How to buy and turn around a
distressed business or 'roll-up' competitors

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✓  Why buying a distressed business is the BEST way to do a start up

From KC Truby Lonesome Cowboy Publishing Inc. 301 Thelma Drive #426, Casper WY 82609 (760) 207-6385

The 3 reasons you will never have an operations manual

By on June 29, 2014

An operations manual will cut cost by 27% in three months

 

When we buy a business our standard offer is 2x earnings averaged over the last 2 or 3 years. If the company has an operations manual that the staff use, we feel comfortable going to 2.5x earnings. Add in a turnkey manager who is staying with the business and we will go to 3x.

 

That means if your generating $100,000 a profit, just having a BIG BOOK on how you run the operation is going to add $50,000 to the value in our estimation.   The book takes away our f

 

On top of that companies with an operations manual in place will generate an average of 27% more net profit per year compared to other businesses in the same market space.

 

So it is well worth the effort. Yet, we never get it done. Even though you have listened to Sam Carpenter or read the      E-myth by Michael Gerber – you still don’t have an operations manual in place.   I know, we used to be in the same boat.

 

The three problems we have.

 

  1. The ROI on an operations manual is not apparent in the near term and since we have so many other fires to put out – it just keeps getting pushed back on the list of things to do today.
  2. The job is BIG and you and I both know that when we’re looking at moving a mountain it is hard to pick up a shovel and move one bucket of dirt.
  3. We don’t know HOW. Which by the way is the number one reason your employees don’t get the work done you ask them to. They don’t know how to do it.

 

Now here is the real kicker, the 3 reasons we DO NOT want to take the time to develop an operations manual are exactly the biggest benefits you’ll get within 90 days of getting started.

 

HOW TO GET IT DONE

 

I have one piece of advice here.   Split the job up with your team. Ask them to only flow chart or check list those items that….

 

  1. Happen at least 5 times a week. or
  2. Cause a customer to be unhappy with us or
  3. Cause confusion and delay in our internal operations more than once a week.

 

Although your business functions in 8 departments the truth is you can cover these 3 categories of problems in under 100 pages of instructions.   Even if you just have a short meeting and say ‘lets flow chart the work flow for an order’ and ‘solve the 3 top customer service calls.’     Those two flow charts alone will have an immediate impact on your internal cost.

 

Then flow chart how you bring in customers – and you have got 80% of the work done.

 

For complete and simple directions on writing a business operations manual be sure to join the BIG BOOK club.   We spend ½ our time together as a group working on our processes to cut cost and convert our acquisitions into turnkey cash cow operations by standardized procedures.

About KC Truby

From their ranch in Wyoming, KC and his wife Linnea have bought or started 21 companies as a side line to their accounting business leading them into M&A as a full time business in 2012. These companies are located all over the Western Rocky Mountains, London and India. Since 1969 through their accounting and training companies, KC has taught 18,000 business owners how to improve cash flow and find more customers by installing standardized systems in their small business. Since 1989 KC has presented over 1,000 seminars and training classes to the small business owner.

4 Comments

  1. Abe WalkingBear Sanchez

    July 5, 2014 at 9:56 pm

    KC,
    and yet most companies operate on WoM (word of mouth)with the new guy learning from the old guy who learned from the dead guy.

    WB

    • KC Truby

      July 6, 2014 at 5:01 pm

      I love that answer. The new guy, learned from the old guy, and he learned from the dead guy.

  2. Abe WalkingBear Sanchez

    July 5, 2014 at 9:59 pm

    KC,
    most companies are too busy fighting fires because of the new guy having learned from the old who learned from the dead guy. they don’t have time to do things right the first time but have time to do it over.

    they hurt everyone in the supply/production chain

    WB

  3. Sky Redpath

    July 8, 2014 at 7:20 pm

    Glad to see you are doing good KC

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