Here at EF we’re not really about flogging others peoples products, but this one time we felt like this one needs to be out there. Over the weekend we came across a unique business book titled “Built to Sell.”
The book written by John Warrillow is ranked one of the top 10 business books ever written by Inc.com. It explores why a business should be built forever but also always ready for sale, and profiles the story of an advertising agency transforming itself into a sellable business.
This writer personally found it a paradigm shifting read and one that would resonate with almost any boutique or young designer toiling away at building their our cog in the fashion business machine.
To really understand the implications, reasoning, and steps of making your business sellable you need to read the full story (you can read the book cover to cover in a single day), but below are the core tips of the story.
Follow these to make sure your blood, sweat, tears, passion, and excitement for your design and entrepreneurial zeal are one-day duly rewarded.
TIP 1) Don’t generalise, speciliase. 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.
TIP 2) Relying too heavily on one client is risky and will turn off potential buyers. Make sure that no one client makes up more than 15% of your revenue.
TIP 3) Owing 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.
TIP 4) Don’t become synonymous with your company. IF buyers aren’t confident that your business can run without you in charge, they won’t make their best offer.
TIP 5) Avoid the cash suck. Once you’ve specialised your service, charge up front or use progress billing to create a positive cash flow cycle.
TIP 6) Don’t be afraid to say no to projects. Prove that you’re serious about specialisation 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.
TIP 7) Take some time to figure out how many pipeline prospects will likely lead to sales. This number will become essential when you go to sell because it allows the buyer to estimate the size of the market opportunity.
TIP 8) Two sales reps are always better than one. Usually naturally competitive types, sales reps will try to outdo each other. And having two on staff will prove to a buyer that you have a scalable sales model, not just one good sales rep.
TIP 9) Hire people who are good at selling products, not services. These people will be better able to figure out how your product can meet a client’s needs rather than agreeing to customise your offering to fit what the client wants.
TIP 10) Ignore your P&L in the year you make the switch to a standardised offering even if it means you and your employees will have to forgo a bonus that year. As long as your cash-flow remains consistent and strong, you’ll be back in the black in no time.
TIP 11) You’ll need at least two years of financial statements reflecting your use of the standardised offering model before you sell your company.
TIP 12) Build a management team and offer then a long-term incentive plan that rewards their personal performance and loyalty
TIP 13) Find an adviser for whom you will be neither their largest nor their smallest client. Make sure they know your industry.
TIP 14) Avoid an adviser who offers to broker a discussion with a single client. you want to ensure there is competition for your business and avoid being used as a pawn for your adviser to curry favour with his or her best client.
TIP 15) think big. Write a 3-year business plan that paints a picture of what is possible for your business. Remember, the company that acquires you will have more resources for you to accelerate your growth.
TIP 16) If you want to be a sellable, product orientated business, you need to use the language of one. change words like ‘clients’ to ‘cusotmers’ and ‘firm’ to ‘business’. Rid your website and customer-facing communications of any references that reveal you used to be a generic service business.
TIP 17) Don’t issue stock options to retain key employees after an acquisition. Instead use a simple stay bonus that offers the members of your management team a cash reward if you sell your company. Pay the reward in tow or more instalments only to those who stay so that you ensure your key staff stays on through the transition.