Built to Sell

  • Author: John Warrillow
  • Full Title: Built to Sell
  • Tags: #Inbox #books

Highlights

  • The point is that the best businesses are sellable, and smart businesspeople believe that you should build a company to be sold even if you have no intention of cashing out or stepping back anytime soon. (Location 95)
  • This book is about how to create a business that can thrive without you. Once your business can run without you, you’ll have a valuable—sellable—asset. (Location 115)
  • Don’t generalize; specialize. If you focus on doing one thing well and hire specialists in that area, the quality of your work will improve and you will stand out among your competitors. (Location 433)
  • If you want to sell your business, you should have a diverse group of clients where no one company makes up more than 10 to 15 percent of your revenue.” TED’S TIP # 2 Relying too heavily on one client is risky and will turn off potential buyers. Make sure that no one client makes up more than 15 percent of your revenue. (Location 437)
  • “In each business I’ve sold, we created a standard service offering, a consistent process for delivering our product or service. We made sure the product or service was something clients would need on a regular basis so we could count on recurring revenue. I’m suggesting you become the world’s best logo design shop. Write down your five-step process and start talking to prospects about your standard service offering. (Location 443)
  • TED’S TIP # 3 Owning a process makes it easier to pitch and puts you in control. Be clear about what you’re selling, and potential customers will be more likely to buy your product. (Location 513)
  • “But designing logos is still a service.” “Fair enough, but your product is your unique methodology for designing a logo. A service company is simply a collection of people with a specific expertise who offer their services to the marketplace. Good service companies have some unique approaches and talented people. (Location 516)
  • When people are the main assets of the business—and they can come and go every night—the business will not be worth very much.” (Location 520)
  • TED’S TIP # 4 Don’t become synonymous with your company. If buyers aren’t confident that your business can run without you in charge, they won’t make their best offer. (Location 534)
  • We’re used to paying for products up front and services after they have been rendered. Think about the last time you had your windows cleaned. The service was performed first and then you paid the bill. Products are paid for before you use them. Now that your service has been productized, you need to start charging up front for it.” (Location 542)
  • TED’S TIP # 5 Avoid the cash suck. Once you’ve standardized your service, charge up front or use progress billing to create a positive cash flow cycle. (Location 565)
  • The result was a split decision with Elijah getting a $2,500 raise and Alex promising to review his salary again in six months. Elijah didn’t know it yet, but he would not be working for the Stapleton Agency in six months. (Location 593)
  • “An amazing thing will happen when you start turning down other projects in favor of promoting your specialized logo design process—you’ll instantly become more referable. If you offer a generic service like advertising or marketing, people will have trouble describing to their friends why you’re special because you are just like everyone else. If, however, you are the world’s best logo creators, you’ll be memorable and referable. For every advertising project you turn down, you will win a logo assignment.” (Location 626)
  • TED’S TIP # 6 Don’t be afraid to say no to projects. Prove that you’re serious about specialization by turning down work that falls outside your area of expertise. The more people you say no to, the more referrals you’ll get to people who need your product or service. (Location 631)
  • “Take each step in the process and write a detailed instruction manual for completing that step. Give the instructions to one of your team members and see if they can follow the directions. Edit it until someone can follow the instructions without you hovering over them. This week, I’d like you to write an instruction manual for the Five-Step Logo Design Process. Bring it with you next time we meet and we can talk about how it is working.” (Location 640)
  • “My advice continues to be about creating a business that can exist without you. That’s the only way to sell your company and be able to walk away without being obliged to stick around for five years.” (Location 733)
  • “To sell your business, you need to demonstrate to a buyer that you have a sales engine that will produce predictable, recurring revenue. We need to figure out how many sales reps you need to drive your sales engine and how many companies are in your target market. (Location 783)
  • TED’S TIP # 7 (Location 811)
  • Take some time to figure out how many pipeline prospects will likely lead to sales. This number will become essential when you go to sell because it allows the buyer to estimate the size of the market opportunity. (Location 811)
  • “An acquiring company will want to see the model for your sales engine, including how many opportunities you have and your historical close rate, to estimate the market potential. You need to demonstrate you know your sales engine and that you can predict, with a fair degree of accuracy, how your sales engine will perform under their roof. (Location 813)
