What you'll learn:
➤ Built to Sell: Short Summary
In this Built To Sell summary, you’ll discover the essential steps to transform a small service company into a thriving business that you can eventually sell.
If you’ve ever been involved in a startup, you understand the demanding nature of the journey, with long hours and constant uncertainty, often leading to burnout.
But what if there was a path that not only offered an exit strategy but also the potential for substantial wealth? Surprisingly, that path is selling your company, and it’s a viable option if you plan strategically.
John Warrillow’s “Built To Sell: Creating a Business That Can Thrive Without You” provides a roadmap for achieving this goal. By considering the idea of selling your business, especially from the outset, you can reduce stress, regain your time, and potentially emerge wealthier.
This book offers valuable insights into entrepreneurship, including:
|Lessons||How to Apply the Lessons|
|Specialization Leads to Success||Identify your core competency and focus on it. |
Hire specialists to enhance service quality.
Build a reputation as the top provider in your niche.
Attract more business through referrals and higher prices.
|Delegate Early for Future Success||Delegate tasks and decision-making as your company grows. |
Develop processes and systems that don’t rely on your presence.
Train and empower your team to operate independently.
Create a culture of self-sufficiency within your organization.
|Diversify Your Income Streams||Diversify your client base to reduce dependency on one source.|
Implement effective cash flow management strategies.
Negotiate terms that allow flexibility without risking major clients.
Develop multiple income streams to enhance business stability.
➤ Built to Sell: Full Summary
The Book in Three Sentences
- John Warrillow highlights the critical mistake many entrepreneurs make: building a business too reliant on themselves, which makes it unattractive to potential buyers, even if profitable.
- Successful businesses should always be sellable, regardless of whether you intend to sell them.
- Once your business can operate independently, it becomes a valuable asset. Specialization, diversification of clients, and ownership of processes are key to achieving this.
The Five Big Ideas
- Run your company as if it will last indefinitely, but also strive to maximize its value for potential sale.
- Smart entrepreneurs build businesses to be sellable, even if they don’t intend to sell.
- A business that can run without your constant involvement becomes a valuable asset.
- Specialization and hiring specialists can improve your work quality and differentiate you from competitors.
- Avoid overreliance on one client (limit them to less than 15% of your revenue) and own a clear, pitchable process.
Top 20 takeaways
Strive for Longevity and Value: Run your company with the mindset that it will endure indefinitely, but always work on enhancing its value, ensuring it’s ready for sale at any time for the highest market price.
Build Sellable Businesses: Regardless of your intention to sell, focus on constructing businesses that are inherently sellable. Even if you don’t plan to cash out or step back soon, this approach is favored by savvy entrepreneurs.
Create a Valuable Asset: Aim for a business that can operate autonomously without your constant presence. This independence will transform your business into a valuable and marketable asset.
Specialization Over Generalization: Specialize in a specific area instead of offering generalized services. Employ specialists to improve the quality of your work and differentiate yourself from competitors.
Diversify Your Client Base: Avoid relying too heavily on a single client, as this presents risks and discourages potential buyers. Ensure that no single client accounts for more than 15 percent of your total revenue.
Ownership of Processes: Gain ownership of your processes, making it easier to pitch your services and maintain control. Clearly define what you offer to increase the likelihood of customer purchases.
Separate Yourself from the Company: Don’t become synonymous with your business. Buyers are more confident in their offers when they believe the business can run smoothly without you at the helm.
Upfront Payment for Services: Depart from the norm of billing for services after rendering them. Implement upfront payment or progress billing to establish a positive cash flow cycle.
Discerning Project Selection: Don’t hesitate to decline projects that fall outside your area of expertise. Demonstrating commitment to specialization by turning down work will increase referrals from people seeking your specific product or service.
Pipeline Prospect Analysis: Calculate the number of pipeline prospects likely to convert into sales. This figure becomes crucial when preparing to sell, allowing potential buyers to estimate the market opportunity’s size.
Two Sales Reps Are Better: Employing two sales representatives is more effective than one. Competitive dynamics between them demonstrate a scalable sales model to potential buyers, surpassing the impact of a single exceptional salesperson.
Product Sales Over Services: When hiring sales professionals, prioritize those skilled in selling products rather than services. They can better align your product with a client’s needs, rather than excessively customizing offerings to match client desires.
Prioritize Cash Flow Over P&L: Disregard your profit-and-loss statement during the year you transition to a standardized offering, even if it necessitates forfeiting bonuses for you and your employees. As long as your cash flow remains robust and consistent, profitability will return swiftly.
Prepare Financial Statements: Ensure you have a minimum of two years of financial statements showcasing the use of your standardized offering model before considering the sale of your company.
Build an Effective Management Team: Establish a competent management team and implement a long-term incentive plan that rewards their individual performance and loyalty.
Select the Right Adviser: When choosing an adviser, opt for someone who doesn’t consider you their largest or smallest client, and who possesses in-depth knowledge of your industry.
Beware of Exclusive Advisers: Avoid advisers who propose brokering discussions with a single client. Seek advisers who create competition for your business, preventing you from becoming a pawn in their efforts to please their top client.
Plan Ambitiously: Develop a three-year business plan that envisions the full potential of your enterprise. Remember that the acquiring company will provide additional resources to accelerate your growth.
