How To Build Your Business Sell – Ep172

Visit John at: https://builttosell.com/

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The business program that brings you the

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podcast can be found in the podcast link at

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drawincustomers.com

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We are locally underwritten
by the Bank of Sun Prairie.

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My name is James Kademan, entrepreneur,

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author, speaker, and helpful coach to
small business owners across the country.

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Today we are welcoming/preparing to learn
from John Warrillow, who is super awesome.

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He’s the author of Built To Sell,
which you’ve probably seen. Host

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of the Built to Sell podcast, and founder
of the Value Builder System.

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So, John, how are you doing today?

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I’m great. James, how are you?

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I am excited because one I’m
familiar with your book.

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I have to apologize because I was not

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familiar to your podcast
until you reached out.

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But the Value Builder system,

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I just recently learned that I actually
hired a coach that used that software.

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That’s awesome.
It was incredible.

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So we have a lot to talk about, I guess
as far as that goes, sounds great.

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So let’s go back way back in time and just
tell us, how did you end up in this whole

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helping people sell their business
or value their business world?

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Yeah, it goes back a while.

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20 years ago, I used to run a market
research company, and I built it up to

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maybe five or 6 million in sales,
probably 25, 30 employees kind of thing.

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And it was profitable.

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We had month to month, maybe 20%
to 30% profit margins each month.

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So it was a good business.

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We had great clients with Bank
of America, Microsoft.

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These are all clients for us.

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And so I decided I want to sell it.

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And I went to see a guy in Toronto.

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And I said, what do you think it’s worth?

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Kind of rubbing my hands together,
waiting for the number.

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It kind of depends on the answer
to a couple of questions.

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He said, You’re in the research business.
So who does the research?

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And I’m like,
I’m involved in some of the research.

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It’s big clients.
I can’t step away.

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And he’s like, okay, who does the selling?

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And I’m like, yeah, I’m involved.
It’s Bank of America.

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Of course.
I’ve got to do some of the selling.

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He’s like, all right,
let me get this straight.

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You’ve got a research company.
You’re doing the selling.

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You’re doing the research.

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I could feel that the hair on the back

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of my neck going up, and he’s like,
I can’t sell your company.

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There’s nothing to sell.
It’s worthless.

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Ouch.
And I started to rebut him, right.

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Like, I’m like, you got to be kidding me.

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Like, Microsoft, Bank of America.

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They don’t care about a client list.

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They care about a business
that they can run without you.

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And as long as you’re in the middle,
it’s worthless to them.

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Right.

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And, man, I’ll tell you what.

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I left that meeting feeling
like about this tall.

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I left that meeting and spent two or three
years really transforming that business.

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We built a subscription model.

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We hired sales people.

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We got me out of doing a lot of the work.
And ultimately,

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it was acquired by a publicly traded
New York Stock Exchange listed company.

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So it had a happy ending.
Okay.

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And that really sort of started my journey

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into helping other owners,
who may have experienced something similar

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where they’re told, hey, their business
isn’t worth what they thought it was.

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Or maybe they want it to be
worth more than it is.

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Right.

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Kind of how to basically think about
improving the value of your company.

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So that’s kind of what I do.

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Very cool.

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So once you sold your company, I imagine,
to a company that size, you probably did.

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Okay.
Stepping out of that role.

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We moved to Europe.

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Nice.

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Three years in a little village called

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Exxon Provost, where we raised
our kids and lived like Expats.

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It was the most incredible
time of our lives.

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Right.

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The thing about the school system is

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in France is that you have six weeks on,
two weeks off throughout the whole year.

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Okay.

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So they take two weeks at the end
of October for a vacation called Tucson.

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And then they have another two weeks
of Christmas, two weeks in February.

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They don’t have as long a summer break.

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But they have these many breaks.

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And so we just made it our mission to get

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in the car every six weeks and go
to another part of Europe.

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So we went to Spain and Italy and Sweden

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and Denmark and all
over England and Wales.

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It’s just the most incredible
time of our lives.

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Oh, my gosh.

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That’s awesome.

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How old were your kids at that time?

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Kids were young, so they were
six and four at the time.

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And then we were there three years.

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So when we came back, there were
nine and six, something like that.

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Nine and seven.
Yeah.

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That’s fun.

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And I think to go back to what
we’re talking about today

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that’s I think one of the true

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blessings of running your own company gosh
knows there’s enough problems, right?

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Like, enough headaches.

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But one of the great benefits is that you
can take a step off the career ladder.

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It’s not going to work at Microsoft or
Proctor and Gamble,

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where you’ve got to get to the next rung
on the ladder because there’s a guy behind

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you or a Gal behind you
who wants your spot, right?

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Unless you keep going up,
you kind of get kicked out.

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And if you take a pause and say,

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I want to take a sabbatical,
I want to leave for a year.

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I want to leave for two years.

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That’s basic career suicide
in Procter and gamble.

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And yet, as an entrepreneur,
your skills are timeless.

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They are transferable.

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If you can start a business in 2021,
you can start one in 2031.

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Like, it’s the same skill set.

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I think that’s really important.

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And it’s one of the tremendous luxuries
of being an entrepreneur is you get

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to take a year off or two years off to go
do something for you,

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your skill set and your career
trajectory doesn’t have to suffer.

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Very true.
Yeah.

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It’s interesting.
After I sold my first business,

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I still had two businesses, but they were
not nearly as involved as that first one.

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And I took that time to write my first

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book, which just kind
of accidentally happened.

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It wasn’t like, hey, I’m going
to sell my business and write a book.

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It was just like, what do I do now?

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I’m a young guy.
That’s one of those.

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Like, okay, I sold the business.

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It’s not somebody else’s
blessing and cursed.

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What am I going to do today?

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It’s the whole Midwest work
ethic or something like that.

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I couldn’t just go to a beach.

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I don’t know if we had
a beach to go to, but anyway,

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we got to do something.
Yes.

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I was in the same boat
when we were in Europe.

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By the third year.
I was kind of, like,

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kind of getting a little bit antsy,
like, I need to do something

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for the book.

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I’ve written the book Built to Sell.

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And so in the back of the book we put

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together, we said,
Go to buildtell dot com.

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And you can take a little questionnaire
about how sellable your company is.

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And so this was sort of the way that we
originally thought about selling books.

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And I was starting to get calls from,

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like, brokers and consultants and saying,
hey, could we license that questionnaire

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you put on your website to evaluate
if someone was celebrating or not?

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I’m like, after the fifth phone call,
I’m like, hold on a second.

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All these coaches and consultants

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and brokers want tools to help
evaluate the businesses anyways.

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And that ultimately led to Value builder
of the company you’re referenced

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at the beginning, which is
a nice management software.

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Yeah.
So that’s how it all came up.

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So tell me, how did you end up writing
Built to sell? Did that come about as you

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were going through the process of selling
your business and transitioning

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from essentially a job owner
with employees to a business owner

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and being able to sell or
does that come about after?

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Yeah.
After.

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So it’s funny.

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My lawyer,

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he said, you’ve got a lot in common
with another client of mine.

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Tom Deans and Tom Deans had
recently written a book.

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I don’t know if you’ve ever had Tom

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in the podcast, but he wrote a great
book called Every Family’s Business.

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And my lawyer said, you should meet Tom.
I’d never met him before.

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He happened to be in the same city as us.

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Okay, so I said, sure.
And we met.

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We had lunch totally out of the blue.

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And he had written this book,
and it was a parable

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about the dangers and follies
of transferring a business to your kids.

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Oh, sure.
Yeah.

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Some of the big traps there,

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and he heard my story, and he’s like,
John, you got to write this stuff down.

