Built To Sell: Creating A Business That Can Thrive Without You (2010) - Plot & Excerpts
Built to Sell | book notesRun your business like it will be sold and run forever.- systems + management teamsPossible exits- sell it- hire president and become chairman- stay in itCreate a business that can thrive without you. Then, it's an asset you can sellStory: Alex runs an ad agency.- stretched thin doing all the sales. Customers want Alex personallyIt's hard to imagine leaving the company, but it's important to thinkof selling your company:- option to sellBuilttosell.comChapter one - company in chaos- big bank client = 35% of rev- cash flow issues- was working on Saturday. Managing designer.- reliant on highly talented designer who he stole from other agency.After too much BS revision direction from bank client, she resigned.- Now, needs to hire new talent.... But everyone wants a Strategy man,and Alex was then required to be there...CHAPTER TWOWorthless business?Ted, a serial entrepreneur who has sold businesses. 26 years married, two kidsAlex - has decided he wants to sell business. Tired of it all. Tiredof being personally required.Ted:Alex, you have a service business highly dependent on people thatpersonally require you, and you have many competitors who do the samething. You have nothing to sell.Has Tony, a crappy copywriter...Jr designer wants a 5K raise.... In opportune time considering bestdesigner is leaving, SEO client is unhappy, needs new copywriterTed:How is biz?Alex describes the steps for logo design.Step 1 - the VisionaryStep 2 - personificationStep 3 - hand drawn rough draft conceptsstep 4 - black and white proofStep 5 - Final designTed: the problem is that you're accepting too many projects, then youhire generalists to do specialist work.- if you want to sell, no client makes up 10% of rev- create a business that has standards, is for a need people containsnelly need = recurring revTakeaway: Don't generalize, specializeAlex then pitched the 5 Step process and landed a 10K project. Pitchedthe process with confidence. In control asTed: stop thinking you're a service company, and think like a product company.- when a service company is sold it's usually an earn out - very risky- grow the business to a point where business operates independent ofAlex. Then you can sell.- people expect to pay for a product up front, services later- bill up front for productAlex, you have a negative cash flow cycle... Instead, charge in advanceKey takeaways:- Don't become synonymous with the company. People won't buy if itdoesn't work without you.- charge up front with progress billingTed:- specialize- say no to projects out if your area of expertise. You'll getreferrals to businesses who need what you do.- people will have a hard time referring you if you're a generalistTakeaways for web dev- Use Genesis as framework so staff can consistently do maintenance- Use WPEngine as host- standard set of plugins. No variation between developersAlex told team it was now a five-step process.- Elijah left- offered an RFP for giant account... Tempting to take it for cashTakeaway for sales- two sales people- ideally competitive people- this will prove that company sales don't require a sakes rockstarCh 7Hire people who are good at selling products, not selling services- people who sell products figure out how the product will meet someone's needsBuild Management Team with long-term incentive plan (instead of equity)- stay bonus for loyalty- performance bonusStarbucksReplace "client" with "customer"- Service businesses have clients- Product businesses have customers, who are more easily replaceable,who buy their productsGet rid of all service business lingo.Don't offer equity to management team; offer a stay bonus to keyemployees who stay through acquisitionCh 13 - a sellable companyPrint Technology makes letter of intent to buy Stapleton Agency for6x. Annual profit at $6,000,000 with 60-Day due diligence.Ted: pressure them to make a decisionCh 14 - the finishing line- Print Technology was not comfortable with how Stapleton sized themarket. Adjusted offer to $5.2 million- Alex, initially upset, reviewed the envelope with the note for$5million from several years ago and decided to accept the offer.Ch. 15 Implementation Guide- a business reliant on the owner is un sellable3 components of scalability1) Teachable to employees2) Valuable to customers3) Repeatable - customers need them more than onceExercise:Make a chart for each serviceCut the ones that don't meet those criteriaTeachableValuable (can other people do it easily)RepeatableSix forms of recurring rev6) Consumables - disposable, i.e toothpaste.5) sunk money consumables - after they've made an investment in aplatform - something that requires repurchasing - I.e. A printer thatrequires specific print cartridges, or Gillette electric raiser thatrequires specifics4) Renewable Subscriptions - ie magazine subscription.3) Sunk Money Renewable Subscription - traders and money managers.**** KEY PART 2) auto renewal subscriptions - auto billing till you tell them to stop1) Contracts - hard contract for defined term. Cell phonesLessons from experience- guy used to own focus group biz that was super profitable- competition grew- RFPS commoditize products down to lowest price. AVOID RFPSWorking Capital Calculation- how much money does it cost to operate a business- a business that requires less working capital to operate is more valuableSales- if you're involved in selling the Products, you'll have a hard timeselling your company (without a long, risky earn out)- acquirers will want to want to buy a product that sales people cansell, rather than a product only a sales rockstar can sellOn customers- businesses often think they need to give customersDon't do customized work and subscription work at same time- cancel non subscription clientsAvoid personally solving problems; instead fix the systemsBrokerFind a broker who specializes in your fieldProtection against employees- own award- own fTHE DREAMGrow a scalable, sellable business. Sell it. Write about it, speakabout it, travel and fish.TAGLINEsmall business marketing expertsTAKEAWAYS- subscription service, its sales scripts, and operations manuals is ascalable, sellable asset- businesses with multiple locations could be a great market for it,I.e. Restaurants, office evolution,- change subscription agreement to longer term with clause that RJ can change it- what do RJ customers need most often?- stop selling things outside the scope of our products- long term incentive plan. See builttosell.com for template Reminds me that there is a purpose behind company building - treat a company like it might be sold at any time and the natural desire to maximize value will float to the surface. The fable is structured to illustrate the author's points but remains generic enough to easily envision how to apply the concepts to other (more personal) circumstances. No major novel directive but rather an acknowledgement that helps put proper focus to company building efforts.
What do You think about Built To Sell: Creating A Business That Can Thrive Without You (2010)?
Very good read for anyone thinking about building a Business in the hopes of selling it.
—bogieshane
Okay, okay, I don't have a business to sell....yet.
—TD25
A book almost every entrepreneur should read...
—Betsy
