The Model for Selling Your Business. The 8 steps to creating a sellable company. E-Myth Worldwide®. By John Warrillow, author of Built to Sell. chapter of Built To Sell: Creating a Business That Can Thrive Without You. I'd Ken Blanchard, who co wrote The One Minute Manager, says, "John Warrillow's. According to John Warrillow, the number one mistake entrepreneurs make is to build a business that relies too heavily on them. Thus, when the.
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Editorial Reviews. Review. “John does a masterful job of illuminating the qualities that business John Warrillow is the author of Built To Sell: Turn Your Business Into One You Can Sell. Throughout his career as an entrepreneur, John has. Built To Sell Creating A Business That Can Thrive Without You John Warrillow [ PDF] [EPUB] -. BUILT TO SELL CREATING A BUSINESS THAT CAN THRIVE. Inside Built to Sell, you'll find out how to create a fast-growing, profitable, scalable business that will give you the freedom you desire.
The bank usually paid in 60 days. Growing up in the creative business, Alex had always been around creative people. They had grown tired of their agency and were looking for a new marketing firm to handle all of their work, which included newspaper ads, local radio spots, store banners, and an e-commerce-enabled website. It was the last Tuesday in March and the sun showed the first signs of warmth after a long winter. Look for a firm with experience in your industry, as they already know many of the potential buyers for your business. Jump Start Your Business: I think you guys have proven that we have a scalable model for creating logos.
I listened to their amazing life stories and decided to create a radio program to tell those stories.
I then spent 12 years building a research company designed to help enterprise companies target small businesses. We interviewed and surveyed more than 10, business owners each year in an effort to delve deep inside their heads. I was lucky enough to have had a handful of mentors who collectively make up the sage wisdom embodied by the character of Ted Gordon. There are many reasons for wanting to build a sellable business: Whatever is motivating you to create a business that could be sold, I hope you find the story of Alex and Ted inspiring and helpful.
He grabbed his portfolio from the back seat and sprinted to the doors. A quick check of his watch made it official: He was late—again. He found an open elevator and hit the button for the 18th floor. He took his first full breath of air since leaving his office. John Stevens had worked at the bank for seven years.
Traffic was. John droned on with more feedback. Alex felt as if he were back in primary school. Alex left the meeting room promising John another round of mock-ups by Monday morning. He pulled out of the parking lot feeling broken. Alex had started The Stapleton Agency eight years before, after a career at a blue-chip marketing agency.
He started doing logos and brochures for small businesses and gradually moved up to becoming an Approved Vendor for First National Bank. Having Approved Vendor status meant that the bank paid their bills and kept The Stapleton Agency on a short list of alternative suppliers to their Agency of Record. He imagined directing models and actors between booze-soaked lunches with chief marketing officers. He wanted to be part of the scene. The office had all of the requisite touches befitting a creative shop: Sadly, it rarely served its purpose—First National Bank insisted that Alex come to them.
He tried to slip into his office without his senior designer, Sarah Buckner, noticing but she heard his keys jangle. She looked up from her computer. He had a few changes, but nothing major. He needed caffeine. He was expecting a check. He needed to get Sarah working on the First National Bank changes, go across town for lunch, get back to write a proposal, and find time to call his banker. Sarah rolled her eyes as Alex delivered the news. She accepted her sentence, donned her sound-canceling earphones to shut out the sorry world she found herself in, and set out to find the proper shade of orange red that would appease Lord Stevens.
Alex kicked himself for not standing up to John. Sandy Garmalo sat at the table sipping San Pellegrino. The law firm never generated huge billings for The Stapleton Agency but they were steady, which required Alex to spring for lunch once a quarter. The waiter arrived and asked if they would like a drink. Alex was about to ask for a Diet Coke when Sandy pre-empted him.
Sandy was a divorced something woman, 10 years older than Alex. She enjoyed flirting with him and Alex obliged, knowing that a little harmless flirting would keep the projects flowing to The Stapleton Agency.
Appetizers were picked at. More wine arrived. Sandy rambled on about the lawyers she worked for. Eventually, the waiter cleared the plates and dessert was offered and refused. Sandy requested a coffee. Resigning himself to another 10 minutes of meaningless banter, Alex ordered an espresso. The bill came and Alex produced his credit card. Alex sat nervously as the waiter went away and asked the credit gods for a little bit of understanding. His bill was due again some time this week and he hoped the date had not passed.