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And I left that lunch.
No word of a lie.

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And I went to the top floor of our house,
and I started typing,

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and that’s what triggered
the initial manuscript for sale.

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Very cool.

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So at that time,
this is of interest to me because I’m

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speaking at when words collide,
which is actually in Canada.

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Oh, great.
In August. So at that time when you were

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writing your book or writing
the manuscript for the book,

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did you have a plan for publishing or
marketing or selling the book,

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or was it more just something to give
the clients and stuff like that?

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No.
Why didn’t clients.

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I’d like a company that had
bought our business.

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And literally it was.

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There was no back end.

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It wasn’t part of the funnel.

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It wasn’t part of sales strategy.

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So many nonfiction business books.

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It’s how we win companies.

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It’s a glorified business card.

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Yet at the time,
that was not the motivation.

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And I think in funny way,

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it was a very pure book in that respect,
because there wasn’t I’ve since written

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that about a customer and the art
of selling your business, which were more

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really books to support
the business value builders.

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So they were more like I would think about
I was writing things like, oh,

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I should include this because that
references this part of our business.

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So it was much less pure,

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but built to sell was actually
a very I didn’t have a grand plan.

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I didn’t have a publisher.

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I didn’t know what I was doing.

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All right, that’s cool.
That’s cool.

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So how did you end up?

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I guess once you had it written and you’re
like, Whoa, I got this manuscript.

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What’s next steps?

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Did you end up self publishing or going

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through traditional
publisher or vanity press?

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I’m just learning all this stuff.
Yeah.

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No, it was a vanity project.

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In a way, I self published it.

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I worked with kind of a contractor

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who sort of helped me design the book
and hired an editor and so forth.

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And I somehow got to a guy
named Borlingham.

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I think I was writing for Inc.

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Dot com at the time.

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And Bo who’s a wonderful guy.

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He wrote the book, staking
the outcome with Jack Stack.

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He wrote The Knack with Norm Brodsky.

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He wrote Small Giants, which is
probably his most famous book.

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Many, many other books.

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Anyways, I somehow must
have gotten it to Beau.

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I can’t remember if I calls on,

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call him or sent it to him,
and he emailed me back.

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And Bo was an editor at large
for 25 years in magazine.

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He’s got a big profile.

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Wonderful guy.

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I was really caught off guard when
he actually reached out to me.

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He said, this book is
actually halfway decent.

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You really should think about getting

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a publisher and I was like, all right,
how does that work?

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And he’s like, well,

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the first thing you do is you need an
agent and you’re going to call my agent.

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And so he gave me the name of his agent,

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and I called her up, and I said,
Bo told me to call you.

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And she said, Well, if it’s a friend of
BoE’s and she read it and she said, yeah,

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I don’t mean to equate it
in any way to this book.

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But she said, it really feels
like a modern day emitted.

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I’d been given to EBITA as a kid, right?
Yeah.

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Go read the E myth.

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It’s kind of like the Bible
for entrepreneurs.

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It’s the first thing you read it’s.

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Everybody’s sort of Goto book.

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And to be even mentioned in the same

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breath as Michael Gorba, I was like,
oh, my gosh, that’s very generous.

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Anyway, she sold it to Random House,
like, the big publisher in New York.

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Nice.
And they kind of gave it life.

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So here we are.

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That’s very cool.

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So I want to go a little bit down

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the rabbit hole of the whole
publishing thing.

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Yeah.
Because I’m talking to a lot of authors.

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I wrote a few books, but I didn’t have the
patience to find an agent or publisher.

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And maybe part of it is I don’t want to
have the patience and then being denied.

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So I’m like, it’s 20.

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I don’t know if that was 2017.

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Back when I published that self publishing

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all the way, click a few
buttons and away you go.

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Yeah.
So I was talking with these

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authors and who I’ll call

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pseudo Masters or teachers,

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because I don’t necessarily know if
they know what they’re talking about.

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But they seem like they do.

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And they tell me, hey,

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if you self published,
you’ll never get published by one

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of the big ones because they
look down on self publishing.

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And my thought was, I’m cool with that.

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But my other thought was,
how do you know that?

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So it sounds like your experience
was the opposite of that.

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It does.
Yeah.

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And look, I don’t hold myself as

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a publishing expert,
so I’m happy to share my experience.

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That’s enough.
Yeah.

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When I built a sale with some publishers,

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I described when my agent pitched it
to Random House, they said,

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we like the book,
but if we’re going to publish it under our

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masthead,
it really needs another chapter or another

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section to make it appear like a brand new
book, because the self published wouldn’t

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have been in the marketplace
for a few months.

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And we’re not into publishing second hand

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books like, we want it to be
fresh, brand new book.

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And so we added, like, a whole kind
of implementation plan to that book.

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And that was that so.
Yeah.

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No, I didn’t get a sense that there was

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any sort of looking down
on the self published route.

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I think

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there’s all sorts of publishing,
I think, has become in people’s minds.

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Certainly people on the outside look at it
as sort of polarizing,

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like you’re either a self published
author, and it’s really just a vanity

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project, and there’s no
legitimacy to it whatsoever.

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Or it’s a six figure advance
from Simon and Schuzer.

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And those are the two options.
Right.

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Actually, the reality is there’s lots
of shades of Gray in between there.

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Right.
Like lots of points that I continuum.

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There’s this hybrid publishing model now
where it’s quasilegitimate publishing.

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There’s also legitimate publishers
who give really low advances if you

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promise to buy a truckload
of books yourself.

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And that’s no more vanity publishing
than the self published books.

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There’s everywhere in between
that spectrum, I think it comes down to,

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at least for me, what’s the business
objective for this book?

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What potential audience?

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Why am I writing it?
Et cetera.

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Right.

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So after you wrote the book or as you were
writing the book, it sounds like the whole

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value builder system came to fruition,
or you had the idea for it.

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That’s right.
Is that the idea?

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Yeah.

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When we were promoting Built to Sell,

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I bought Built to Sell,
dot com, the website.

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And again on the website with this

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questionnaire,
how sellable is your company?

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And that’s how advisors
started to find us.

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And that’s when the kind of light bulb

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moment went off and said, okay,
I should start a business providing

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practice management tools to advisers
who want to reach this market.

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Nice.
All right.

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So then when you decide, hey,
I’m going to start this business,

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I imagine talk to your wife and say, hey,
I’m going to start another business.

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Get out of the house.

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Did you do the coding originally
or did you hide it out?

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They wouldn’t let me near that.

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No.

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I worked with a couple of different firms

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over the years,
and since then, we’ve got a team on staff

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that does the coding,
but we still work with some folks

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from overseas that do some
of the kind of heavy lifting.

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We’ve got a VP engineering in Toronto
who does the sort of the strategic

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thinking and the overall
planning for the tool.

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But, yeah, we’ve got a team outside

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of the country who does some
of the development work.

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Nice. And how difficult was
that to essentially put what you had

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in your mind as far as valuation into this
software tool via the programmers?

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Yeah.
It’s tough, man.

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I would tell you a lot of people want
to prioritize their service or build

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a technology software
from a service business.

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And it’s a tough transition.

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I just did a podcast
with a woman who made that shift.

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She had

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an insurance brokerage,

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and she got fairly low multiples
for the first two companies.

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I think she got, like, one and a half,

[00:16:41]
two times profit, and she thought,
I want to do better.

[00:16:43]
So she changed her consulting
business into a technology business.

[00:16:47]
She took basically all of her processes

[00:16:49]
and systems, and she made them essentially
a software product and system.

[00:16:54]
All right.

