Many small business owners start a business with the idea of greater freedom in mind, yet end up chaining themselves to something that takes even more dedication than a regular job.
This book discusses the dos and don'ts that business owners need to be conscious of in order to create a business that is independent of its owner(s) in order to be able to sell it. It does so in an easy to read format that's a bit of a gimmick – a fictional story illustrating the authors points. Like most business books, the core idea isn't that hard to explain. the book even includes a handy summary of the main points, which I'll paraphrase here:
- Focus on one thing you can do really well; even a service business can be 'productized' by creating a standard service that is the focus of the business.
- If your business revolves around one or two key clients, the risk inherent in that approach will lower the value or scare of potential buyers completely.
- Put a process in place, from sales through production.
- Don't "be" your company. If the company is all about you, what's a potential buyer really getting if you sell it and leave?
- By focusing on products, you can charge up front rather than having poor cash flow. If you pay people to work on a project for 3 months, and don't get paid for another month, you are, by the end, out 4 months salary while waiting for the payment.
- Say no to projects outside the scope of your business. Only by focusing narrowly can you really excel at what you do.
- Spend time doing some research and calculations to estimate your potential market size; buyers will want to know this.
- If you have a business that has sales people, hire at least two so that they'll compete with one another.
- You want people who are good at selling products, not services; the latter will want to tweak your offering for each and every client, rather than selling it as-is and trying to find how it can meet the customer's needs that way, which is the best strategy for a product.
- If you were previously running a more 'generic' services company, and you switch to a more productized approach, be prepared to take a hit the year when you switch.
- Potential acquirers will want to see at least a couple of years of steady growth with the new model after making the switch.
- If you grow, you'll need a management team that can work without you. Put an incentive system into place to reward their loyalty and results.
- When looking for an adviser to sell your company, aim for one where you will not be the largest or smallest client.
- If your adviser really only has one company in mind to sell yours to, they may be trying to sell you off cheap as a favor.
- Consider how much you could grow with the resources of a buyer. Think big, and show them what kind of growth could happen with the right backing.
- Think and speak like a product business with 'customers' rather than 'clients'.
- Stock options are more complex than simpler options like bonuses that are paid out over a period of time, in terms of ways to give people an incentive to stay.
All in all, it was an enjoyable read, with solid points. Even if you have no intention of selling your business, thinking of the business itself as a sort of "product" that is not dependent on you to work correctly is a sensible way to go about creating and growing a business.
He's certainly not, nor claims to be the first one to discuss this idea, and indeed references the well known E-Myth Revisited which focuses less on selling a business, and more on how to go about extricating you and your skills from the business.