The waiter returned. Alex smiled, retrieved the card, signed the receipt, and got on with the business of extracting himself from lunch. Alex feigned interest and eventually made his escape. Alex stopped at Starbucks on the way home for a second coffee, which he hoped would sober him up enough to write the proposal he desperately needed to have accepted. They had grown tired of their agency and were looking for a new marketing firm to handle all of their work, which included newspaper ads, local radio spots, store banners, and an e-commerce-enabled website.
Alex knew that his team could handle the print ads and in-store signage. He had a friend at a production house who could help with the radio work. Most of the website work would be outsourced, but Urban Sports Warehouse did not need to know that. After pasting the requisite drivel about the history of his agency, its creative credentials, and awards, Alex began to estimate his fees.
There would be hard costs for studio time, proofs, and freelance web designers. These were largely arbitrary rates established over time by researching how much competitors charged.
Alex hated the process of estimating hours. He knew it was an inexact science and that his actual hours invested would have no resemblance to what he was estimating. Creating marketing 6 John Warrillow material was such an iterative process that there was no way to estimate his time accurately. After four hours of writing and doing some fuzzy math, the proposal was done. It was 6: He handed it to the clerk and hoped that Urban Sports Warehouse would be the client that would finally make him less reliant on First National Bank and the likes of John Stevens.
Mary had kids so she usually left by 5: Alex left Mary a voice mail, hoping that it would buy him a few days. The Stapleton Agency provided Alex with a decent income and a great vehicle for tax write-offs. He ran the Range Rover through the business and was sure to keep the bill whenever he ate out with friends. The Decision Alex met a client for breakfast on Monday morning. It was after When he arrived, he knew it was going to be a bad day.
Sunday, 4: We need to talk. Sarah This was not going to be good. Sarah was needed for all of the First National Bank work. She looked up from her work. Sarah followed and closed the door. He knew that there was nothing he could say or do. Working the weekend to revise the First National Bank brochure to accommodate a client who knew nothing about design had finally pushed Sarah over the edge.
The meeting ended with Alex making some weak attempts to thank her for her service. Both knew the damage was done and neither wanted to be where they were at that moment. Sarah went back to her earphones and computer. Alex sat back in his chair and considered the rest of his team.
Leveling with himself, Alex knew that he had assembled a mediocre team. Sarah was the best of the lot. He had two other designers who were generalists. They could create decent brochures, functional websites, and acceptable print ads. His account directors were equally average. Before joining The Stapleton Agency, Dean Richardson had been an account supervisor at a large local agency.
Having been passed over twice for promotion to account director, Dean had been easy prey for Alex to recruit with an offer of becoming an account director at The Stapleton Agency. Alex knew titles were a currency he could afford to be liberal with. Rhina Sullivan was the other account director at The Stapleton Agency. She was efficient and detail oriented. However, as account director, she was also responsible for client strategy, which was over her head.
Losing Sarah meant his other designers would need to work overtime. His team, average to begin with, would be stretched to their limits. When he started his agency, Alex dreamt of attracting the best specialized talent in the city, paying them well, building a magical work environment, and eventually selling out to a multinational agency holding company.
In reality, he had secondrate generalists working at the beck and call of unknowledgeable clients.
Alex was tired of the grind and decided it was time to sell his company. Ted Gordon had been a family friend for decades and had inspired Alex to become an entrepreneur. Ted had built and sold a number of businesses over the years and Alex had watched Ted acquire new heights of personal and financial freedom. Ted was a serial entrepreneur. He had made his first million starting, and ultimately selling, an insurance agency. He had moved on to build a consulting company, which he sold to a multinational firm.
He also sold a commercial real estate business a few years ago. By the age of 59, Ted had started, built, and sold five businesses. His net worth was well into eight figures. Not only was Ted a success in business, he was also a success in life. He had a happy family with a beautiful wife and two adult kids who still talked to him. There were also annual ski trips and long summers at the beach house. It seemed like Ted had figured things out, so Alex decided to give him a call.
How are you? Would you mind if I came up to see you? When Alex arrived, a receptionist informed him that Ted would be right out. A few minutes later, Ted came out of his office and put an arm around Alex. Did she offer you a drink? They shunned the desk for a more comfortable spot on two white leather chairs divided by a glass coffee table. Ted rested his feet on the coffee table. Why do you think you want to sell? Ted listened carefully, asking questions for clarification.