[00:16:55]
And she ultimately sold that company
for eight times or four times.

[00:17:00]
So like a much bigger
exit than her first two.

[00:17:04]
Wow.

[00:17:05]
But she’s somewhat among the minority.

[00:17:08]
I think it’s very common for service based

[00:17:11]
businesses to want to have a product based
business or want to have a technology

[00:17:14]
business because they’re aware
of the heightened, the better multiples.

[00:17:18]
But it’s much more difficult.

[00:17:21]
I think one of the challenges is that as
service business owners,

[00:17:25]
I think we are hardwired to want to create
a custom solution for the client.

[00:17:32]
We grow up around solution based selling
and consultative selling and finding out

[00:17:38]
what the customer wants and providing
them with the solution.

[00:17:40]
All these things,
they sound good on paper, but effectively,

[00:17:43]
what that means is you’re creating
a custom solution for every customer.

[00:17:47]
And as long as every project is different,

[00:17:50]
there’s no way you can scale
that business, because in order to slow it

[00:17:53]
beyond you, you need to be
able to hire people.

[00:17:56]
And as long as you’re doing a different
custom job for every project,

[00:17:59]
you’re never going to hire good people to
be able to run the business without you.

[00:18:03]
So that’s one of the traps.

[00:18:04]
I think a lot of service companies fall
into when they make the transition.

[00:18:09]
It’s interesting and extremely

[00:18:11]
coincidental that you mentioned that
I have a call answering service.

[00:18:16]
We have agents,

[00:18:17]
we’re completely customizable,
and we’re growing to the point where

[00:18:23]
we’re scaling very quickly.

[00:18:25]
So 2021 has been a boon for us.

[00:18:28]
But now we’re learning where the little

[00:18:30]
things are that we do that are
not necessarily scalable.

[00:18:33]
They’re not scalable the way
that we’re doing them.

[00:18:36]
And one of those is customizable thing

[00:18:39]
just in the brain or the memory power
of each of the agents trying to remember

[00:18:45]
or be fluid with all
of those different systems.

[00:18:49]
Yeah.

[00:18:49]
So it’s interesting we’re having to break
off into pods so that not every agent

[00:18:54]
knows every client,
which is a huge paradigm shift,

[00:18:58]
but one that we knew we’d
have to go to eventually.

[00:19:01]
But I don’t know.

[00:19:02]
It’d be today.

[00:19:03]
Yeah.

[00:19:05]
We didn’t want it to be today.
Yeah.

[00:19:07]
We talk a lot about

[00:19:09]
most small businesses.

[00:19:10]
I’m talking kind of sub 20 employees.

[00:19:13]
Most small businesses sell a lot
of things to a few people.

[00:19:17]
Right.
So think of that.

[00:19:18]
I was doing a podcast yesterday for a guy

[00:19:20]
who does have a bunch of work in
construction, like, think of the general.

[00:19:22]
The guy who comes in does
a kitchen, does a bathroom.

[00:19:26]
Every job is different,

[00:19:29]
lots of different clients.

[00:19:32]
And that’s really the essence

[00:19:34]
of an unsellable business selling
lots of things to a few people.

[00:19:39]
The opposite is a very sellable business

[00:19:41]
where you sell one or two
things to lots of people.

[00:19:45]
Right.

[00:19:45]
And so when you think about your televotry
service, it’d be interesting to think

[00:19:49]
through, how can we narrow what we offer,
kind of reduce the level of customizations

[00:19:54]
that we’re offering and really start
to zero in on one thing, I’m reminded of

[00:19:59]
an interview I did
with Stephanie Breedlove.

[00:20:01]
I’m not sure if you’ve ever
had Stephanie on the show.

[00:20:04]
She’s an amazing entrepreneur.

[00:20:07]
She did payroll for Nannies.

[00:20:10]
Oh, really?
Yeah.

[00:20:11]
If you’re like a parent who has a nanny
to pay, you call up ADP like Stephanie did

[00:20:16]
in the early days, and they will give
you a crappy customer experience, right.

[00:20:20]
They’ll bounce your call around
to six different people.

[00:20:23]
And it’s not a great experience, right.

[00:20:24]
Because they want to do payroll
for Proctor and Gamble for four.

[00:20:27]
They don’t want to do it
for you and your nanny.

[00:20:30]
Right.

[00:20:30]
And so Stephanie realized there’s
a business opportunity here.

[00:20:34]
So she started this company,
Breed Love and Associates.

[00:20:37]
They do payroll for parents
of an entity pay.

[00:20:39]
So she built it up.

[00:20:41]
And she told me she reached
about 300 grand in revenue.

[00:20:43]
So it’s like Stephanie and one employee.

[00:20:46]
And she reached a fork in the road where

[00:20:47]
it was getting harder for her to use your
personal network to win new customers.

[00:20:52]
So she’s like this for conversion.
What do I do?

[00:20:55]
Do I sell more to my existing customers?
Right.

[00:20:59]
Which every business pundit was telling

[00:21:01]
her to do, because it’s,
like, eight times easier.

[00:21:02]
Cross sell another service
to an existing customer.

[00:21:05]
Right.
So you get busy parents.

[00:21:08]
What else do they need?
They will.

[00:21:09]
They need meal delivery services,
like lawn care, all this stuff.

[00:21:13]
Right.

[00:21:14]
And then the other road,

[00:21:16]
the much more difficult road was to
find more parents who had a nanny to pay

[00:21:21]
effectively double down on our
strategy of doing payroll for Nay.

[00:21:24]
All right.
And she gets to the stop at 300 grand.

[00:21:27]
She’s like, I’m going
to take the harder road.

[00:21:29]
And so she grew much more
slowly over 25 years.

[00:21:33]
Think about it 25 years.
Wow.

[00:21:35]
She built it up to $9 million in revenue.

[00:21:38]
All right.

[00:21:40]
But it’s not Google.

[00:21:41]
It’s not Tesla.

[00:21:43]
It’s a slow burn.

[00:21:46]
It’s a more realistic number as far as
businesses go than a Google or a Tesla.

[00:21:52]
But check it out.

[00:21:53]
She builds it to 9 million
in revenue, 10,000 customers.

[00:21:56]
And she decided that she wanted to sell.

[00:21:59]
And she went out and looked at who would

[00:22:01]
be the most strategic
acquire for the company.

[00:22:03]
And at the time, Care.

[00:22:05]
Com was in an aggressive growth.

[00:22:07]
More Care dot com is like the Angie’s
list of care providers plug in.

[00:22:11]
I live in Madison, Wisconsin,
and you press search and out comes all

[00:22:16]
the babysitters that have been rated
five star in Madison, Wisconsin.

[00:22:19]
So you can hire one feeling confident

[00:22:21]
that you’ve got someone who’s
going to take care of your kids.

[00:22:22]
All right.
Cool.

[00:22:23]
Offering.

[00:22:25]
Well, at the time,
they had 7 million subscribers.

[00:22:29]
And so Breed Love went to them and said,
look, we’ve got 10,000 customers here.

[00:22:33]
We’re doing 9,010,000 customers.

[00:22:35]
You’ve got 7 million subscribers,

[00:22:38]
all of whom need to pay their
nanny or pay their babysitter.

[00:22:42]
Like, if 1% of your 7 million
buy my payroll service,

[00:22:47]
that’s a company seven times the size
of my business today, right?

[00:22:51]
If 2-5-I mean, it’s incredible.

[00:22:56]
Anyway, long story short, Care.

[00:22:58]
Com acquired Breedlove’s
business for $54 million.

[00:23:03]
Whoa.
That’s a multiplier.

[00:23:07]
Think of it.
This is not a $9 million profit business.

