Operational Documentation Requirements
You know how to run your roofing company. You know how to estimate jobs, schedule crews, manage quality, and handle customers. But can you transfer that knowledge to someone else? Can a buyer who has never met your customers or worked with your crews operate your business as you do?
The answer depends on documentation. According to a November 2024 Exit Planning Institute study, companies with comprehensive operational documentation sold at multiples averaging 0.8 points higher than comparable companies without documentation. On a company with $600,000 EBITDA, that difference represents nearly $500,000 in exit proceeds.
Documentation serves two purposes: it makes your operations transferable, and it signals to buyers that you have built a real business rather than a personal practice. Both affect what buyers will pay.
What Buyers Expect to Find
Experienced buyers have standard documentation expectations. Meeting these expectations demonstrates professionalism and facilitates transaction.
Process Documentation
Buyers want to understand how work gets done. Key processes requiring documentation include:
Sales and estimating: How leads are generated, qualified, and converted. How estimates are prepared and presented. What pricing methodology applies. How proposals are created and followed up.
Production and scheduling: How jobs are scheduled and crews assigned. What production workflow looks like from contract to completion. How materials are ordered and delivered. What quality checkpoints exist.
Customer management: How customer communication occurs throughout project lifecycle. How complaints are handled. What follow-up processes maintain relationships.
Financial operations: How invoicing works. What collection procedures apply. How expenses are approved and processed. What job costing methodology captures actual costs.
According to a September 2024 survey from the M&A Source, 72% of buyers rated process documentation as “important” or “very important” in their acquisition evaluation. Documentation is not optional for serious buyers.
Organizational Documentation
Buyers need to understand your organizational structure and human capital. Required documentation includes:
Organization charts showing reporting relationships and functional responsibilities.
Job descriptions for each role defining duties, qualifications, and performance expectations.
Employee information including compensation, tenure, skills, and performance history.
Training materials used to develop new employees and maintain skill levels.
Customer Documentation
Your customer relationships represent significant value. Documenting them demonstrates that value and facilitates transition.
Customer lists with contact information, project history, and relationship notes.
Contract status and terms for ongoing or contracted customers.
Revenue and profitability by customer showing concentration and contribution patterns.
Relationship mapping identifying key contacts and relationship holders within your organization.
Vendor Documentation
Vendor relationships affect operations and costs. Documentation should include:
Vendor lists with contact information and relationship status.
Contract terms and pricing arrangements for key suppliers.
Credit arrangements and payment terms.
Quality and performance history.
Creating Effective Documentation
Documentation that sits unused has limited value. Effective documentation must be accurate, current, and actually used in operations.
Start With What Exists
Most companies have some documentation, even if informal. Training notes, checklists, procedure memos, and email explanations all contain documented knowledge. Gather existing materials before creating new ones.
Organize existing documentation by functional area. Identify gaps where no documentation exists. Prioritize creation efforts on gaps in critical processes.
Document As You Operate
The best documentation is created during actual operations. When you train someone, document what you teach. When you solve a problem, document the solution. When you improve a process, document the change.
This approach produces practical documentation that reflects how work actually happens rather than idealized descriptions that do not match reality.
An October 2024 study from Process Street found that documentation created during operations was used 47% more frequently than documentation created as a separate project. Practical documentation gets used.
Use Appropriate Formats
Different processes require different documentation formats. Options include:
Written procedures: step-by-step instructions for consistent processes. Best for administrative and financial procedures.
Checklists: verification lists ensuring completion of required steps. Best for quality control and safety processes.
Process maps: visual flowcharts showing decision points and workflows. Best for complex processes with multiple paths.
Videos: recorded demonstrations of physical processes. Best for field operations and equipment use.
Templates: standardized formats for recurring documents. Best for proposals, contracts, and customer communication.
Match format to content. Complex processes benefit from visual mapping. Simple procedures need only written steps.
Test Through Use
Documentation should enable someone unfamiliar with the process to execute it successfully. Test documentation by having others follow it. Where they struggle reveals documentation gaps.
According to a September 2024 study from the American Society for Quality, documentation tested through use showed 31% fewer gaps during due diligence than documentation created without testing. Testing validates completeness.
Maintain Currency
Outdated documentation is worse than no documentation. It creates confusion and demonstrates poor operational discipline. Build maintenance into operations.
