There are many ways to improve your EBITDA – several of which I’ll highlight in this blog over the course of the next few weeks.
The most critical to increasing EBITDA – whether it be sales or cost reduction or efficiency improvement – is the establishment of processes. My background is “lean” – I’ve worked for some of the most accomplished lean organizations including Danaher Corporation and ITT Corporation. We focused on the establishment of processes to drive continuous improvement both on the shop floor and in the back office. It was more than the physical application of lean – value stream mapping and kaizens being two examples – it was the establishment of a mentality in the organization. All of us consistently looked for ways to establish processes and make the process more efficient with the result being a focus on the 2 or 3 main drivers or goals for the organization. If the process did not tie into the top line goals, it wasn’t a main priority for the group at that time.
A good first step is to understand your top goals for the organization and prioritize in setting processes around those goals. For example, if one of your goals is to increase sales by increasing the contacts with new customers, the first step would be to establish a process to accomplish the goal and subsequently measure the success of the actions. The process needs to be documented so that anyone can do it and include multiple departments as necessary.
Nothing is ever perfect – the role of continuous improvement helps drive refinements to processes. Experience will dictate changes and enhancements to a process so that it will become more efficient and focused. Incorporating eyes from other areas of the company will help keep the process focused avoiding department centric processes and keeping the overall goals of the company in focus.
Utilizing documented processes will allow success to be measured driving countermeasures to improve the metric – resulting in improved EBITDA. Ultimately, processes will drive an increase in value for your business. In fact, the absence of processes will decrease the value of your business as a potential buyer is looking for businesses that are process oriented.
If your goal as a business owner is to walk away from the business at the exit, establishing processes now will allow for the buyer to avoid attaching contingencies to the deal. The business is a standalone entity easy to transition to a new ownership group – a high value organization!
So – start at square one – identify your key goals for the business, design and document processes to achieve the goals, continuously improve and move to the next area that needs processes and repeat the process. You will be successful in increasing the value for your business.