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The Value of Documenting Processes

FastTrac, Kauffman Foundation

Are documented processes, procedures, and policies really worth it? They are for business owner, Beth Hagan, who started her company in Illinois. Over sixteen years, Hagan built her enterprise into an eight-location quick print, high-speed xerography, graphic design, and blueprint company. She confirms that her Operations Manual was critical in the sale of her company, as it dispelled the perception that she was a "one-woman copy shop." The manual helped the buyer see that Hagan had very specific procedures and depth of management at each store and each production center. This documentation was valued at $100,000 at the point the business sold.

But the real value of documenting your processes can be seen long before your exit strategy is implemented. Having processes documented and controls in place establishes your business's readiness for growth, which means you can successfully handle an increased sales volume. Controlled processes will also save you money that can be lost through fraud, embezzlement, or employee theft.

Ask most business owners about losses due to their employees, and they will assure you it isn't a problem. The facts, however, disagree. The U.S. Chamber of Commerce estimates that theft by employees of small businesses totals between $20 and $40 billion in this country each year. While it is difficult to believe that the person you hire to fill a trusted position in your company would actually steal from you, it happens every day in all kinds of businesses and in a variety of ways. It is estimated that up to 75 percent of all employee theft goes unnoticed.

A general rule of thumb is that a company can lose 1 to 2 percent of its sales to misdeeds mostly committed by insiders. Looking at your sales figure, you can easily calculate how much it can be worth to document your processes. By identifying the proper controls, you can prevent, reduce, or totally eliminate financial threats.

© 2007 Ewing Marion Kauffman Foundation. All rights reserved.

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