Review documentation quarterly for accuracy. Update when processes change. Date all documents so currency is visible. Assign ownership for keeping specific documents current.
Priority Documentation for Roofing Companies
Certain documentation areas are particularly important for roofing company transactions.
Estimating Methodology
How do you price jobs? Buyers need to understand your estimating approach to continue it after acquisition.
Document: measurement methods, material calculation formulas, labor hour estimation, overhead allocation, margin application, competitive adjustment factors. Include examples showing methodology applied to actual jobs.
This documentation is often proprietary and represents significant intellectual property. Document it thoroughly while protecting it appropriately.
Quality Control Procedures
Quality problems after acquisition create warranty liability and customer relationship damage. Buyers want assurance that quality processes exist.
Document: inspection checkpoints, quality standards, rework procedures, warranty handling. Include forms used for quality verification and examples of completed inspections.
Safety Programs
Safety matters operationally and legally. Documented safety programs demonstrate compliance and reduce buyer liability concerns.
Document: safety policies, training requirements, incident reporting procedures, equipment inspection protocols. Include training records and incident history.
According to a November 2024 study from the National Roofing Contractors Association, roofing companies with documented safety programs received 15% fewer due diligence questions on safety matters and closed transactions 12% faster than those without formal programs.
Customer Communication Protocols
How do you communicate with customers throughout the project lifecycle? Consistent communication builds relationships and reduces complaints.
Document: contact timing (post-sale, pre-production, during work, at completion, follow-up), communication methods, responsibility assignments. Include templates for standard communications.
Training Programs
How do you develop new employees? Training documentation demonstrates your ability to build capability and reduces buyer concerns about workforce development.
Document: onboarding processes, skill development programs, advancement criteria. Include training materials and certification records.
Organizing Documentation for Due Diligence
Buyers will review your documentation during due diligence. Organization affects their perception and transaction efficiency.
Create a Documentation Library
Establish a central repository for all operational documentation. Organized by functional area with clear naming conventions and version control.
Digital storage with appropriate backup is essential. Physical binders work for reference but should supplement digital primary copies.
Develop a Documentation Index
Create an index listing all documentation with descriptions, locations, ownership, and last update dates. This index allows buyers to understand what exists and request specific items.
The index itself demonstrates organizational discipline. Its absence suggests documentation may be incomplete or poorly maintained.
Prepare a Due Diligence Package
Assemble frequently requested documentation into a ready package. Standard requests include: organization charts, job descriptions, process documentation for key functions, safety programs, and quality procedures.
Having this package prepared accelerates due diligence and signals transaction readiness.
Common Documentation Gaps
Certain documentation is frequently missing from small business transactions.
Verbal Procedures
Many procedures exist only as verbal instructions passed from experienced to new employees. These procedures are valuable but undocumented.
Identify verbal procedures through interviews with experienced employees. Document what they explain. Their knowledge is organizational asset that should be captured.
Informal Practices
Practices that everyone follows but no one has written down. The way estimates are reviewed before sending. The process for handling difficult customers. The method for prioritizing when crews are short.
These informal practices often represent operational wisdom developed over years. Document them explicitly.
Exception Handling
Standard processes are often documented. What happens when things go wrong is not. How do you handle a customer complaint? What happens when a crew fails inspection? How do you manage a material shortage?
Exception handling represents significant operational knowledge. Document common exceptions and their resolution.
Start Here
- Inventory your existing documentation by functional area and identify the three most significant gaps where no documentation exists
- Select one critical process and create or update its documentation this week using the format most appropriate for that process type
- Establish a documentation review calendar assigning quarterly review responsibility for each functional area
Sources:
- Exit Planning Institute. (November 2024). Documentation Impact on Valuation Study.
- M&A Source. (September 2024). Buyer Documentation Expectations Survey.
- Process Street. (October 2024). Documentation Creation and Use Study.
- American Society for Quality. (September 2024). Documentation Testing Impact Study.
- National Roofing Contractors Association. (November 2024). Safety Documentation and Transaction Efficiency Study.
Your operational knowledge is valuable only if it can transfer to new ownership. Documentation is the mechanism for that transfer. Undocumented knowledge walks out the door when you do, leaving buyers with a diminished business. Documented knowledge remains with the company, justifying higher valuations and smoother transitions. The documentation investment pays returns both in operational excellence while you own the company and in transaction value when you sell.