[00:23:10]
This is a $9 million revenue.

[00:23:12]
Right?

[00:23:13]
And so she got six times top line revenue.
Wow.

[00:23:19]
My point is when it comes to making
your company more valuable

[00:23:24]
and a choir is going to look
at your business and say,

[00:23:28]
Is there something here that they have
done that is so unique that it would take

[00:23:32]
us years and many millions of dollars
to do exactly what they’re doing, right.

[00:23:36]
If the answer to that is yes,

[00:23:38]
then the chances are they’re going to pay
a premium for your company if you’re just

[00:23:42]
selling a bunch of commoditized
products and services.

[00:23:44]
If you’re selling a lot of things to a few
people and none of which you’re truly

[00:23:48]
differentiated on, they’re
not going to want to buy you.

[00:23:50]
They’re going to want
to just compete with you.

[00:23:52]
They’ll let your price,
they’ll outbid you for jobs.

[00:23:55]
But if you have the courage,

[00:23:57]
when you reach whatever the $300,000 fork
on your road is where you’re like,

[00:24:03]
I’m going to double down
on my original proposition.

[00:24:06]
I’m not going to take the easy route
and start cross selling a bunch of stuff.

[00:24:09]
I’m going to just do one thing that’s when
you build real value with your company.

[00:24:15]
Interesting.
I like that.

[00:24:17]
It’s interesting.

[00:24:18]
I guess anecdotally here when I was using
the coach that was using the value builder

[00:24:22]
system on your software, you had little
dials where you could adjust it.

[00:24:27]
Yeah.
And my thought was that it was going

[00:24:30]
to take in the neighborhood of six months
to negotiate back and forth, find a buyer.

[00:24:34]
All that jazz, which is a pretty accurate.

[00:24:38]
And I figured if I was buying this
business or I take it back if I was

[00:24:42]
considering buying this business
and because the dollar amount for this

[00:24:46]
particular business was six
figures, it wasn’t crazy.

[00:24:48]
Seven figures or something like that,

[00:24:50]
my thought was, how much would I have
to spend in marketing to essentially

[00:24:54]
duplicate the brand awareness
that my company had?

[00:24:58]
So instead of just buying James’s company,
I’ll just spend some money on marketing,

[00:25:02]
get the name recognition
equivalent that he has.

[00:25:05]
How much would I have to spend?

[00:25:07]
So it’s interesting, I guess, comparable.

[00:25:09]
I was looking at marketing where you’re

[00:25:11]
looking at just the utility of it or
the expansion or the customization of it.

[00:25:17]
Yeah.

[00:25:17]
You’re looking almost like
the replacement value.

[00:25:20]
I mean, it’s not exactly apples to apples,
but when you sell a company,

[00:25:25]
the cheapest way you can unload your
company is to sell it to assets, right.

[00:25:29]
Like sell the desk, sell the trucks,

[00:25:30]
and you can sell it just about any
business by selling the assets, right?

[00:25:34]
Sure.
There’s a market value.

[00:25:35]
Yeah.
Not very much.

[00:25:36]
It’s got a liquidation value, but you
can sell it what you really want to do.

[00:25:41]
I think that the kind of job description
of entrepreneur is to maximize what

[00:25:44]
accountants call goodwill,
which is the difference between what you

[00:25:48]
sell your company for and the
value of your hard assets.

[00:25:51]
That’s called goodwill.

[00:25:53]
And if they’re just buying what it would
take to replicate the kind of brand equity

[00:25:59]
you have, they’re not really
buying a lot of goodwill in there.

[00:26:02]
There’s a little bit, but not a lot.

[00:26:05]
What buyers really care about is
your future stream of profit.

[00:26:09]
So they’re trying to figure out,

[00:26:11]
is this company going to create
profits in the future?

[00:26:15]
And if so, how reliable
are those estimates?

[00:26:19]
And that’s what drives up
the value of your company.

[00:26:21]
If you can make the case that your
business is bulletproof and it’s kind

[00:26:26]
of an annuity stream,
and it kind of chunks along without a lot

[00:26:29]
of involvement from you,
that’s a really valuable company.

[00:26:32]
And that’s why recurring revenue is one

[00:26:34]
of those big drivers
of value in your company.

[00:26:37]
If you could create some recurring

[00:26:40]
and what I mean recurring,
I mean, it’s automatic.

[00:26:43]
You don’t have to stimulate demand.

[00:26:44]
You don’t have to get customers to buy.

[00:26:45]
They buy automatically, either on, like,

[00:26:47]
a service contract or
a subscription or something.

[00:26:50]
Those businesses tend to trade at much

[00:26:51]
higher multiples because
they’re more predictable.

[00:26:54]
And buyers are looking to buy future
profits, and they pay more when they can

[00:26:59]
feel confident that future profit
stream is going to continue.

[00:27:03]
Yeah.
That’s cool.

[00:27:04]
So one of the things I want to ask you

[00:27:06]
about with the value builder system is it
had to take a lot of homework to figure

[00:27:11]
out what industries have,
what multipliers and all that.

[00:27:15]
There’s

[00:27:17]
a lot of numbers or a lot of verticals
that go into the whole algorithm to figure

[00:27:24]
out what the end number is. I guess as far
as that goes, how did you figure that out?

[00:27:30]
Just a quantitative market research.

[00:27:33]
My former company was a quantitative
market research business.

[00:27:35]
When we went to build the algorithm,

[00:27:37]
we did a big quantitative market research
study and looked at offers being

[00:27:42]
offered to business owners what
industry they were in and what drivers.

[00:27:45]
And Interestingly,

[00:27:47]
the industry does definitely
impact the value of your company.

[00:27:50]
A SAS software business is trading on much

[00:27:52]
higher multiple than a graphic
design studio as an example.

[00:27:55]
But I think we oftentimes
run a little bit.

[00:27:59]
The risk of feeling like our evaluation is

[00:28:03]
preordained, meaning
we’re guaranteed to get the prevailing

[00:28:08]
multiple because plumbing companies
are trading at five times.

[00:28:11]
Therefore, I should get five times.

[00:28:14]
And I think we’ve seen valuable instances

[00:28:17]
where companies can earn more than
two X the prevailing valuation.

[00:28:22]
If they focus not just on the industry

[00:28:23]
they’re in, but on some of the other
things that we’ve talked about today.

[00:28:26]
Equally, I’ve seen instances where

[00:28:28]
companies get less than half
the prevailing valuation,

[00:28:31]
even though they’re in a very
attractive industry, because

[00:28:37]
there are things about the structure
that draw down the value of your company.

[00:28:41]
So I think industry is important.

[00:28:44]
It’s a major factor
to the value of your company.

[00:28:47]
But don’t go in with horse Blinders to say

[00:28:50]
that’s the only thing that matters
because there’s lots of other things.

[00:28:53]
Recurring revenue is a big one.

[00:28:56]
Having one thing that makes you really

[00:28:58]
unique is what we refer
to as monopoly control.

[00:29:01]
It comes from the old
Warren Buffett statement.

[00:29:02]
He buys companies with a deep
and wide competitive moat.

[00:29:05]
Monopoly control.
That’s what Stephanie Breedlove had.

[00:29:08]
She was the one best payroll company
for parents got a nanny to pay.

[00:29:13]
So that’s one of the other drivers
that you really want to focus on,

[00:29:16]
what’s the one thing that you
could do better than anybody else?

[00:29:18]
Okay, that’s interesting.

[00:29:20]
I like that.

[00:29:22]
I had another guest on the show that said,
riches come from niches or something.

[00:29:29]
Riches whatever it was.