Having listened to Alex for the better part of 30 minutes, Ted asked a question that seemed somewhat odd. We create marketing materials like brochures, print ads, and websites. Sometimes we lose out to regional offices of large agencies. There are a lot of freelancers who work from home and.
If you want to sell it, we need to work on making some changes in your business. Are you prepared to follow my advice? John Stevens had seen the latest round of revisions and had more changes to make to the brochure.
Hostage Taking Alex got back to the office and took an inventory of projects that needed to get done for the week.
It would be a busy week and Alex needed extra effort from each of his employees. Awkward in high school, Tony had chosen a career in advertising because he thought being funny would make him more attractive to the opposite sex. He had been in the bottom half of his class at college and, upon graduation, had bounced around five agencies over three years. Somehow, Tony had managed to land a short stint at a respected agency in town, so when Alex was desperate for a copywriter, he hired Tony after a minute interview.
Alex was regretting his haste. He tossed the page to the side of his desk and promised himself to get rid of Tony as soon as he could replace Sarah. The Free Checking branch posters were not going to win any creative awards but at least they were done. They needed to be proofed and printed, so Alex sent Elijah Kaplan, his youngest designer, to the print shop for the morning.
Chris was reasonably savvy with websites but by no means a specialist. Through some reworking of copy and tags, he had managed to get the bike store ranked fourth among Google natural searches for road bikes and fifth for bike service. The client wanted to be first or second in both categories. Chris broke the news to Alex. Word had circulated among the design team that Sarah was leaving and Elijah spotted his opportunity.
Because his mother worked at First National Bank, Elijah was given a starting salary that was 10 percent higher than was typical for a junior designer. It seems fair under the circumstances. The Process Ted greeted Alex warmly and offered him the same leather chair beside the coffee table.
He had started by sifting through a file of thank you letters and testimonials from clients. He looked at the time sheets his designers submitted and tracked them back to his most profitable projects. He also thought about the disaster projects over the last year and made a list of the types of projects that caused the most problems. We have a system we follow every time we get asked to create a product logo.
Once we create one product logo, we have our foot in the door and clients often come back as they launch new products.
So by showing them concepts in rough, we force them to focus on high-level ideas instead of details like colors or fonts. Step 3: Again, we limit the variables a client can see by only designing in black and white.
That way the client judges the logo on its design merits before we get into colors. Step 4: After they select colors, we provide the client with digital files and a brand standard guidebook, and then our work is done. Step 5: Step 1: Visioning Step 2: Pe rsonification Step 3: Sketch Concepts Step 4: Alex immediately recoiled. Plus, our other clients think of us as their agency and we get asked to do all sorts of projects for them.
If you specialize, you can hire specialists and improve the quality of your work. Nobody wants to buy a business where 40 percent of the revenue comes from one company. If you want to sell your business, you must have a diverse group of clients where no one company makes up more than 10 — 15 percent of your revenue. We made sure it was a service clients would need on a regular basis so we could count on recurring revenue.
Write down your five-step process and start talking to prospects about your Standard Service Offering. Create a one-page description of your approach to creating logos and find 10 people to pitch it to.
Come back next week and tell me how you made out. He closed his office door and considered his cash position. The bank usually paid in 60 days.
Alex turned his attention to his suppliers. He could delay his trade vendors for an extra 30 days. The phone company would give him an extra month or so.
His email to Ralph Stone in the strategic sourcing department of First National Bank was brief, cordial and, Alex hoped, fruitful. Hi Ralph: Thanks in advance, Alex Alex hoped for a speedy response. He had five days to visit 10 prospects. He quickly mocked up a one-page sell sheet and had Chris lay it out and print 10 color copies.
He fired off two dozen emails and hoped to get at least 10 meetings to pitch his new process.
His third meeting of the week was with Ziggy Epstein. Ziggy owned Natural Foods Inc. Her company supplied most of the specialty food stores in the surrounding area and had used The Stapleton Agency to build a website a few years ago. Alex met Ziggy at a small office attached to her production facility on the outskirts of town.
Have you come up with a name? Do you have a logo for Natural Treats? Can you send me a proposal? Alex started by estimating the number of hours it would take.
