Key Messages
How To Structure Your Service Business For A Successful Acquisition: A Guide Using Alex Stapleton’S Story
Are you an entrepreneur looking to sell your business some day? In the book Built to Sell, author Ted Gordon guides the reader through a process for creating a well-structured company that will be attractive to potential buyers.
Using the story of Alex Stapleton, who wants to sell his marketing agency and have more time with his family, readers learn why it’s important to have more than one salesperson on staff, how to get your management team to stay with your company for a long time, and methods for finding a broker that will get you the best possible deal.
These lessons can be applied in any small business setting and allow entrepreneurs avoid feeling overwhelmed while attempting to createa successful exit strategy.
With this book as your guide, you can craft a company structure that will enable it to reach its maximum acquisition value.
The Benefits Of Specializing For Service Businesses: Focus, Quality, And Streamlined Operations
Business success lies in specialization in a single service.
This is evident from the example of Alex, who focuses on designing logos and becomes a top logo designer as a result.
He doesn’t have to fulfill a broad range of requests like, design brochures and copywriting which do not make up for his core strength.
As a result, clients come to him for solutions to their specific problems and are willing to pay higher prices for the quality work that Alex produces.
Furthermore, such focus also enables him to hire experts in the particular field which allows Alex’s company to create products with superior quality as compared to what smaller firms can produce when they have to hire generalists for different tasks.
Therefore, by specializing instead of diversifying your services, you can ensure that the company produces excellent work and you don’t have to oversee too many things either.
Why Founders Should Not “Become The Business” And Let Their Company Grow Independently
The success of any business relies heavily on a founder’s ability to step away and let the company continue to function without them.
This idea is at the heart of the Built to Sell Book Summary, which states that in order for a company to succeed, it must be structured such that it can still operate effectively even after its founder has moved on or taken a break.
In other words, rather than having an overly involved founder who implements their decisions into every aspect of the business, the aim should be to create systems and structures within the company that will enable everything to run smoothly independently.
That way, if you as a founder are unable to attend meetings or take time off from work, your business won’t suffer as much – because your team will be able to carry on functioning with minimal supervision.
For instance, if Alex had been able to focus less on client meetings and more on developing strategies and managing his employees, he wouldn’t have had such tight schedules and his business would have been better off.
Therefore, for long-term success in business it is essential to build a company that can operate without requiring its founder’s presence all the time.
How To Build An Effective Sales Team To Grow Your Business And Maximize Profitability
If you want your business to succeed, you need to have a solid sales team.
This means you should hire dedicated employees who understand your service and are able to represent the firm well to potential customers.
The best way to do this is by hiring more than one salesperson.
Having two or more of them on staff provides internal competition which helps motivate employees to perform at their peak.
Additionally, multiple staff members can provide coverage if somebody takes a sick day or has to leave town for any reason.
This is especially important for smaller companies that may offer specialized services like logo design as opposed to regular products.
To sell such services effectively, you need experienced salespeople who know how become familiar with a customer’s needs and sell the product in a standard yet compelling way.
It isn’t just about finding people who are good at offering custom solutions; they must also be able to make customers believe that your product package is indeed the perfect solution they need – even when the customization aspect isn’t present.
Don’T Let Big Clients Force You Into An Overly Dependent Business Relationship For Maximum Buyer Appeal
If you overrely on one big client in your business, it can put you in a vulnerable position and could lower the attractiveness of your business to potential buyers.
For example, if 40 percent of Alex’s revenue comes from a single major client, he could end up having trouble making payroll or paying rent when that client is late with payments.
As seen by Alex’s experience when his designer was forced to work over the weekend for a last minute edit from MNY Bank, relying on one big client could mean sacrificing other strategic decisions and not putting your best foot forward in negotiations.
Additionally, should the major client no longer be interested in what you offer e.g.
services like logo design for Alex – almost half of his revenue would be lost!