[00:29:31]
And it took me a little while
to just ponder that and think,

[00:29:35]
maybe I’ve been doing it
wrong this whole time.

[00:29:38]
Yeah, I’ve been trying to target
essentially every small service business.

[00:29:44]
In the end, we should be
more focused on that.

[00:29:47]
It’s interesting.
Yeah.

[00:29:50]
I think if you can carve out a really

[00:29:53]
unique niche or niche, depending
on where you are in the country

[00:29:59]
again, what do acquirers buy?

[00:30:01]
They buy what they could
not easily replicate.

[00:30:06]
And therefore you really want
to build something that you are

[00:30:11]
the world’s expert in to give
you that competitive moat.

[00:30:16]
I’m reminded of another guy I interviewed

[00:30:18]
on my podcast named Jay Steinfeld,
jbuiltblinds.

[00:30:21]
Com.

[00:30:22]
I don’t know if you’ve ever heard
his story, but amazing story.

[00:30:25]
He starts blinds right around the time.

[00:30:27]
Jeff Bezos is selling books online,
and he’s, like, Bezos can sell books.

[00:30:30]
I can sell blinds, window coverings.

[00:30:33]
And turns out, it’s a lot harder to sell

[00:30:35]
blinds than books because
you have to measure them.

[00:30:38]
You got to pick the fabric,
you got to install them.

[00:30:43]
But he sticks to it,
and he doesn’t go off piece.

[00:30:47]
He stays on lines online.

[00:30:49]
That’s all he does.

[00:30:50]
And over, I guess a 30 year run, 93 to
well, maybe more like 25 year run.

[00:30:58]
He builds it to 100 million dollar
company just selling blinds.

[00:31:02]
Wow.
That’s a lot of blinds.

[00:31:05]
Yeah, it sure is.

[00:31:06]
And it’s enough to get
the attention of Home Depot.

[00:31:08]
Home Depot at the time was like a $90
billion company, but they were having

[00:31:14]
problems in the blind space because
Jay was beating them every day.

[00:31:19]
All right.
And so when they looked at blinds.

[00:31:22]
They saw two things.

[00:31:23]
Number one, a way to quickly
leapfrog into the blinds category.

[00:31:27]
But the other thing is,
it was important to Home Depot,

[00:31:30]
and it’s the hidden reasons a lot
of strategic by companies is for them.

[00:31:35]
They were struggles to get
people to buy on their website.

[00:31:38]
Think about your own behavior.

[00:31:39]
If you want to get a new faucet for your
kitchen or you want to get a refrigerator

[00:31:44]
or you want to get some lumber,
you don’t go to Home Depot.

[00:31:46]
Com.

[00:31:47]
My guess is you probably
go into a store, right.

[00:31:49]
But that’s a whole lot more
expensive for them to fulfill.

[00:31:52]
You coming into the store than it is
to do a few clicks on the homedepot.

[00:31:56]
Com.
Right.

[00:31:57]
So Home Depot is trying to get people

[00:32:00]
to buy complicated products
that need to be installed online.

[00:32:05]
Sound familiar exactly the not
the Jstinefeld had solved at blinds.

[00:32:11]
Com.

[00:32:11]
So they were getting a two
for when they bought Jason.

[00:32:14]
Number one, they got leapfrogged
number one in the blinds category.

[00:32:17]
But the other thing was that they could

[00:32:19]
take that learning that he had discovered
for complicated products that needed to be

[00:32:25]
selling them online and graphed
it across their entire business.

[00:32:29]
90 billion of revenue.
Wow.

[00:32:31]
They could get, like,
1% better at selling stuff online.

[00:32:35]
That has massive impact
for a $90 billion company.

[00:32:40]
That’s what I’m talking about.

[00:32:42]
When I talk about monopoly control,

[00:32:45]
it’s finding one thing that you can
be the world’s dominant player.

[00:32:49]
And even if it’s something as obscure as

[00:32:51]
blinds, if you can be the dominant player,
you’re creating monopoly control

[00:32:57]
and that’s attractive
to acquires, that is cool.

[00:33:01]
That’s very cool.

[00:33:02]
So stuff like this stuff that you learned

[00:33:05]
from selling your business,
writing the book,

[00:33:07]
or is this more from helping clients
and learning from their experiences

[00:33:11]
that you’re helping them along with a lot
of the stuff we built to sell radio.

[00:33:14]
To be honest,
the tool value builder

[00:33:18]
and the corresponding tools are
all steeped in market research.

[00:33:21]
They are rigorous research that allowed us

[00:33:24]
to build those algorithms
that run the tools.

[00:33:26]
Then we’ve had tens of thousands

[00:33:28]
of business owners go through it
and validate the algorithm every day.

[00:33:30]
So it is sort of self healing if you are
in that regard, the stories I’m sharing

[00:33:34]
with you today, Stephanie Breedlove,
the Jay Steinfeld.

[00:33:37]
They all come from Build to Sell Radio,
which is a podcast.

[00:33:40]
I do where we interview a different

[00:33:42]
entrepreneur every week and we ask them,
tell me about your exit.

[00:33:46]
And so we just interviewed people who sold
the company, and we asked them about

[00:33:50]
the things they would do differently
if they had it all over to do again.

[00:33:53]
All right.
And so I.

[00:33:54]
Equated.
A little bit of a story.

[00:33:56]
I tell a lot.

[00:33:58]
Do you remember Sully, the guy who flew
the airplane into the Hudson River?

[00:34:02]
Yeah.

[00:34:03]
It goes back maybe ten years ago now,
but basically, he was this legendary pilot

[00:34:08]
that done everything
there is to do in a plane.

[00:34:10]
He was a trainer,

[00:34:12]
flooding every kind of airplane
yet he never in his career had

[00:34:18]
the opportunity to land
an airplane on the Hudson River.

[00:34:21]
Right.

[00:34:22]
It’s probably a good thing it’s a perfect
parallel for the entrepreneur because as

[00:34:26]
entrepreneurs like,
we do everything in our companies.

[00:34:29]
Right.

[00:34:29]
We open the doors in the morning,
we do the marketing plan,

[00:34:32]
we hire the people, we deal
with the customers, the complaints.

[00:34:37]
We do it all.

[00:34:38]
And you learn by doing over years
and you get really good at what you do.

[00:34:43]
Just like selling, just like selling,
no matter how good you are at selling your

[00:34:47]
widgets or running your small company,
you probably haven’t got a lot

[00:34:51]
of experience landing
the plane on the Hudson.

[00:34:53]
In other words, selling that company.

[00:34:56]
You’ve sold a couple of businesses.
That’s rare.

[00:34:58]
Most people only get one shot.
All right.

[00:35:01]
He had one shot to grease the landing.
He had 95 lives in his hands, right?

[00:35:06]
Yeah.
I think a lot of entrepreneurs,

[00:35:10]
you got one shot at this.

[00:35:11]
You built this business over years,

[00:35:13]
maybe decades, and they’re just
unforced errors that we make

[00:35:20]
that, I think can oftentimes wipe a lot
of money off the table just by just

[00:35:26]
knowing some simple things about how
to maximize the value of your company.

[00:35:28]
So that’s kind of what we
do with Sell Radio fair.

[00:35:32]
You remind me of something because I’ve

[00:35:34]
coached a few people selling their
business, and I remember,

[00:35:38]
particularly there’s one guy
that was selling a company.

[00:35:41]
He was making a six figure income,
probably working 15 to 25 hours a week.

[00:35:46]
How do I get that gig?

[00:35:48]
Yeah.
This is the thing.