The fee was a combination of what he thought a logo was worth, how much agency time it would take, and gut feeling. There was nothing scientific about it. He emailed the estimate to Ziggy and crossed his fingers. It was a note from Ziggy. Thanks for such a speedy turnaround on the estimate. He had his first client for his new process. Alex took a celebratory walk around the block.
He was basking in the glow of his new assignment when he looked down at his mobile—a missed call. Mary Pradham was trying to reach him. He had sent 24 emails to dormant clients, which resulted in six meetings and one sale to Ziggy. I was in control. I felt confident that we have something of value and I think that confidence was contagious for Ziggy. Alex, I want you to stop thinking of The Stapleton Agency as a service company and start thinking like a product company. A service company is simply a collection of people with a specific expertise who offer their services to the marketplace.
Good service companies have some unique approaches and talented people. But as long as they customize their approach to solving client problems, there is no scale to the business and its operations are contingent on people. When people are the main assets of the business, and they can come and go every night, the business will not be worth very much.
The acquiring company is now in 28 John Warrillow control. An earn out is almost always a disappointment for an entrepreneur. Acquiring companies use an earn out formula to buy a business when they know the founders are the business. Your job is to build The Stapleton Agency up to a point where the business is independent of Alex Stapleton. When you have a product, people expect to pay for it in advance. When you go to Costco to buy toilet paper, you expect to pay for it before you use it!
The service was performed first and then you paid the bill. Products are paid for before you use them. Now that your service has been productized, you need to start charging up front for it. If I turn the sell sheet into a brochure and put our fee on the brochure, it would look even more like a tangible product.
If your business is a cash suck—and it sounds like it is today—then they will be willing to pay less for the business. If your business generates cash, they will be willing to pay more to buy your business.
Alex, give me a rundown on how you bill for your service today. Once we complete the project, we send our bill and wait 60 days or so for a check.
You have a negative cash flow cycle. On a typical logo design project, it takes four to five months before you get paid because it takes two to three months to do the work and another two months before your invoice is paid. The more projects you sell, the more cash you sop up. No wonder your bank is on your case. Now compare your existing cash flow cycle with a model that allows you to charge in advance.
You win the project and you ask to be paid before they experience the product. He knew if he could start getting clients to pay up front, he would get Mary off his case and sleep a lot better at night. It was everything about the letter that he found unbearable.
As he approached Sarah from behind, Alex had a full view of what was on her inch monitor. Instead of the First National Bank brochure, it seemed Sarah was engrossed in a last-minute travel site. Alex approached, and stood beside Sarah until she noticed him and sheepishly removed her earphones. There were three invoices from suppliers and two checks.
He was now down to 12 business days. How was your night? Elijah would not be working for The Stapleton Agency in six months. Ralph Stone also needed invoice number re-submitted with the correct purchase order number listed. There was an email from Ziggy. It would be radio and newspaper ads and possibly a local TV spot.
Sarah would be gone by the time the work came in. Elijah was too junior and Chris would be busy with the logos they were already committed to designing. Before Alex could come up with a response, Ted interrupted. That means you need to stop accepting other projects. If you offer a generic service like advertising or marketing, people will have trouble describing you to their friends and business associates because you are just like everyone else. For every advertising project you turn down, you will win a logo assignment.
Alex capitulated. That means you need to provide instructions to your employees so that they can implement the Five-Step Logo Design Process.
Imagine your Five-Step Logo Design Process is an assembly line with five machines and you need to teach someone to operate each machine.
Start with how to turn it on, how to make it go, and how to read all of the buttons and gauges as it runs. Give the instructions to one of your team members and see if they can follow the directions.
Edit it until someone can follow the instructions without you hovering over them. Bring it with you next time we meet and we can talk about how it is working.
He carefully gathered the pile, cradling it close to his chest so as not to lose anything. One by one, he placed the mail in two piles. The first pile was for junk mail. The second pile contained white number 10 envelopes.
The first pile began to grow: The second pile started to grow too. Once he finished sorting the mail, Alex carefully organized the second pile. He took his letter opener, inserted it into the 38 John Warrillow crack at the top of an envelope, and sliced it open. The first envelope revealed an invoice from a photographer they had used for the First National brochure. Another invoice. This could only mean one of two things: He inserted the letter opener and made a clean incision.
