Friday, March 2, 2012

Factor #4 of 10: Source


Source of the product or service provided to customers

In the Self-Assessment, we asked you this question:

  1. Our business has:
    1. full control of the manufacturing and distribution of products.
    2. full control of our services offerings.
    3. distribution contracts with more than one supplier with competitive terms and conditions.
    4. various systems in place to access products and services as we require them.
    5. a distribution contract with only one major supplier.

Every business meets some need or desire of the customer. Whether the business model requires the owner to be baking cookies at two o'clock in the morning for the breakfast coffee crowd, or the business requires semiconductor crystals for manufacturing a temperature driven remote power source; the business relies on a product or service.

One business will have total control of that product or service in-house. Another business will have a distribution agreement or some source of independent supply which is fundamentally out of their control. Ideally the source of supply is protected by an agreement or contract. The typical business model includes some of both of these models.

While you as the business owner understand and have confidence in your model, a buyer will need to understand the "sources of supply" model and how your business meets and exceed customer expectations. Whether total control is in-house, or the business model is built on a distribution agreement, the buyer will look for reliable documentation. Fuzzy or unclear source of supply create risks. Poorly defined risk reduces the value of the business to the point where it might be unsellable. A business with clearly documented products and/or source of supply increases the opportunity for the successful sale of the business.

In business models where you provide a service or advisory services, your challenge is providing a reliable system for access to team members rather than yourself to complete the service required. In models where you provide advisory services you will need a reliable source or knowledge pool for the Buyer to access when you exit the business. This can be in form of suitable and clear working agreements, manuals, or access to support systems and resources.

As the business owner you understand your "sources", a Buyer will have to develop a similar level of understanding.

TO DO:
  1. As appropriate review and update of any documentation (i.e.: agreements) related to your various outside sources of supply or service insuring they are accurate and current.
  1. As appropriate, review and update your internal documentation on how you provide products or services insuring they are accurate and current.
  2. Schedule regular reviews for updates to manage all your critical "services".