Tuesday, June 8, 2010

Getting Your Business Ready to Sell

I recently read John Warrillow's book Built to Sell: Turn Your Business Into One You Can Sell.  It is a great resource for anyone that is building a business that they plan to exit by selling it. The book focuses on 8 steps for helping business owners maximize the value of their businesses when they sell.

There is obviously a lot that goes into getting a business ready to sell and maximizing its value in the process.  In my opinion, the first four steps are the hardest for most entrepreneurs and business owners that I know.  Here is why:

Step 1 involves determining which service is the most 'scalable' and creating a replicable process for it.  This is an exercise that most entrepreneurs fight, primarily because they struggle to be objective about selecting and then building a system to replicate one of their services.  Sometimes it is driven by fear that the service will lose its value, and sometimes entrepreneurs just don't want to figure out how everything works and create a system around it.  This requires a lot of mental energy, and most entrepreneurs refuse to engage in this activity - and it costs them a lot of time and money in the short-term and a poor exit as a result.

Step 2 involves charging in advance for this "Standard Service Offering."  Most business owners and entrepreneurs like the sound of this but hesitate to change this delicate part of their relationship with their clients.

Step 3 involves hiring a sales team to sell it.  This presents several challenges, including figuring out the model and compensation program for sales reps and cash-flowing the sales cycle.  This requires a leap of faith, and even when most entrepreneurs take it, they often do not hire the right sales reps who end up costing a lot of money but do not produce desirable results.  These challenges can certainly be overcome, but most either avoid this step or have lost money trying to do it in the past.

Step 4 requires the business to stop doing all other services except the one included in the "Standard Service Offering."  This is a very large leap of faith.  This means saying goodbye to some long-time good-paying clients and it means cutting the revenue of the firm in the short-term to hopefully come back bigger, stronger, and more scalable.

Mr. Warrillow's book is worth reading, and I especially enjoyed the realistic fiction setting that seemed to make the 8 steps more real and applicable.