With the envelope fully opened he could see inside. He sat down with his cup of Grande Bold and wrote down the instructions he wanted followed for each of the five steps in his logo design process.
For step one, he wrote the exact questions he wanted to ask clients. The fourth step included strict instructions on how to present each black and white version, including the paper stock to use for printing.
It was a complete summary of his vision and directions for creating a logo. Alex went home exhilarated by the thought of starting to build some scale into his business. Employee Mutiny Alex was slightly nervous as all seven employees of The Stapleton Agency found a seat at the boardroom table. He looked around and sized up his audience.
His account directors were sitting next to each other. Rhina was sitting attentively with a notepad and sharpened pencil placed neatly in front of her. Dean sat beside Rhina, fiddling with his BlackBerry and pretending he had important clients to get back to. The designers flocked together on one side of the table with Sarah looking disinterested, Chris thumbing his mobile, and Elijah chatting with Tony.
Alex started the meeting by setting the stage for the changes he was about to implement at The Stapleton Agency. He talked about examples of companies that specialize in one thing. He explained why Southwest Airlines only uses the Boeing model of airplane so that their crew can learn one piece of equipment and maintenance teams can quickly spot problems with one set of diagnostic routines to follow.
Alex was proud of his example and used it as a springboard into revealing the changes that were afoot at The Stapleton Agency. Alex read a thank you letter from a client who had used the firm to create a product logo. He also talked about how much more satisfied their logo design clients were when compared to clients overall and how often logo clients returned for multiple 40 John Warrillow logos over time.
Alex admitted where they had gotten in over their head taking on advertising projects that went beyond their capabilities. He passed around a copy of the instruction manual that detailed the procedure for each step.
The presentation lasted 45 minutes, and then Alex paused for questions. Rhina was the first to speak.
Alex felt his temper rising. He quickly adjourned the meeting. Alex stared as Elijah fumbled to collect his things, refusing to make eye contact with his boss.
Alex walked across the room to close the door. I like drawing and did well in art class. It just seemed like a good choice. And as a business, our first priority is to make money.
If you want to be an artist, I suggest you go find somewhere else to work. He put a few things in his bag and left. Alex felt good to have exercised the power he had as the owner of his own company.
After all, his name was on the door and he would not stand for such blatant contempt—especially from his most junior employee. The broader implications of what he had just done started to wash over him. A knock on the door jolted Alex out of his fog. It was Rhina. The subject line read simply: He scanned the first few paragraphs and realized The Stapleton Agency had been offered a contract to become the Agency of Record for Urban Sports Warehouse.
It had been 24 hours since receiving the email from Blair Donaldson and he needed the exercise to work off the competing messages flying through his brain. But the only way a big agency will buy another small, undifferentiated agency will be if they tie you into a five-year earn out agreement.
You need to build a business where the majority of your proceeds get paid up front. I told you your resolve would be tested throughout this process. This is one of those moments. She informed him that Mr. The minutes felt like hours as Alex waited. Finally, Blair returned his call. Donaldson thanks for calling back. Alex looked down to see that he still had plenty of bars on his mobile.
Blair had hung up. Off to see the Spring Valley Homes guys?
He left the portfolio closed and started to fumble as he hurried to put on his jacket. When we got into the personification exercise, it was clear that they have a big vision for this condo project. They want to sell 56 units this fall and make it the first of five condo projects around the city. There was a mock-up for a print ad, a brochure, and six logo concepts all printed in full color.
Did you even read the instruction manual I handed out? Remove the print ad and brochure mock-ups. Urban Sports Warehouse would have been a big client for us. We need to figure out how many sales reps 48 John Warrillow you need to drive the sales engine and how many companies are in your target market.
How many companies are there in town? They found a U. Census Bureau website that showed there were , businesses within a mile radius. Ted wanted to tighten the target market as much as possible. How many companies did you email? He angled the pad so Alex could see his math.
That assumes one logo per company, which is conservative given most companies create logos for new divisions and products on a regular basis.
For example, you started with 44 leads and after two weeks you made two sales. If the average salesperson has 50 productive weeks per year, each salesperson you hire should be able to sell 50 logos.
From there we can project out various scenarios. You need to demonstrate you know your sales engine and that you can predict, with a fair degree of accuracy, how your sales engine will perform under their roof. You need to hire at least two. Published in: Full Name Comment goes here. Are you sure you want to Yes No.
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