[00:35:50]
I feel like he was one of those guys
who left a lot of money on the table,

[00:35:53]
and she was tired of the business
he’s been working it for.

[00:35:58]
I want to say, a neighborhood of 15 years,

[00:36:00]
there’s a commercial cleaning company,
and he was essentially the guy that was

[00:36:04]
on calls when an employee didn’t show up
at two in the morning to clean some bar.

[00:36:08]
Sure, he had to get in the car and go
mop up Duke or whatever it was.

[00:36:12]
And he was tapped out,
and I had phoned him a buyer.

[00:36:17]
And the buyer was kind of lowballing.

[00:36:20]
And I’m like, I think you can do better.

[00:36:22]
I think you can do a lot better.

[00:36:24]
And he essentially asked me,
how long will it take?

[00:36:28]
Like, it’s tough to put a timeline on it,

[00:36:30]
but I would say minimum six months,
maybe a year or two, depending.

[00:36:34]
This is pretty focused type of buyer that
you’re trying to sell in this market.

[00:36:41]
It’s going to take a little while.

[00:36:43]
And he’s like,
how fast can we sell it to this guy?

[00:36:49]
So I’m like realistically financing.

[00:36:51]
So six weeks,
it depends how fast the bank will move.

[00:36:56]
And he’s like, just do it.

[00:36:59]
But I think you could get a few hundred

[00:37:01]
thousand dollars more,
and he was just so tired of it.

[00:37:05]
He just wanted to wash his hands,
move on with his life.

[00:37:08]
I’m so glad to share this story because I

[00:37:10]
think it is the biggest error
we make as entrepreneurs.

[00:37:16]
We call it riding it over the top.

[00:37:18]
But you hold on to your company too long,

[00:37:21]
you hold on until you’re tired,
you’re bored, you’re frustrated,

[00:37:25]
and then it’s not worth anywhere near
what it is when it’s on an upswing.

[00:37:29]
And this is just such a tragedy
because you’re absolutely right.

[00:37:32]
Had you made a couple of tweaks to his

[00:37:34]
business model,
negotiated from a position of strength,

[00:37:39]
he could have gotten potentially
multiples more for what he had built.

[00:37:43]
But he was exhausted and tapped out.

[00:37:46]
And I think that’s a tragedy.

[00:37:47]
There’s an antidote to that or
an alternative way of thinking.

[00:37:51]
I call it the freedom point,
which is where the sale of your company,

[00:37:58]
along with whatever assets you built

[00:38:00]
outside of your company,
would create a nest egg large enough

[00:38:02]
to live comfortably
for the rest of your life.

[00:38:05]
All right.
And I think when you reach that point,

[00:38:09]
I think it’s worth pulling up and saying,

[00:38:13]
Do I want to continue?

[00:38:15]
Do I want to get to the next level?
Because the next level may not be

[00:38:19]
something you value as much as
the financial freedom you’ve created.

[00:38:23]
Fair. What’s the point, right?
Yeah.

[00:38:25]
And

[00:38:27]
you’ve created if you make that value
liquid, if you hold it,

[00:38:31]
you are effectively the gambler at the
poker table is just won five hands.

[00:38:35]
Right.
And who knows when the next pandemic,

[00:38:38]
the next recession is going to happen
and what you thought you had,

[00:38:42]
which was financial independence,
gets flittered away.

[00:38:46]
So I think Buffett was the one who said

[00:38:50]
it’s insane to risk something you value
for something you do not.

[00:38:58]
Yeah.

[00:38:58]
It’s such a simple term,
which he’s such a guru at.

[00:39:01]
But the idea is,
for most of us as entrepreneurs,

[00:39:05]
we don’t want to be the next Elon Musk,
the next Steve Jobs.

[00:39:08]
Most of us, I think, are motivated
by independence and freedom, right?

[00:39:12]
That’s our primary need.

[00:39:14]
Our primal need, if you will, right?

[00:39:16]
Is independence.

[00:39:17]
And so once you reach that again,

[00:39:20]
the freedom point when you sell your
business, the after cash,

[00:39:23]
the after tax proceeds is a big enough
nest egg for you to basically have freedom

[00:39:27]
to do whatever you want
to work if you want to.

[00:39:29]
But not.

[00:39:30]
I think it’s just a really good
moment to say, okay, is now the time.

[00:39:35]
And there’s lots of other reasons
to build a business beyond that point.

[00:39:40]
Maybe you want to create a legacy,
you want to build it, whatever.

[00:39:44]
But I think at least when you reach it,

[00:39:46]
it’s worth pulling up and saying,
Do I want to risk it?

[00:39:50]
Is the next million dollars
in revenue the next ten employees?

[00:39:53]
Is that worth it to me?
Maybe it is.

[00:39:56]
Maybe it isn’t that’s fair.

[00:39:58]
I love that, because that actually gives
a trigger to actually saying is now

[00:40:03]
the time or is not instead of just going
your day to day and then thinking, oh,

[00:40:08]
wait, one of these days,
I should get out of here.

[00:40:11]
Yeah, I’ll tell you a story
on that because it’s a tragic story.

[00:40:15]
But I think it’s one
that people need to hear.

[00:40:17]
It’s from a guy named Rand Fishkin,
who I interviewed maybe a year ago,

[00:40:21]
he wrote a great book
called Lost and Founder.

[00:40:23]
But Ran built a company called
Maz SEO Software,

[00:40:26]
search engine optimization software
if you want to get ranked on it.

[00:40:29]
Oh, yeah, I know mine.
Yeah.

[00:40:30]
So Rand builds up 5 million or so
in revenue, but it’s growing quickly.

[00:40:34]
He’s expecting to get to ten,
and he gets a call from a guy named

[00:40:38]
Brian Halligan,
who is a cofounder of HubSpot and Halogen,

[00:40:43]
says, Look, Rand,
we’re kind of weak on SEO.

[00:40:45]
We love what you’re doing.
We want to buy your company.

[00:40:48]
And Ran says, okay, how much?

[00:40:49]
He says $25 million
of cash and HubSpot stock.

[00:40:53]
So this is a $5 million business,

[00:40:55]
and he’s offering five times revenue,
which that’s a pretty big number.

[00:41:00]
But

[00:41:02]
exactly.
But Rand had been told by some advisers

[00:41:05]
that his business was probably
worth four times revenue.

[00:41:09]
And remember, he was at five,
but he was getting to ten,

[00:41:12]
and he thought there was a good
chance he might get to ten that year.

[00:41:16]
And so he’s doing the math
on forward looking

[00:41:19]
forward ten.

[00:41:21]
And we could get four times ten.

[00:41:22]
That’s 40.

[00:41:24]
And he said no.

[00:41:27]
And so instead, he
continued to run the business.

[00:41:31]
They raised some venture capital.

[00:41:32]
The venture capitalist forced him to push
them to build a bunch of products.

[00:41:36]
None of them were really
in his wheelhouse.

[00:41:38]
They really started to bleed cash.

[00:41:40]
The VCs ultimately removed
Ran from the company.

[00:41:43]
Oh, no.

[00:41:44]
And I interviewed him.

[00:41:45]
I said, Well, at least you’ve got your

[00:41:47]
stock, right, rand and he said,
you know what, John?

[00:41:49]
Based on the way the VCs invest, they
use what are called preferred shares.

[00:41:53]
And that means they get
a preferred return.

[00:41:55]
And based on the length of time they’ve
held, my shares are probably worthless.

[00:42:00]
And I said, but ran,
what would that offer from HubSpot be

[00:42:05]
worth these days, given the appreciation
of HubSpot stock, now that it’s public,

[00:42:10]
and he said it would be
worth close to $200 million.