  • Two sales reps are always better than one. Often competitive types, sales reps will try to outdo each other. And having two on staff will prove to a buyer that you have a scalable sales model, not just one good sales rep. (Location 823)
  • TED’S TIP # 9 Hire people who are good at selling products, not services. These people will be better able to figure out how your product can meet a client’s needs rather than agreeing to customize your offering to fit what the client wants. (Location 919)
  • TED’S TIP # 10 Ignore your profit-and-loss statement in the year you make the switch to a standardized offering even if it means you and your employees will have to forgo a bonus that year. As long as your cash flow remains consistent and strong, you’ll be back in the black in no time. (Location 1033)
  • TED’S TIP # 11 You need at least two years of financial statements reflecting your use of the standardized offering model before you sell your company. (Location 1050)
  • Revenue: $1,400,000 Expenses: $1,313,000 Pretax Profit: $87,000 Alex understood that small service businesses like his typically sell for roughly three to four times pretax profit, which meant his business was worth less than $500,000. It wasn’t enough. (Location 1094)
  • TED’S TIP # 12 Build a management team and offer them a long-term incentive plan that rewards their personal performance and loyalty. much. As an employee, I’d much rather have an understandable cash bonus plan than a few shares in a closely held small business.” (Location 1211)
  • TED’S TIP # 13 Find an adviser for whom you will be neither their largest nor their smallest client. Make sure they know your industry. (Location 1328)
  • TED’S TIP # 14 (Location 1401)
  • Avoid an adviser who offers to broker a discussion with a single client. You want to ensure there is competition for your business and avoid being used as a pawn for your adviser to curry favor with his or her best client. (Location 1401)
  • “When you write your next draft, think about how aggressively Starbucks has grown. Imagine that you have a blank check to grow the Stapleton Agency as large and as fast as you possibly could given unlimited resources. You need to paint the picture for an acquirer of what is possible for the business of creating logos.” (Location 1428)
  • “The best way to do it at this point is to imagine you have a blank check and unlimited resources. There will be plenty of time for an acquiring company to scrutinize your plan and discount your projections based on what they think is reasonable. I want you to take off your conservative business owner hat and imagine what is possible. Could you start a satellite office in every major city in the country? Could you double your sales force? Could you make better use of the Internet to sell logos? Think like Starbucks.” (Location 1435)
  • TED’S TIP # 15 Think big. Write a three-year business plan that paints a picture of what is possible for your business. Remember, the company that acquires you will have more resources for you to accelerate your growth. (Location 1444)
  • TED’S TIP # 16 If you want to be a sellable, product-oriented business, you need to use the language of one. Change words like “clients” to “customers” and “firm” to “business.” Rid your Web site and customerfacing communications of any references that reveal you used to be a generic service business. (Location 1517)
  • TED’S TIP # 17 Don’t issue stock options to retain key employees after an acquisition. Instead, use a simple stay bonus that offers the members of your management team a cash reward if you sell your company. Pay the reward in two or more installments only to those who stay so that you ensure your key staff stays on through the transition. (Location 1597)
  • “We’ve proven the model can work in one city. I’m at a stage of my life personally that I’d like to create some liquidity for the value I’ve created so far, and I’d like to find a partner that can help us replicate the model in other cities and allow me to share in some of the future growth.” (Location 1709)
  • If you want your business to be profitable, enjoy fat margins, and thrive without you, you need to stop responding to RFPs and start carving out your own oneof-a-kind product or service. RFPs commoditize a category down to the point where the only way for a business to win a contract is to be the lowest-cost provider. (Location 1982)
  • “Your job as an entrepreneur is to hire salespeople to sell your products and services so you can spend your time selling your company. You make a few hundred or thousand dollars when you sell your product, but if you turned those same skills to selling your company, you can make exponentially more. You have the right skills, but you’re selling the wrong product.” (Location 2035)
  • The next step in the process is to find representation. If your company has less than $2 million in sales, a business broker will best serve you. If it has more than $2 million in sales, a boutique mergers and acquisitions firm is probably your best bet. Look (Location 2164)
  • As long as you get what you want for the business up front and treat the earn-out as gravy, you can walk when things get nasty. If you feel as though you have to stay to get full value for the business, then expect life to be uncomfortable for the duration of the earn-out. (Location 2247)