Built To Sell: Creating A Business That Can Thrive Without You

In the world of entrepreneurship, one common pitfall is building a business that is too reliant on its owner. This dependency not only stifles growth but can also make the business nearly impossible to sell. John Warrillow’s Built to Sell: Creating a Business That Can Thrive Without You provides a transformative guide to overcoming this issue. By using a compelling parable and an 8-step action plan, Warrillow shows how to create a business that is scalable, sellable, and ultimately more valuable.

Who May Benefit from the Book

• Entrepreneurs looking to sell their business
• Small business owners seeking to streamline operations
• Service-based business owners wanting to create scalable offerings
• Startup founders preparing for acquisition
• Business consultants advising clients on increasing business value

Top 3 Key Insights

1. Focus on Scalability: Create a product or service that can be taught, replicated, and delivered repeatedly, increasing business value.
2. Positive Cash Flow Cycle: Charge customers upfront to improve financial stability and attract potential acquirers.
3. Standardization: Develop detailed, documented processes that allow the business to run independently of the owner.

7 More Lessons and Takeaways

1. Create a Differentiated Offering: Stand out by branding your process or product, avoiding commoditization.
2. Build a Sales Team: Delegate sales to avoid being the main “rainmaker” and focus on growing the business.
3. Avoid Custom Work: Focus on a specific scalable offering to increase efficiency and brand clarity.
4. Operate the Model: Run your focused, scalable model for at least two years before considering a sale.
5. Incentivize Managers: Offer cash-based bonuses instead of equity to retain key management after a sale.
6. Prepare for Due Diligence: Expect scrutiny from potential buyers and maintain business performance during the sale process.
7. Understand Working Capital: Negotiate favorable terms for working capital during acquisition discussions to maximize deal value.

The Book in 20 Words

Transform your business into a sellable asset with John Warrillow’s 8-step model for creating a scalable and valuable enterprise.

The Book Summary in 1 Minute

Built to Sell teaches entrepreneurs how to make their business sellable by focusing on scalable, teachable, and repeatable offerings. Warrillow suggests avoiding custom projects, building a sales team, and charging upfront to improve cash flow. Key to this process is standardizing operations so the business can run independently of the owner. The book outlines actionable strategies, from identifying scalable products to incentivizing managers, making it a must-read for entrepreneurs considering selling or just streamlining their business.

The Book Summary in 10 Minutes

The Backdrop to the Built to Sell Fable

The Story of Alex Stapleton

The central narrative of Built to Sell follows Alex Stapleton, a fictional entrepreneur who owns The Stapleton Agency, a marketing firm. When Alex decides to sell his business, he seeks the advice of Ted Gordon, a seasoned entrepreneur and family friend. To Alex’s dismay, Ted informs him that his business is essentially worthless. The reasons include:

• Lack of Differentiation: The agency does not stand out in its market.
• Owner Dependency: Alex is the linchpin of the business.
• Revenue Dependence: 40% of the agency’s revenue comes from a single client.

Ted explains that such businesses are often sold under an earn-out agreement, where the seller only receives a portion of the sale price upfront and must achieve specific targets over several years to earn the rest. To avoid this predicament and make his business genuinely sellable, Alex must transform his business with Ted’s guidance.

The 8-Step Model to Sell Your Business

Building a business that can operate independently of its owner requires deliberate and strategic action. John Warrillow’s 8-step model provides a roadmap for creating a business that can thrive without you. Here’s a detailed breakdown of each step:

1. Develop a Standard Service Offering (SSO)

Objective: Focus on a specific area of expertise to create a niche.

• Specialization: Concentrate on one service you excel at to differentiate from competitors.
• Process Documentation: Create a standardized process for delivering this service.
• Scalability: Ensure the service can be taught and replicated by others.

By developing a Standard Service Offering, you position your business as a leader in a particular niche, making it more attractive to potential buyers.