[00:42:15]
Ouch.
That’s called riding it over the top

[00:42:19]
brand was gracious enough
to share that story with me.

[00:42:23]
And it was just a reminder that
when you reach the freedom point

[00:42:29]
and the sale of your business would
basically give you enough money to do what

[00:42:32]
in the hell you want to do
for the rest of your life,

[00:42:35]
it’s worth pulling up
and thinking about it.

[00:42:37]
Yeah, it’s worth thinking about it.

[00:42:40]
And that may sound like
greedy or money hungry.

[00:42:43]
It’s not intended to be that way.

[00:42:44]
It’s just that if your primary motivation

[00:42:47]
to start a business was to create
financial freedom and selling your

[00:42:50]
business would give you that,
then I think it’s worth just saying this

[00:42:53]
is what I wanted,
but I got to pull the trigger first.

[00:42:56]
Yeah, you could almost argue the whole

[00:42:59]
greed or money hungry
thing on the flip side.

[00:43:02]
You totally could.

[00:43:03]
Yeah,

[00:43:04]
if you keep riding this,
that’s risk like you mentioned right now,

[00:43:08]
you could essentially have essentially
what you’re working for, your goal.

[00:43:12]
You’ve achieved your goal as long
as you say yes at this moment.

[00:43:16]
Exactly.

[00:43:17]
And then whatever you do
from that point on is up to you.

[00:43:19]
So, oh, my gosh.

[00:43:21]
But they don’t go to the beach.

[00:43:23]
You couldn’t live more than three
months without having to visit, right?

[00:43:26]
Like you’re like.

[00:43:36]
I can’t not do something.

[00:43:39]
I don’t even know how my wife
wants to go on vacation.

[00:43:42]
She wants to sit on the beach.

[00:43:43]
I don’t even know how
to just sit on the beach.

[00:43:46]
I want to go see the world,

[00:43:47]
meet some people, try the food, just check
out other businesses wherever your head.

[00:43:54]
I don’t find any fun in sitting still.

[00:43:57]
I think you’re not alone, though.

[00:43:58]
I think most entrepreneurs
are wired exactly the same way you are.

[00:44:03]
We love the innovation.

[00:44:05]
We love the new thing.

[00:44:06]
We did some research
a little while ago where we looked

[00:44:10]
at the reasons owners end up regretting
their decisions to sell their company.

[00:44:15]
And the number one reason is that they are

[00:44:18]
all push and no pull,
meaning they’re all frustrations about

[00:44:22]
their current business, which are
pushing them out of their company.

[00:44:25]
So it’s frustrations with employees,

[00:44:27]
frustrations with regulation,
red tape, blah, blah, blah.

[00:44:31]
Yet they’re like, oh, I’ll figure out what
I want to go do after I sell my company.

[00:44:35]
The most successful EBITA.

[00:44:37]
The happiest people after exiting are
the ones that got really clear upfront

[00:44:41]
on their pull factors, which are
the things they want to go do next.

[00:44:46]
I interviewed a guy.

[00:44:48]
This goes back a while.

[00:44:49]
I think it was episode 100 Built.

[00:44:51]
Radio name was Sean is
Sean Osman, 39 years old.

[00:44:56]
He runs an it consultancy,
a couple of million dollars in revenue,

[00:44:59]
and he realizes he’s been living
in Denver his entire life.

[00:45:02]
And he’s like, I want
to live on a sailboat.

[00:45:06]
That’s a weird thought for a 39 year old

[00:45:08]
guy who’s been living in Denver
for a long time, like, landlock.

[00:45:10]
There’s no water.
Yeah.

[00:45:11]
No lot of water.
Yeah.

[00:45:12]
It’s not like he’s from Miami
or something like that.

[00:45:14]
But he’s like, no,
I want to live on a sailboat.

[00:45:16]
And so he commits that by his 40th

[00:45:18]
birthday, he’s going
to live on a sailboat.

[00:45:20]
And so he takes his business
and he takes it to a broker.

[00:45:23]
Broker comes back, gets him an offer
of 2.6 times profit, and he accepts it.

[00:45:28]
And I interviewed him on the show.

[00:45:30]
And I’m like, But Sean 2.6 is like,

[00:45:33]
in a baseball analogy, like,
that’s a solid single.

[00:45:35]
But it’s not like getting
it out of the home run.

[00:45:38]
How come you’re so happy?

[00:45:39]
And he’s like, yeah, John,
I don’t think you get it.

[00:45:43]
I live on a sailboat.
Yeah.

[00:45:47]
It was kind of cliche.

[00:45:48]
It was like, my whole life is like,
got to maximize value.

[00:45:52]
And he was like, yeah,
maximizing value is important.

[00:45:55]
But actually, what you want to go do
next is probably even more important.

[00:45:59]
And so I think it’s a really important

[00:46:02]
lesson for us to learn is that before
you sell, get really clear.

[00:46:07]
So you say you want to travel,
where do you want to travel to?

[00:46:09]
What do you want to do while you’re there?

[00:46:10]
What food do you want
to eat while you’re there?

[00:46:12]
What people do you want to meet?
Like, get really clear.

[00:46:14]
And I think that gives you the motivation

[00:46:17]
and the focus to just to actually take it
over the finish line and sell your company

[00:46:23]
when so many others kind of just
stay on through inertia, right.

[00:46:27]
And then you ride it over the top.

[00:46:29]
That is cool.

[00:46:30]
I like that man.

[00:46:33]
I always think of James Bond,
where Q was lowering.

[00:46:37]
I’m trying to think of the James Bond
guy was at the time.

[00:46:41]
Q said, always have an exit strategy
before he passed away.

[00:46:48]
I can’t place which one.

[00:46:49]
I’ve watched many of them, but they all
kind of meld into one another these days.

[00:46:52]
Yeah.
Rates.

[00:46:55]
Have an exit strategy.

[00:46:57]
I call it an options
strategy, not stock options.

[00:47:02]
But I like the idea of building a business

[00:47:04]
that you could sell, because when I do,
like, a speech or whatever for a bunch

[00:47:09]
of business owners, I’ll say,
how many of you guys want to sell?

[00:47:12]
And, like, maybe of 100 business owners, I
might get one person to raise their hand.

[00:47:15]
Part of it like, I don’t want to reveal
to the world that I want to sell, right?

[00:47:19]
No.
Most people are like, no, I’m happy.

[00:47:24]
Yeah.

[00:47:25]
I’ll sell when I die,
whenever all that good stuff, right.

[00:47:28]
And then I’ll ask you
a different question.

[00:47:29]
I’ll say, okay, fair enough.

[00:47:31]
How many of you would like to know you
could sell your business if and when

[00:47:36]
you’re ready, every hand goes
in there at that point, right.

[00:47:40]
Because I think we all want to know
that we’re building an asset that has got

[00:47:43]
value, that when we’re ready
on our terms, we can sell.

[00:47:45]
And that’s what I mean
by an option strategy.

[00:47:47]
It’s like building it so
that you could sell it.

[00:47:51]
And the definition of that,
as we talked about at the very beginning

[00:47:54]
of this conversation is like,
It can run without you.

[00:47:57]
And if it can run without you, you’ve got,
like, the ultimate poker hand, right?

[00:48:02]
You could sell.
You could bring in a manager to run it.

[00:48:05]
You could bring in a private equity group,
sell 60% of it, keep 40% of it.

[00:48:10]
You can do any number of things.

[00:48:13]
And you’ve got all
the cards at that point.

[00:48:15]
But if it’s a business that’s dependent on
you showing up, it’s not really sellable.

[00:48:20]
And therefore you’re kind
of trapped in your company.

