Throughout history knowledge has been aligned with power — but in today's world that knowledge can count against you.
I know it sounds backwards, but it's reality if you have a specific type of business. That specific type is one that you want to eventually sell, or have the option to sell. It doesn't matter the niche or the industry — if you're building something you want to have optionality on, you'll need to break the Knowledge Chain.
The Knowledge Chain isn't about thinking you have all the knowledge you need. It's about where that knowledge lives inside a business.
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During conversations with people in the M&A space, one thing stood out clearly — a business's valuation is regularly discounted because of knowledge. Not because the business has no knowledge, but because that knowledge is tied up inside the owner's head.
There's a dependency on the owner, and buyers see it as risk. When they do all their calculations they want to be sure they are buying something that won't crumble the moment the owner walks out of the door. If there's a level of dependency, the valuation of the business can be discounted by hundreds of thousands of dollars.
Most owners start from zero when building their business. They try and they test and they fail and try again until things start to take off and the business grows. They create processes and products and services that take the business to the next stage. They keep key relationships with clients and know their children's names and birthdays, favourite restaurants and life history. And they continue to be heavily involved in the day-to-day because of the knowledge inside their head of how things work.
The blood, sweat and tears are worn as a badge of honour, and the owner stays involved to support the business through the next phase.
But for anyone who wants to sell a business, that next phase is completely different from what they imagine.
A buyer doesn't really care about how the business got to where it is — they care about where they can take it next and how stable it is. The knowledge that's trapped in the owner's head is no longer a badge of honour. It's a red alert.
I've been guilty of this myself.
When I was creating conversational AI Agents for med spas and clinics in the US, I gained knowledge from creating the agents, testing them, and then building a platform to make the implementation quicker and easier. This internal tool saved me hours on each implementation. But I hadn't documented the process, so it still relied on me to do the heavy lifting.
The knowledge was trapped inside my head, and I was chained to the implementation. There was a dependency on me because nothing was documented, and nobody could come in and take over.
To solve this, I created documents with screenshots, step-by-step guides, and video tutorials of how everything worked. It meant I could start to step away from the process and not be tied down to it. I was moving the needle on owner dependency in my favour.
And the great news is that this documentation process is now easier than ever.
The cliché of the best time to plant a tree being a thousand years ago — and the second best time being now — is true for the Knowledge Chain.
Maybe selling your business hasn't crossed your mind yet, or it's something you want to look at in the next 2 to 3 years. It doesn't matter where you are in your business journey. The process of breaking the Knowledge Chain and documenting what's in your head will help grow the business valuation because it will become less dependent on you.
Here are 3 steps you can do right now to get the process started:
- Sit with a pad and pen and write down all the tasks you do on a weekly basis — whether it's a sales call, taking a client for lunch, managing part of a process, or running weekly internal team meetings
- Once you have your list, write down all the knowledge you have about each specific thing as it relates to your business. If you've perfected an unwritten sales script, write down the exact words and flow you use. If it's a client relationship, write details about the relationship. For processes, write down each step, who's involved, what any approvals look like, and any other relevant information
- Allocate time each week to review your list — to see if there's something you missed or something new that's come up that needs documenting
It may take some time to compile your list and thoughts, but it will mean you've started the process of breaking the Knowledge Chain.
We're now in a world where you can send a voice note to AI and get it to write SOPs, flow diagrams, and tutorials. You can get it to write scripts and produce tutorial videos — whole presentations. This is the process I use in my own business: voice notes transcribed and processed by AI into structured documents ready to review.
If that sounds too technical, the pen and paper approach is just as valid. The goal is to get what's inside your head out — written and structured in a way that other people can use, whether that's a team member or a buyer.
If you're already using AI inside your business, I'd like to invite you to join the industry research I'm doing for my book The Optional Founder. The research is looking at how businesses are currently using AI, for which business functions, and the challenges and successes they've experienced. It's 12 questions, takes roughly 10 minutes, and I'll be sending the final report to everyone who completes the survey.