
  • Systems refer to a group of related processes.
  • Processes have purposes and functions of their own and are components of a system. Taken independently, a process alone cannot do the work of a system.
  • Procedures are the approved way we do things and often include a sequence of steps.
  • Steps are the actions we take to get something done.

 

A solid management team is one of the first important value drivers to focus on when you are preparing your business exit. In addition to building a strong management team, it is important to build reliable operating systems that can sustain the growth of the business. The second value driver then is the development and documentation of business systems that either generate recurring revenue from an established and growing customer base or create financial efficiencies. For most businesses, this includes all of the core processes that generate revenue or control expenses. These systems may include processes related to production or service delivery, but also may include people-related processes such as a succession planning or a performance management approach.

Look at your business from a buyer's perspective. If you leave shortly after a sale, what remains? If the answer is top management and highly efficient business systems, you can be more confident that you will be able to get top dollar for your business.

In addition to the business systems related to revenue and expense, some systems are related to customers, such as tracking systems, and the delivery of your products and services such as distribution systems. The documentation of these systems and their related processes and procedures is important to ensuring that quality and consistency can be maintained after the sale. They also signal to the buyer that elements critical to the successful transition of a business are in place. Some examples of items worthy of documentation are:
  • Financial control systems and accounting policies.
  • Policies to ensure compliance with legal and regulatory matters, especially those related to employer/employee relationships and safety.
  • Data management and information systems that tie the company together.
Again, put yourself in the shoes of a would-be buyer. Buyers want assurance that the business can continue to move forward after new ownership and that operations will not break down if and when the former management leaves. This assurance can be obtained when there are documented systems in place that enable the buyer to repeat the actions of the former owner to generate income and grow the business.

There are several business systems, which, once in place, enhance business value whether you plan to sell your business now or decide to keep it. These systems include:
  1. Human capital management including: recruitment, selection, hiring, and retention; performance management; training and development; compensation and benefits.
  2. Production including product or service quality control and improvement.
  3. Product or service research and development.
  4. Inventory and fixed asset control.
  5. Sales, marketing and communications.
  6. Procurement including the selection and maintenance of vendor relationships.
Obviously, appropriate systems and procedures vary depending on the nature of a business, but at a minimum, those resources and activities necessary for the effective operation of the business should be documented.

If you have any questions about increasing the value of your business prior to your exit, please contact us to discuss your particular situation. We can help guide you through the process of identifying the current value drivers in your business and creating a road map for increasing value to meet your overall exit objectives.

Taking control of your business’s way with the assistance of a financial planner will spare you time and money. Once you spend time performing functions that are not among your center capacities, you deny your business this mastery. Complex tasks can be taken care of quickly and you'll make imperative financial choices from a position of strength. For example, a financial planner can utilize his or her experience to set up inner accounting processes for observing expenses. Learning through experience can be one of the finest ways to memorize a lesson. Not each small business proprietor ought to go through bankruptcy, in any case, to learn the most excellent ways to handle their accounts. A financial planner can assist you avoid expensive mistakes, sparing you the torment of going through excruciating and pointless customs of passage.

Our Locations

Pensacola, Florida
Lafayette, Louisiana
Palm Bay, Florida
Tallahassee, Florida
Texarkana, Texas
Birmingham, Alabama
Fort Walton Beach, Florida
Check the background of your financial professional on FINRA's BrokerCheck.
*Securities offered through OneAmerica Securities, Inc., a Registered Investment Advisor, Member FINRA/SIPC.
American Heritage Financial, LLC is not an affiliate of OneAmerica Securities or the companies of OneAmerica and is not a broker dealer or Registered Investment Advisor. American Heritage Financial, LLC is authorized to conduct life insurance and securities business in Florida and may be licensed in other states. American Heritage Financial, LLC cannot conduct life insurance or securities business in states in which we are not licensed. This website is in no way to be construed as an offer for the sale of insurance or securities products in unauthorized states or countries.
Provided content is for overview and informational purposes only and is not intended and should not be relied upon as individualized tax, legal, fiduciary, or investment advice. Neither OneAmerica Securities, the companies of OneAmerica, American Heritage Financial, LLC, nor their representatives provide tax or legal advice. For answers to specific questions and before making any decisions, please consult a qualified attorney or tax advisor. Guarantees are subject to the claims paying ability of the issuing insurance company. American Heritage Financial, LLC is not affiliated with or endorsed by the Social Security Administration, the Centers for Medicare & Medicaid Services or any other governmental agency. All numeric examples and any individuals shown are hypothetical and were used for explanatory purposes only. Actual results may vary. The use of asset allocation or diversification does not assure a profit or guarantee against a loss. Investing involves risk which includes potential loss of principal.
Login