“Built to Sell”, Turn you business into one you can sell
How much is your business truly worth? In many ways the ultimate objective for any small business is to maximize the value that business would command in the open marketplace. Despite its importance this concept of positioning a business to sell, like so many other things, gets lost in the malaise of tending to day-to-day operations.
John Warrillow author of the book “Built to Sell”, claims that only a few hundred thousand businesses are sold each year of the 23 million businesses in the United States. Released earlier this year, “Built to Sell” takes on the subject of business valuation and succession in a somewhat unusual way.
In “Built to Sell”, the process of selling a small business is explained with a fictional story, and two main characters; Alex, the owner of a small advertising firm, who can’t sell his business because he is the business, and Ted, a serial entrepreneur who has successfully bought and sold several companies (and Alex’s family friend).
Alex is trapped in his business, depending way too much on the whims of clients that monopolize his time, ask for eleventh hour changes, and take too long to pay. His employees are uninspired and despite his many years of hard work, Alex’s business is worth very little especially if he were to leave. Ted looks at Alex’s situation through a more critical lens, introducing a set of common-sense principles that force Alex to become more focused on working on his business rather than in it, and for the business to be less dependent on his own participation.
As the book progresses, it’s difficult not to be caught up in the relatable plotlines. The lessons learned are presented through weekly mentoring sessions with Ted leading Alex through the progressive reorganization of his small business model until it eventually becomes attractive to potential buyers. Ultimately Alex is able to realize substantial rewards for his years of hard work and toil.
Many small business books tend to rattle off their magic potion for success early in the narrative and proceed to fill the remaining portion of the book with drawn-out reframing of the original concepts. With “Built to Sell”, Warrillow’s choice to work with a fictional story telling format sucks you right in. This concept has been attempted before with business oriented books (“Who Moved my Cheese” and the “One Minute Manager” come to mind), but with “Built to Sell” the story creates an empathetic foundation that hits home with any entrepreneur.
Solving the mystery of dealing with a business broker who acts as the intermediary for the business sale will be an eye opener for many. The simplistic example of Alex and Ted’s story may seem flawed to some. After all, this story has quite the happy ending. In reality the negotiation of a business sale is likely a lot messier. Regardless, the process of organizing a business so it has a solid operating system will be a relief for the business owner who has toiled for too long and can no longer tell the forest from the trees
“Built to Last” is in many ways is a book to read before one goes into business, when an infrastructure and system can be created the correct way from scratch. For the seasoned entrepreneur, understanding the protocol of a business sale will bring enhanced value and peace of mind, if the business is sold…or not.
Tips from the character “Ted” in the book “Built to Sell”:
- “Being a generalist forces you to hire generalists and your offerings will be average at best.”
- “Prove that you’re serious about specialization by turning down work that falls outside your standard service.”
- “If you run a service business that’s highly dependent on a single client who depends on you personally to tend to their account and you compete with a lot of other players who provide similar services – your business is virtually worthless. Make sure that no one client comprises more than 15% of your revenue.”
- If you’re selling a product, you can create a flat fee as a price and get paid up-front.