OPERATIONAL EFFICIENCIES

Operational Margin

Your operating margin is a metric that reflects how effectively your business runs.  Operating margins that increase with economies of scale indicate a business with the capacity to scale.  Scalable businesses are attractive to potential acquirers.

Potential buyers will compare your operating margin to other businesses in your industry.  If your business has a lower operating margin it will be less attractive to potential buyers.  An operating margin that is lower than the market rate reflects a business that: can’t scale and/or will require additional investment to increase

operational efficiencies

Invest

People + Processes + Technology = Optimal Operational Efficiency

People

Invest time and effort in recruiting the right individuals into executive roles.

Leverage their experience in establishing ‘been there done that’ processes and systems.

Enable succession so that you’re attractive to potential buyers who will need executives to stay on and manage operations after you leave.

Processes

Identify best practices and industry standards.

Implement those that are most relevant to your business.

Consider all aspects of your business: financial, legal, marketing, sales, customer service, etc.

Technology

Assess functions, tasks and areas that can be automated.

Consider the importance of remote & centralized access to data, files and information.

Ensure the right technology is implemented at the right time (consider the size, scope of what you require and how long it will take you to outgrow the infrastructure).

Implement

Assess functions, tasks and areas that can be automated.

Consider the importance of remote & centralized access to data, files and information.

Ensure the right technology is implemented at the right time (consider the size, scope of what you require and how long it will take you to outgrow the infrastructure).

MEasure Any changes implemented through investments in people, processes or

technology should be evaluated using Key Performance Indicators (KPIs).

KPIs can be used to measure the success (or not) of the changes made.  The KPIs used to measure projected results against actual results can vary based on business sector or model.  However, what is consistent across any business is that KPIs are used to assess your company’s performance against your strategic and/or corporate objectives.  In other words, your business’ key objectives drive what you measure.

Increasing operational effectiveness and operating margin should be an important objective if you want to exit from your business successfully.  There are many different KPIs you could use to measure performance but here are a few examples:

number of customer support calls

rate of client attrition

client acquisition cost