Built to Sell

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Todays Book

Built to Sell
By John Warrillow

Summary Snapshot

The core concept of "Built to Sell" is that entrepreneurs should structure their businesses in a way that allows them to function independently, making them more attractive to potential buyers and ultimately more valuable, even if the owner doesn't plan to sell immediately.

1. Building a Sellable Business Benefits Everyone: The principles of building a sellable business, such as high-profit margins, low risk, and growth potential, benefit all businesses, regardless of whether the owner intends to sell immediately or at all.

2. A Sellable Business Provides Options and Security: Owners gain flexibility and security by creating a business that can function independently. If unexpected circumstances arise, they have the option to sell quickly and capitalize on their hard work.

3. Don't Start a Business Solely to Sell It: While building a sellable business is advisable, starting a business with the sole intention of selling it is often counterproductive. First, focus on building a strong brand and a profitable, sustainable business model.

4. Owner Independence is Paramount: The most crucial factor in building a sellable business is its ability to operate without the owner's direct involvement. When a business is overly reliant on the owner, it becomes less attractive to potential buyers.

5. Avoid Owner Dependency Traps: Businesses become owner-dependent when customers are accustomed to dealing only with the owner, or when employees require the owner's constant presence to perform their jobs. Design systems and processes to prevent this.

6. The Personal Toll of Owner Dependency: Running a business that requires your constant attention can lead to burnout and hinder growth. Delegating tasks and building a capable team are essential for both your well-being and the company's success.

7. Specialize to Scale Effectively: Avoid spreading your resources thin by specializing in a specific product or service. This allows you to focus your efforts, resources, and expertise to achieve dominance in a niche market.

8. Finding Your Scalable Specialty: Identify a product or service that offers unique value to customers, is teachable to employees, and has a high potential for repeat purchases or recurring revenue.

9. Balancing Uniqueness and Learnability: Strive to offer a specialized product or service that sets you apart from competitors while ensuring that its production or delivery can be standardized and taught to employees.

10. Prioritize Repurchase Potential: Focus on offerings that encourage repeat business, such as subscription services or consumables. This creates a more predictable and reliable revenue stream, making your business more attractive to buyers.

11. Generate Positive Cash Flow Early On: Positive cash flow—bringing in more money than you spend—is crucial for sustainable growth and enables you to implement strategies for building a sellable business.

12. Charging Upfront for Positive Cash Flow: Implement billing practices that prioritize upfront payments, such as subscription models or requiring deposits. This ensures you have the capital to deliver the service and minimizes risk.

13. Building a Sales Team to Drive Revenue: Hiring a sales team frees you from direct sales responsibilities, allowing you to focus on strategic tasks and demonstrating to potential buyers that the business can generate revenue without you.

14. Recruit Salespeople with Product Experience: Prioritize salespeople experienced in selling defined products over those accustomed to customizing services. This ensures consistent delivery of your specialized offering and strengthens your brand identity.

15. Cultivate a Competitive Sales Environment: Hire at least two salespeople to foster healthy competition and demonstrate to potential buyers that the product or service drives sales success, not just one individual's talent.

16. Assemble a Capable and Stable Management Team: Establish a management team with the expertise and authority to oversee all aspects of the business without your direct involvement, signaling to buyers a smooth transition of ownership.

17. Incentivize Management for Long-Term Stability: Offer incentives for managers to remain with the company after a sale, such as time-vested bonus accounts. This reassures potential buyers that the existing leadership structure will remain intact.

18. Exercise Caution with Equity and Profit Sharing: Avoid offering equity or profit sharing to managers as long-term incentives. This can complicate the sale process and create conflicts of interest that deter potential buyers.

19. Seek Professional Guidance for the Sale: Engage a business broker or merger and acquisition firm with the right expertise and network to navigate the complexities of the sale process and ensure you secure the best possible deal.

20. Choose an Advisor Who Understands Your Value: Select a firm or broker with deep knowledge of your specific industry or niche. This ensures they can accurately assess and communicate your company's unique value proposition to potential buyers.

21. Align with an Advisor of the Right Size: Match your business size with the appropriate advisor. Smaller businesses may benefit from a business broker's localized expertise, while larger companies may require the reach and resources of an M&A firm.

22. Communicate Transparently with Your Management: Inform your management team about your intention to sell once you find a serious potential buyer. Transparency builds trust and allows them to prepare for the transition.

23. Address Concerns and Offer Reassurance: Acknowledge any anxieties your management team may have about the sale and highlight potential benefits, such as increased growth opportunities within a larger organization.

24. Provide Financial Recognition for Management's Contributions: Consider offering your management team a one-time bonus upon the company's successful sale. This will demonstrate your appreciation for their hard work and ease the transition process.

25. Be Prepared for Employee Impact: Acknowledge that a sale may lead to changes in roles and responsibilities for employees, particularly within management. Communicate openly about these possibilities and prioritize transparency throughout the process.

26. Define Your Desired Outcome Before Entering Negotiations: Determine your non-negotiables for the sale, such as the minimum upfront payment, to ensure you secure a deal that aligns with your financial goals and future plans.

27. Balance Rational Valuation with Emotional Attachment: While assessing your company's worth, consider both its objective market value and your personal attachment to it. Seek external perspectives to ensure a realistic valuation.

28. Prepare for the Due Diligence Process: Potential buyers will likely thoroughly examine your company's financials, operations, and legal standing. This process can be lengthy and demanding, requiring meticulous record-keeping and transparency.

29. Remain Firm During Negotiations: Don't be pressured into accepting a deal that falls short of your expectations or undervalues your company's worth. Stand firm on your desired terms and be willing to walk away from unfavorable offers.

30. Embrace the Transformative Nature of Selling Your Business: Selling your business is a significant milestone that requires careful planning, emotional intelligence, and a clear vision for your future. Approach the process strategically and celebrate your achievements.

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