"...the best businesses are sellable, and smart businesspeople believe that you should build a company to be sold even if you have no intention of cashing out or stepping back anytime soon."
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I almost didn’t read Built to Sell. Sure, I’d heard great things, but since I have no intention of selling my business anytime soon, I thought, “There’s definitely more relevant books for me to read out there, right?”
I was mistaken. I don’t care if you’re actively trying to sell your business, or simply have a dream of one day starting your own business; if you’re ever planning on being an entrepreneur, I highly recommend you read John Warrillow’s Built to Sell. Because here’s the logic –
Certain over-priced dot-coms and fire-sales aside, people typically want to buy healthy companies. Cash flow positive companies. Companies that can run without their founder. Companies that can be scaled and grown. And, if you’re an entrepreneur, isn’t that exactly the type of company you’d like to be running? Even if you have no intention to sell? Yup, me too.
So, since we’re on the same page – wanting to build scalable, cash generating businesses that can survive without our involvement on every little thing – you’re going to want to pay attention here. Warrillow says some stuff that goes against the very fibre of my “customer-centric” being… but he’s right.
The Big Idea
Don't generalize, specialize
"If you focus on doing one thing well and hire specialists in that area, the quality of your work will improve and you will stand out among your competitors."
There’s nothing wrong with being a consultant. Or a freelancer for that matter. Both of them can make a decent living listening intently to the needs of their clients and then creating custom solutions to address those needs. They make customers very happy that way. But they’re not building businesses.
Built to Sell is a story – a story about a fictional business owner named Alex Stapleton who runs a small design agency (The Stapleton Agency). The agency does everything their clients want, from websites and Search Engine Optimization to posters and radio commercials. As a small shop, they have a small staff, and as the small staff is required to know how to do everything, Alex Stapleton leads a team of generalists.
20 years ago this would have been less of a problem. Hemmed in by geography, most clients in need of a design agency would go to the one in town. And it was good, in those days, if you could address their varied needs. That’s changed.
As we’ve discussed so many times before, we’re now competing on a global landscape, no matter how large or small we are. As such, we need to be the very best in order to stand out. If we’re not the best, we’re competing on price (and we’re going to get killed). How do you get to be the best, especially when you’re the little guy? You go niche. Specific. Absolutely brilliant at one thing. For Alex Stapleton and his team, that one thing was designing logos. It really doesn’t matter what it is you choose to specialize in, so long as there’s a demand for it and you can work towards doing it with excellence, consistently. Which leads us to our first GEM…
Develop your process
"Ted's Tip #3: Owning a process makes it easier to pitch and puts you in control. Be clear about what you're selling, and potential customers will be more likely to buy your product."
I like the fact that Warrillow used a design agency as the business example in his story. Can you think of a more “creative”, unstructured, un-process-driven environment than a creative agency? And yet, create a process is exactly what Alex does. (FYI, the “Ted” in “Ted’s Tip #3” refers to the Yoda-like mentor in Built to Sell; the gentleman who guides Alex through the process of structuring the business to sell)
When you develop a process, you gain significantly in two crucial areas:
- You can scale. It’s a heck of a lot easier to teach employees how to do what you do when it’s detailed and documented. You can also teach employees how to sell like you do when you have a process.
- You can manage cashflow more effectively. Having a process is like having a product. People are used to paying for products up front (or at least in instalments), meaning you can charge and then do the work. Also, when you have a process, you have a standard price for it. Knowing that price makes it clearer how many sales you need to bring in each month.
"Clients will test your resolve every day. They're used to bossing their service providers around and, if given the choice, would always prefer you customize your solution just for them. If you want to sell your business, you can't give in. ... You can't be 'kind of' a specialist."
This was the hard part for me – learning to say no. Of course clients want customization; they assume the rules don’t apply to them. You need to stay strong. As Warrillow says in the quote above, “you can’t be “kind of” a specialist.” Heart surgeons don’t occasionally do knee surgery. Could they? Maybe. But that’s not their gig. And they’re not getting any better – any more credible – as a heart surgeon if they’re messing around with other procedures. You’re not a heart surgeon (I’m assuming), but you can build a reputation as an expert. You just need to stay strong, and stay away from projects that dilute your business offering.
So what’s the benefit here? We’re saying no to clients, we’re limiting the scope of our offering, and we’re documenting (in excruciating detail) everything that we do in our “process”. We’re also building a business. Whether you choose to sell, choose to scale back your personal involvement, or simply choose to use the process to streamline and grow your business, these “tips” really aren’t optional for entrepreneurs. Like I said earlier, there’s nothing wrong with being a consultant or a freelancer. But you’re not an entrepreneur unless you’re building a business that can thrive without you. And that takes discipline.