Speak the Language of Product-Oriented Businesses: To transition into a sellable, product-oriented business, adopt the language used in this context. Replace terms like “clients” with “customers” and “firm” with “business.” Revamp your website and customer-facing communications to eliminate references to your past as a generic service provider.
Retain Key Employees with Stay Bonuses: Instead of offering stock options to retain key employees following an acquisition, implement a straightforward stay bonus system. Reward members of your management team with a cash incentive only if they stay through the transition, paid in multiple installments.
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➤ Built to Sell: Top 3 Lessons
1️⃣ Specialization Leads to Success
Imagine having a peach tree in your backyard that, in previous years, produced mediocre fruit. It wasn’t until you decided to thin the peaches one Spring that you ended up with larger, more delicious peaches. This simple act of focusing on a single task made a significant difference in the quality of the outcome.
In the world of business, this concept holds true as well. When you try to juggle too many opportunities, none of them may flourish. However, by concentrating your efforts on one area and striving to become the best at it, you can enjoy far more fruitful rewards.
Specialization offers several advantages. First, it positions you as an expert in your chosen field, allowing potential clients to see your unrivaled competence. Your reputation as the provider of the highest-quality service in the industry begins to grow, leading to recommendations and making it easier to command higher prices.
Moreover, specialization streamlines the process of assembling a top-notch team. If your company focuses on a single area, you can attract top talent to excel in that specific domain, even if your organization is relatively small. This targeted approach sets the stage for long-term success.
2️⃣ Delegate Early for Future Success
Starting your own business can be an exhilarating experience. The sense of ownership and the knowledge that you’re providing value to your clients are truly rewarding. In the beginning, you may find yourself deeply involved in every aspect of your business, and this hands-on approach is natural. After all, it’s your brainchild, and you want to ensure that every decision aligns with your vision.
However, if your ultimate goal is to sell your startup, you must be cautious about becoming the linchpin upon which the entire operation relies. Your initial heavy involvement can lead to a situation where you are irreplaceable, and this poses a significant challenge when you intend to step back or sell the company.
Clients become accustomed to dealing exclusively with you, making you the face of the business in their eyes. Breaking this habit becomes increasingly difficult as time goes on. Consequently, your ability to onboard new clients and expand the company becomes severely restricted, as it hinges on your already packed schedule.
This also impedes your capacity to work on the broader aspects of your business, seeking growth opportunities, and enhancing efficiency. Furthermore, it makes taking vacations or any time off a near impossibility.
To prepare your business for a future sale and avoid these pitfalls, it’s crucial to delegate responsibilities as early and as extensively as possible.
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3️⃣ Diversify Your Income Streams
As an entrepreneur with the dream of eventually selling your company, your focus naturally gravitates toward landing those big clients, and that’s a positive move. However, it’s essential to exercise caution when your business becomes overly reliant on these clients.
Firstly, the danger lies in cash flow. Imagine a scenario where one significant client constitutes 40% of your revenue. What happens if that client is late in making a payment? It can quickly put your business in a precarious position, making it challenging to meet payroll and cover essential expenses. This additional stress is something you can do without in the already fast-paced world of startups.
Furthermore, depending heavily on just one or two major clients makes it challenging to negotiate effectively. You may want to secure higher prices or request more extended project timelines, but abruptly raising fees or imposing new terms could lead to the loss of a major client.
In this situation, retaining your most talented employees also becomes a challenge. If a major client demands a project delivery by Monday and it’s already Friday, your top employees may have to work over the weekend, putting their job satisfaction and loyalty at risk.
For potential buyers, these scenarios are concerning signs when considering the purchase of your company. To make your business more attractive to prospective buyers, diversify your income streams as early as possible. This strategy helps reduce risks and enhances your business’s overall stability.
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➤ Built to Sell: Popular Quotes
|Built to Sell: Popular Quotes by John Warrillow|
|“An amazing thing will happen when you start turning down other projects in favor of promoting your specialized logo design process—you’ll instantly become more referable.”|
|“Next, name your scalable product or service. Naming your offering gives you ownership of it and helps you differentiate it from those of potential competitors.”|
|“Don’t be afraid to say no to projects. Prove that you’re serious about specialization by turning down work that falls outside your area of expertise. The more people you say no to, the more referrals you’ll get to people who need your product or service.”|
|“Once you’ve isolated what is teachable, what your customers value, and what they need most often, document your process for delivering this type of product or service.”|
➤ Built to Sell: Final Thoughts
Built To Sell summary provides invaluable advice for those looking to sell their business or seeking a way out of the daily grind of entrepreneurship. Its practical tips and strategies resonate with anyone considering the long-term prospects of their business.
Who Would Benefit from the Built To Sell Summary?
- The Established Founder: This book is a must-read for seasoned founders who’ve dedicated years to building their businesses and are now seeking an exit strategy.
- The Aspiring Entrepreneur: If you’re a young entrepreneur contemplating the benefits of starting and eventually selling a business, this summary offers valuable insights.
- Anyone Interested in Entrepreneurship: Whether you’re deeply involved in entrepreneurship or simply curious about the world of business, Built To Sell provides knowledge that can benefit a wide range of readers.
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