No firm that wants to see the company they acquire grow and unlock its full potential would want to purchase an enterprise wholly dependent on another.
To make sure that your business is attractive to buyers out there, it’s important to diversify your portfolio and not let one large client dictate all your operations.
The Benefits Of Standardized Services: Positive Cash Flow, Efficient Time Management, And Attracting Potential Buyers
Offering a standardized service is essential for businesses of all sizes, as it can save you time, lead to better cash flow and make your company attractive to buyers.
With regard to time, a standardized approach allows you to estimate the amount of time it’ll take to deliver a product more accurately.
This saves companies from unnecessary delays or detours from customer alterations.
Furthermore, having set services further streamlines efficiency as well as reduces costs in customer meetings.
From a financial standpoint, standardized services result in better cash flow by requiring customers to pay upfront for the service–thus reducing any debt owed later.
This positive cash flow is seen as an attractive feature since it creates a buffer that helps support unexpected expenses and improves profitability overall.
Keeping Management For The Long Term With Creative Incentives
When Alex wanted to leave his company after its sale, he had to create incentives for his management team to stay.
Without them, the business wouldn’t be able to continue running as it should.
One of the best ways to ensure managers’ loyalty is to give them equity in the form of stock options.
This makes them feel more invested in the company and motivates them to stay, even after the sale.
However, setting up stock options can be complicated, especially for smaller firms.
Therefore, Alex could opt for a long-term incentive plan instead – one that rewards their performance and loyalty throughout the duration of their appointment at the company.
Ted told his friend Alex that he sets end-of-year targets for his managers; when they meet these benchmarks, Ted pays them a bonus and puts aside a fund from which each manager can withdraw one third of its value after three years have passed.
This way Ted ensures that these important personnel stay on with the firm even when ownership changes hands.
Choose The Right Broker To Ensure You Get The Best Price For Your Company
If you are looking to sell your company, don’t underestimate the value of the broker.
The right broker is essential for getting the best price by arranging negotiations with different potential buyers.
This competition will result in a higher price for you and gives you the opportunity to choose between buyers.
For instance, some buyers may be looking for strategic opportunities in acquiring your business and thus be more willing to pay a higher price.
Others may be interested in financial returns only and won’t care about any potential uniqueness of your business.
It’s important to have a medium-sized brokerage firm when selecting a broker as this ensures that your deal will get personalized attention without it being overshadowed by larger deals.
Additionally, if you hire an experienced broker they may also have expertise in your industry which will be advantageous during negotiations.
Want To Sell Your Business? Write A Plan That Caters To Key Buyers’ Needs
If you’re looking to sell your business, it’s important to think big and create a savvy plan to present your company in the best light.
Start by writing a plan that details your business model, expected cash flow and a three-year plan with what the company could achieve with unlimited resources.
These details should be clear and precise in order to make a positive impression on buying companies that are larger than you.
Try to use words like “customers” and “business” instead of “clients” and “firm” as this is more likely to be perceived favorably.
Using these tactics can help ensure that when selling your business, you will get the maximum amount of money upfront without an earn out or having to wait for years to receive any payments.
By creating an impressive plan with cleverly chosen terminology, you have an even better chance at securing the best deal possible when selling your business.
Wrap Up
The Built to Sell Book Summary’s final take-away is that building a specialized service business will make it more attractive for buyers.
It’s about having a strong sales team, growing a variety of customers, and well-thought-out rewards or incentives to encourage management loyalty–all pieces needed to create a thriving and successful company.
Actionable advice would include standardizing services you provide as much as possible – this simplifies the process and ensures you get quick payments instead of having to wait until client satisfaction has been achieved.
This way, you’ve got your finances in order and don’t need to worry about cash problems while delivering quality services.
Ultimately, The Built to Sell Book Summary provides an insightful road map on how to build an attractive business with the potential of being sold in the future.
With its tips on promoting growth and loyalty, it’ll be have you shining at the top!
