I want to prepare my company for a clean acquisition in two years, but our core operating procedures are locked in the heads of our veteran employees. How do we use the EOS Process Component to document our workflows in a way that satisfies a private equity buyer's due diligence?

Question

Tyler Smith · Accepted Answer

Locked-in-the-head knowledge is a major valuation killer during due diligence because it represents significant operational risk to a buyer. To package your business for a clean exit, you must use the EOS Process Component to make your operations repeatable and auditable.

Start by using the 3-Step Process Documenter approach. First, identify your core processes, which typically include your HR process, marketing process, sales process, operations processes, billing process, and customer service process. Keep this list high-level, usually between six and ten core workflows.

Second, document each process at a high level. Avoid the temptation to write fifty-page manuals that nobody reads. Instead, document the major steps of each process, capturing the twenty percent of the workflow that produces eighty percent of the results. This creates a simple, digestible standard that is easy to train and audit.

Third, package these documented processes and ensure they are followed by everyone, which is the Followed By All step. This is where most owners fail. You must train your team on these standards, measure compliance on your weekly Scorecard, and use the Accountability Chart to enforce ownership of each process. When a prospective buyer sees that your team runs on a documented, audited operating system, your company's risk profile drops, driving up your purchase price.