2. Build a Positive Cash Flow Cycle

Objective: Ensure the business generates consistent cash flow.

• Cash Flow Management: Develop strategies to maintain a positive cash flow cycle.
• Financial Health: Improve financial metrics to enhance business attractiveness.

Buyers are more interested in businesses with robust financial performance. A positive cash flow cycle indicates a well-managed business.

The Two-Year Rule

Warrillow suggests operating the business for at least two years under the new, standardized model before considering a sale. This gives potential buyers confidence in the sustainability and scalability of the business model. It also provides the owner with time to refine processes and resolve any issues.

3. Hire a Sales Team

Objective: Create a sales team that operates independently of you.

• Sales Independence: Build a team that can generate sales without needing your direct involvement.
• Diverse Client Base: Ensure that no single client accounts for more than 10-15% of your revenue.

A capable sales team and a diverse client base will make your business more attractive to buyers.

4. Stop Accepting Projects Outside of Your SSO

Objective: Focus exclusively on your Standard Service Offering.

• Commitment: Reject projects that fall outside your SSO.
• Resilience: Overcome challenges and resistance from clients and employees.

Maintaining strict adherence to your SSO will enhance your business’s specialization and operational efficiency.

5. Launch a Long-Term Incentive Plan for the Management Team

Objective: Develop a management team that will remain with the company after the sale.

• Retention Strategy: Create an incentive plan that motivates the management team to stay.
• Avoid Equity: Use alternatives to equity for retention.

A strong and committed management team will increase the business’s value and appeal to buyers.

6. Find a Suitable Broker

Objective: Engage a broker to help sell your business.

• Broker Selection: Choose a broker with experience in selling businesses similar to yours.
• Sale Strategy: Develop strategies to maximize the sale price.

An experienced broker will facilitate the sale process and help secure the best possible price.

7. Inform Your Management Team

Objective: Communicate the potential sale to your management team.

• Transparency: Inform your team about the sale to avoid rumors and uncertainties.
• Engagement: Ensure your team is supportive and prepared for the transition.

Clear communication with your management team is crucial for a smooth transition.

8. Convert the Offer(s) into a Binding Deal

Objective: Finalize the sale and ensure all agreements are binding.

• Due Diligence: Be prepared for an extensive due diligence process.
• Pitfalls: Understand and avoid common pitfalls during the negotiation phase.

Securing a binding deal involves careful negotiation and thorough preparation.

Getting the Most from Built to Sell

For a comprehensive understanding of these strategies and their application, consider exploring the complete book, offering in-depth insights into creating a sellable business. You can purchase the book or find additional resources at Built to Sell.

You explore Clockwork: Design Your Business to Run Itself

About the Author of Built to Sell

Built to Sell is authored by John Warrillow, a seasoned entrepreneur with over 20 years of research experience in small and medium businesses. Warrillow founded The Value Builder System™ and has successfully started and exited several companies. His contributions to business marketing were recognized in 2008 by BtoB Magazine, which named him one of America’s most influential business-to-business marketers.

Built to Sell Quotes

• “To sell your business, you need to demonstrate to a buyer that you have a sales engine that will produce predictable, recurring revenue.”
• “You can’t be ‘kind of’ a specialist. Either you specialize or you don’t.”
• “Stop using the language of a service firm and start using the language of a sellable business.”
• “Buyers understand that entrepreneurs want to put some cash in their jeans but nobody wants to buy a sinking ship where the captain is about to jump.”
• “Think big; remember that the company that acquires you will have more resources for you to accelerate your growth.”

Conclusion

John Warrillow’s Built to Sell offers a practical and insightful guide for entrepreneurs aiming to create a business that thrives independently of them. By following the 8-step model, you can enhance your business’s value, scalability, and sellability, paving the way for a successful exit strategy or continued growth. Whether you plan to sell your business or simply want to improve its structure and profitability, this book provides essential strategies and actionable tips for achieving your goals.