Know-How, Know-What, Know-Who: Unexpected Sources of Business Value
When it comes to having know-how, you have to know what your business can do that no-one else can.
In the Business World, Knowledge is Money
You can’t even begin to run a business if you don’t have the knowledge of what a business is and does. That’s why 60% of restaurants fail within the first year and 80% fail by their fifth anniversary. Many amateur restaurateurs are people with a lot of money and a dream, but no knowledge of what it’s actually like to live in the role of a restaurant owner.
One estimate says that the average adult makes 35,000 decisions a day. Some of these are small and inconsequential, like what shirt to wear or whether to drink a cup of coffee. Others can have a major impact on your life, your success, and your well-being. When it comes to running a business, having the know-how, know-what, and know-who of your particular industry is critical to making the right decisions, both small and large.
As you near your transition, the legacy of knowledge you leave behind is worth its weight in gold.
The concept of “know-how” specifically refers to the abilities and talents that your business or the people in your business possess. To go back to our restaurant example, a great restaurateur knows how to cook, clean, socialize, balance the books, order inventory, work a room, and find time within it all to have a family life.
If you know how to order inventory, you don’t have to pay someone else to do it. If you know how to cook, you don’t have to close the doors for the day when your chef comes down with the flu. If you know how to react to an angry Yelp review, you don’t have to deal with the consequences of blowing up on a customer.
In any business, know-how is the meat and potatoes of your day. Those with the right knowledge can accomplish their tasks efficiently and properly, leaving more time for big picture decisions. Passing know-how on to the buyer of your business can really only be done correctly if someone is training them. Whether it’s you or a trusted employee, know-how has to be passed on through actions, reflection, and explanation.
When you have know-what, you understand facts about your business and the sectors that it functions within. Know-what can typically be learned independently, through research and reading. It can also be passed down from one business owner to the next through data collection and good record-keeping.
Know-what should form the basis of all your business decisions. They should be grounded in fact, not in gut feelings. Someone who decides to open a small business in Rhode Island is on the fast-track to failure. Rhode Island has significantly higher taxes, uses legislation to inhibit small business growth, and has one of the lowest entrepreneur rates in the United States.
On the other hand, someone who does their research might want to look into cutting the proverbial ribbon in New Hampshire. In addition to boasting no state sales taxes, they also have a high quality-of-life rating, above average income levels, and proximity to some of the most well-educated United States citizens. The government of New Hampshire is also exceedingly generous with entrepreneurs, offering assistance programs to get new businesses off the ground.
Without research and know-what, you could make decisions that conflict with your goals as a business owner. Buyers want to know that the business they are looking at is firmly rooted in data-based choices, and they want to have access to that data in order to continue growing.
When the network that you build around your company is one full of esteem and prosperity, it reflects well on the value of your business. When you have know-who, you understand the intricacies of the social world that surrounds a business, and you capitalize on those relationships by forming bonds through reciprocal interests.
A report from the MacAuthor Foundation, whose focus is on supporting innovative nonprofits, had this to say about the concept of know-who:
“Know-who is as important as know-how to getting things done. Social networking and coming to understand who is good at what and how a group of particular people can work together effectively is… essential. Nothing of value gets undertaken unless people are motivated to act and feel comfortable with the domains of know-how and the kinds of collaboration with others needed to get things done.”
When a buyer is considering purchasing your business, they want to know what kinds of bonds you’ve already forged with your community, your suppliers, and your employees.
If you have shown your community support, and they support you, it’s much easier to sell your product in the area than if no one knew your shop existed.
Good relationships with suppliers means discounts, promotions, and a more pleasant process for getting the inventory you need.
Perhaps most importantly, having a high level of know-who with your employees can be pivotal when it comes to the value of your sale. After you’ve transitioned out, employees need to bridge the gap while the buyer is still learning the ropes. If collaboration and cooperation were not valued while you were at the helm, it’s quite possible that they won’t be willing to bridge the gap between owners. That means a decrease in efficiency and likely in profits.
Transitions are scary, but they can be simplified by gathering and documenting your knowledge. There’s no point in owning a business if you don’t know what to do with it, and buyers know that. Presenting them with the information they need to be successful is going to motivate them to follow-through with the sale, and put more intrinsic value back into your business.