[00:48:22]
So I think the most important thing

[00:48:26]
to do is to get it to a point
where it can thrive without you.

[00:48:30]
And that just gives you all the cards.
That’s cool.

[00:48:33]
I like that.

[00:48:34]
I remember whenI first sold.

[00:48:37]
When I sold my first business,
I realized that I own a job,

[00:48:43]
and I gave myself essentially six months
to remove myself from being necessary.

[00:48:50]
I set up some ground rules where,

[00:48:52]
essentially, I could still
be a part of the business.

[00:48:54]
But if I ever got hit by a bus,

[00:48:56]
the business will still keep
moving and not lose pace.

[00:49:00]
It took a little bit to figure out.

[00:49:01]
What do you have to do?

[00:49:02]
What do you have to invest in?

[00:49:03]
Who do you have to hire
all that kind of stuff?

[00:49:06]
But that made it way easier to sell

[00:49:10]
the company that ended up buying it.

[00:49:13]
It was harder to convince them that I

[00:49:15]
wasn’t needed because they wanted
to keep me on for six months.

[00:49:19]
I’m like, no,

[00:49:21]
I’ve made it so that I’m not needed.

[00:49:26]
I just interviewed a woman

[00:49:27]
on Built On Radio whose name,
forgive me, it just slipped my mind.

[00:49:32]
But it’s one of the most recent episodes.

[00:49:34]
She built a consultancy,

[00:49:37]
a marketing agency that specialized
in social media in the UK.

[00:49:42]
And so if you know anything about

[00:49:44]
marketing services businesses,
they’re almost always

[00:49:47]
sold using an earnout where you get
a little bit of money up front,

[00:49:51]
but then you have to hit a bunch
of targets in the future.

[00:49:54]
And if you do all things stars aligned,
you get an extra payment.

[00:49:57]
Well, she didn’t want anything
to do with an earn out.

[00:50:00]
And so she went out and really
structured the company.

[00:50:03]
So that was no longer dependent on her.

[00:50:05]
And she invested heavily and her time
primarily in building out processes like

[00:50:10]
employee manuals and processes
for people to follow.

[00:50:13]
Yeah.

[00:50:13]
And I said to her, I said, that sounds
like an entrepreneur’s worst nightmare.

[00:50:18]
Sitting down and like,
writing processes for three months.

[00:50:20]
That sounds like the absolute worst
thing way to spend your time.

[00:50:25]
And she’s like, yeah,I get it.

[00:50:28]
It probably feels like being in jail.

[00:50:31]
But if you wanted to be in jail,

[00:50:32]
would you rather be in jail
for three months or three years?

[00:50:36]
And her point was that, yeah.

[00:50:39]
Take your medicine up front, right?
Yeah.

[00:50:41]
Three months sucks.
And productizing or systemsizing.

[00:50:45]
Your business is really boring work.

[00:50:47]
If you do it, you’re going to really

[00:50:50]
minimize the need for you to stay
on with your acquirer for 2345 years,

[00:50:55]
which for a lot of entrepreneurs,
is like a prison sense, right?

[00:50:58]
People love to do their own thing.

[00:50:59]
The independence decision making,

[00:51:01]
the freedom working for a big company
is like, it’s the opposite of that.

[00:51:05]
It’s torture for many.

[00:51:07]
And so her point was, yeah,

[00:51:09]
take your medicine now or take
a whole lot more down the road.

[00:51:12]
Interesting.
Yeah.

[00:51:14]
Jody Cook is her name if you want to.
Jody Cook.

[00:51:17]
All right.

[00:51:18]
Very cool, John.

[00:51:22]
I feel like we could talk for hours

[00:51:23]
because the whole exiting business is such
an important

[00:51:28]
deal with businesses that I feel like
is overlooked by the majority of them.

[00:51:32]
They spend so much time trying to start it

[00:51:33]
and build it that they forget
that there’s an end game.

[00:51:37]
The last chapter.
Yeah.

[00:51:38]
There should be an endgame, I guess,
as far as that goes outside of dying.

[00:51:43]
So at any rate, John,
where can people find you?

[00:51:47]
Just head over to builttosell.com.

[00:51:49]
We got a bunch of things there
that folks can take a look at.

[00:51:55]
So, yeah, just builttosell.com
Okay.

[00:51:56]
And then the value builder system. Is
there a link to that on there as well?

[00:52:00]
That’s valuebuilder.com
Got you.

[00:52:02]
Well, easy enough.
Right.

[00:52:04]
And then Value Builder,
where I phone it was through a coach.

[00:52:07]
Can people use that independently?
No.

[00:52:10]
100% of our users for Value Builder do
so at the invitation of an advisor.

[00:52:16]
So we call them Certified Value Builders.

[00:52:18]
Value Builder is actually a practice
management software for advisers,

[00:52:21]
business coaches, and they
use it with their clients.

[00:52:25]
Got you.

[00:52:27]
If folks are interested, we can get them
in touch with a certified Value Builder.

[00:52:31]
Just go to valuebuilder.com.

[00:52:32]
Got you very cool. And then your podcast,
where can people find that?

[00:52:37]
Anywhere good podcasts are available.

[00:52:39]
So Stitcher, Spotify,
iTunes, it’s called Built To Sell radio.

[00:52:45]
Got you.
Awesome.

[00:52:46]
Well, John, thank you so
much for being on the show.

[00:52:47]
This is super cool.
Hey, thanks, James.

[00:52:49]
It’s going to be with you.
I am impressed with how many people

[00:52:52]
and how many businesses that you
have helped through this.

[00:52:55]
And you make it seem so simple.

[00:52:57]
But maybe it is easy
for me to say hard to do.

[00:53:01]
But I think it’s worthwhile investment.

[00:53:03]
Very cool.

[00:53:04]
This has been
Authentic Business Adventures,

[00:53:06]
the business program that brings the struggle stories

[00:53:16]
and triumphant successes of business owners across the land.

[00:53:13]
We are underwritten locally by the Bank of Sun Prairie. If you are listening to this on the web, which you probably are

[00:53:17]
Please be sure to give a thumbs up, comment,

[00:53:19]
subscribe, and, of course,
share with your entrepreneurial friends.

[00:53:22]
My name is James Kademan,
and Authentic Business Adventures is

[00:53:25]
brought to you by Calls on Call,
offering call answering and reception

[00:53:29]
of services for service businesses across
the country on the web at callsoncall.com

[00:53:37]
As well as, Draw In Customers
Business Coaching offering business coaching

[00:53:38]
services for entrepreneurs looking

[00:53:40]
for growth. On the web
at drawincustomers.com.

[00:53:43]
And, of course,
The Bold Business Book,

[00:53:45]
a book for the entrepreneur in all of us
available wherever fine books are sold.

[00:53:49]
We’d like to thank you our wonderful

[00:53:50]
listeners, as well as our guest,
John Warrillow, author of Built To Sell,

[00:53:54]
host of the Built To Sell podcast
and founder of the Value Builder System.

[00:53:58]
This guy just helps people exit
businesses, which is awesome.

[00:54:02]
What else we got here?

[00:54:03]
Past episodes, of course,
can be found morning, noon, and night.

[00:54:06]
The podcast link found
at drawincustomers.com.

[00:54:09]
John, thank you so much
for being on the show.

[00:54:11]
This is a lot of fun.

[00:54:12]
Thanks James.
All right.

[00:54:14]
Thank you for listening.
We’ll see you next week.

[00:54:15]
I want you to stay awesome.

[00:54:16]
And if you do nothing else, of course,

[00:54:19]
enjoy your business and make
sure that you exit it right.