Turn Your Business Into One You Can Sell

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Dear Business Owner,
What’s your exit strategy?

John Warrillow wants to know.  He says that high-impact businesses that are ones that offer products and services that are teachable, valuable and repeatable.  As the author of  “Built to Sell” (2010, Flip Jet Media), Warrillow presented his perspective to the Greater Dallas Chamber of Commerce quarterly briefing today at Cityplace.

From Warrillow’s vantage point, many entrepreneurs create businesses as an expression of their own personal creativity.  Their inventiveness and ingenuity are personified in their firm; it is the source of their wealth, and creates opportunity for their team and their customers.  Oftentimes, the best salesperson at the firm is the owner; a fixture that is inextricably linked to the company’s internal workings.  Yet, in order for a business to be valued and ultimately sold, that valuation must be based solely on the processes within the company – processes that will continue to produce after the current owner is no longer there.

While business owners are arguably the best sales people within the firm, being linked to the sales process is actually a detriment in business valuation.  The worst remark an owner can make in front of potential investors?  “Everyone always relies on me as the last word on any decision.”  Uh-oh; then how will this thing run after you are gone?  Are you the business, or are you the business owner? Investors acquire processes – as well as property, plant and equipment –  in a transaction.  If a business owner is intricately linked to the day-to-day production and sale of products, then the process has a built-in flaw.  That business is not, in Warrillow’s words, “Built to Sell”.

For entrepreneurial firms that do get sold, the transaction is often a reaction:  either in response to some life-changing event (like health issues), or the phone rings – with an offer on the line.   The most highly-valued businesses are pro-active about the sales process, and understand how to create value within their processes for potential suitors.  They also have positive cash flow, the kingpin of all valuation models.

What Warrillow didn’t address was, “What now?”  Once a business owner has sold his “baby”, what’s the next step?  Dedicating your life’s work to a particular enterprise is a full-throttle, all-encompassing endeavor.  Suddenly, it’s sold – and then what?  If you are pro-active in selling your business, you have to find another path.  Easier said than done for many who have their own businesses.  That psychological shift can be massive if you are not a serial entrepreneur.  (in John’s defense, how much ground can you really cover in a keynote address?  Delving into the psyche behind the sale is a pretty deep swimming hole…)

However, there has to be an exit strategy, and “Built to Sell” may help point toward the door.  Creating wealth and building an enterprise is a worthwhile goal in and of itself, but Warrillow suggests that changing the business model may be the only way to truly sustain – and ultimately sell – the company.

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