I just finished reading Built to Sell by John Warrillow and it immediately hits my top 5 list of essential business reading. If you combined the teachings of The E-Myth Revisited (Michael Gerber) with Built to Sell you would have a text book in running small businesses that deliver more value to customers, employees and entrepreneurs.
As with E-myth, the advice in Built to Sell is offered through a fictitious business owner seeking guidance from a trusted and experienced advisor.
Alex Stapleton owns and operates a small advertising agency that has become overly-reliant on a large client, heavily dependent on his hands-on involvement, and basically undistinguishable from its competitors. When he decides to sell his business, he contacts Ted Gordon – a friend experienced in growing and selling businesses – who tells him that his business is more or less worthless in its current form. Through the course of the book, Ted mentors Alex in changing his business so that it becomes stronger, cash generative, systemised and valuable.
Beyond the story of Alex and The Stapleton Agency, there is very specific and actionable advice in this book. This is not all concepts and strategy – there are tactical and practical tips that you could implement in your business today to get it from being worthless to valuable within a couple of years.
Some of the advice is offered as “Ted’s Tips” throughout the book; here’s a few examples:
- Being a generalist forces you to hire generalist employees and your offering will be average at best. If you specialise, you can hire specialists and improve the quality of work.
- Make sure no client makes up more than 15% of your revenue
- Make the business less dependent on you so you can reduce or avoid an earn out
- Prove that you’re serious about specialisation by turning down work that falls out of your Standard Service Offering. The more people you say no to, the more referrals you’ll get to people who do want your Standard Service Offering
- Generic, owner-dependent service businesses usually sell for no more than a small amount of cash up front and a 3-5 year earn out, which places all of the risk on the person selling the business and puts almost all of the potential rewards into the buyer’s hands. You need to build a business where the majority of your proceeds get paid up front.
- Two sales reps are always better than one because they compete with each other and prove to a buyer that you have a scalable sales model (not just one good sales rep)
- Hire people who are good at selling products, not services.
- Only use equity as a last resort for motivating and retaining your management team. Consider alternative forms of long-term incentive plans.
Through the example of The Stapleton Agency, John Warrillow is able to cover the full lifecycle of turning around a generalist, owner-dependent business that has little or no value into a process-based, specialist that is ready to sell. It covers in varying degrees of detail – process definition, recruitment, building the sales team, incentivising management, hiring a business broker, and the final sale.
This is an easy and enjoyable book to read (c. 150 pages) packed with sound and actionable advice. I highly recommend you read it.