How to Build a Business You Can Sell for Millions [Built to Sell]

whether you're a freelancer trying to

start a small business or a business

owner looking to build something you can

sell your goal is the same you want a

business that runs smoothly without you

when your business runs on its own it

becomes a valuable asset you'll have

choices you can take vacations explore

new hobbies or just relax freedom is

something that every small business

owner dreams of including myself while

looking for ways to get that kind of

freedom in my business I found this book

built to cell creating a business that

can Thrive Without You by John wo John

shares his lessons through the story of

a small business owner named Alex

Stapleton I will share 11 of those

lessons that really stood out to me meet

Alex Alex owns a company called the

Stapleton agency he offers lots of

different advertising services and has

plenty of clients but there's a big

problem Alex is doing almost all the

work himself because his clients only

want to deal with him

Alex is tired he's always running from

one problem to the next his employees

they're below average they're not good

at what they do and then there's the

money one month he's making good money

and the next he's struggling to pay the

bills when Alex started his agency he

dreamed of hiring the best people paying

them well getting bigname clients and

one day selling the business for a lot

of money in reality he's dealing with

average employees tough clients and

stress that never goes away his income

it's all over the place up one minute

down the next Alex was frustrated and

tired of all that and decided to sell

his company he turned to Ted Gordon for

advice Ted was a family friend and a

Serial entrepreneur who had started

built and sold four successful

businesses if anyone could help it was

Ted they made an appointment and Ted

asked Alex why he wanted to sell his

business Alex talked about his problems

with his clients his average team and

how clients always wanted to deal with

Alex himself he also complained about

his inconsistent cash flow Alex was

shocked when he heard what Ted said next

Ted said that his business was worthless

and he wouldn't be able to sell it Alex

was devastated he'd spent eight years

building Stapleton agency and now the

man he most respected in the business

told him it was worthless Ted explained

that the number one mistake

entrepreneurs make is to build a

business that relies too heavily on them

as a result many business owners find

themselves trapped in an unsellable

business customers constantly ask to

deal with the owner the cycle repeats

and the owner stays stuck a business

reliant on its owner is unsellable even

if it's profitable but Ted added that if

Alex wanted to create a business that

could run and Thrive without him he'd

need to make some changes it wouldn't be

easy but Ted could help him Ted asked

Alex if he was prepared to follow his

advice Alex said yes and they agreed to

meet every Tuesday at 9:00 in the

morning Ted's first tip isolate the

product that has the potential to scale

Ted gave Alex his first assignment he

asked him an important question a

question every entrepreneur needs to ask

what kind of projects are you really

good at the reason Ted started with this

question is because the first step in

creating a business that can Thrive

without you is identifying the right

product to sell and the right product is

the one that has the potential to scale

scalable products meet three key

criteria they are teachable valuable and

repeatable teachable means you can train

others to build and sell them valuable

products are something your customers

will pay for because they solve an

important problem for them repeatable

means customers come back for it again

and again just like their favorite brand

of coffee often you'll find that the

most teachable products are the ones

that customers value the least

alternatively products your customers

value the most are the least teachable

this is normal when Alex met with Ted

the following Tuesday he was ready with

his answer Alex had thought about it and

realized that their best work was

designing logos they had a system they

followed clients liked their work and

they could charge good money because

clients know a product logo is something

they'll use for a long time and once

they nailed One logo they had their foot

in the door clients often came back

asking for more logos as they launched

new products Ted asked Alex to explain

the system and in the end they came up

with a five-step logo design process

step one visioning step two

personification step three sketch

Concepts step four black and white

proofs step five final design Ted

recommended Alex to focus his business

only on logos logos were something

Alex's company was good at plus it was

scalable Ted's tip number two don't

generalize specialize once you find the

right product focus on that Alex didn't

like the idea of focusing only on logos

he explained that he couldn't build a

business on logos alone

his biggest client didn't even use

Stapleton Agency for their logos and

most of their other clients needed many

other types of projects Ted didn't

sugarcoat it that's the problem Alex

you're trying to do too many different

things that means you need Specialists

but you can't afford them so you're

stuck with a team that's just average at

a lot of things but not great at

anything and that's why your results are

weak if you focus on doing one thing

well and hire specialists in that area

the quality of your work will improve

you'll Stand Out Among your competitors

and you will become more efficient in

delivering your product efficiency and

Improvement come when you are focused on

one thing for example there's a reason

Southwest Airlines only uses the Boeing

737 airplanes this way their crew can

learn one piece of equipment and

maintenance teams can quickly spot

problems with one diagnostic routine to

recap tip number two don't generalize

specialize focus on selling one product

or service Ted's tip number three

diversify your client base Alex still

wasn't convinced if they did just logos

they'd have to stop working for mny Bank

his biggest client Ted explained that

relying on mny would provide cash flow

but it would make it difficult to sell

the company nobody wants to buy a

business where 40% of the revenue comes

from one company it's too risky Ted told

him that if he wanted to sell his

business Alex needed to have a diverse

group of clients where no one company

made up more than 10 to 15% of the

revenue Ted suggested that the Stapleton

agency become the world's best logo

design shop he told Alex to write down

the five-step process and start talking

to prospects about his offer he told him

not to fire his other clients yet but to

start talking about the five-step logo

design process to new prospects he

instructed him to create a one-page

description of his approach to creating

logos and find 10 people to pitch it to

Ted come back next week and tell me how

you've made out back at the office Alex

focused on Ted's assignment he created a

one-page sheet and emailed it to 24

clients he hadn't spoken to in a while

the next week Alex reported to Ted and

said that from 24 emails he got six

meetings and made one sale Alex was

super happy about the sale he added that

he also felt more confident pitching his

new process he felt like an expert to

recap Ted's thirdd tip relying too

heavily on one client is risky make sure

no one client makes up more than 15% of

your

Revenue Ted's tip number four own a

process become a product company not a

Service Company Ted explains that when

you own a process you're in control your

unique process becomes your product Alex

but designing logos is still a service

Ted your unique method for designing a

logo is your product you're not

customizing your approach to solve every

client's problem your product is your

process which isn't dependent on

Specialists or you a service company is

simply a collection of people with

specific expertise who offer their

services to the company good service

companies have some unique approaches

and talented people however as long as

they customize their approach to solving

client problems there is no scale to the

business and its operations are

dependent on people this is why you need

to own a process and become a product

company to recap tip number four owning

a process makes it easier to pitch and

puts you in control this shift from

customizing your approach for every

client to offering a unique and consist

method helps you move from a service

company to a product company Ted's tip

number five make the business

independent of you when people are the

main assets of a business the business

becomes dependent on them and therefore

not worth very much because these people

can come and go Ted told Alex that what

he needed to do next was train people to

handle each of the five steps of the

process so he wouldn't have to be the

only guy piecing every project together

from scratch Ted don't become synonymous

with your company

if buyers aren't confident that your

business can run without you in charge

they won't make their best offer this is

why your job is to build the Stapleton

agency up to a point where the business

is independent of you to recap tip

number five don't become synonymous with

your business make it independent of you

Ted's tip number six charge upfront Alex

was worried he was expecting a big check

from his biggest client mny and they

were late he needed money for rent and

payroll and a couple of weeks Alex's

concerns seemed like music to Ted's ears

Ted Alex these are all the more reasons

to think of your five-step logo design

process as a product when you have a

product people expect to pay for it in

advance when you go to a store to buy an

orange don't you have to pay for it

before you eat it we're used to paying

for products upfront and services after

they've been done the last time you had

your windows cleaned the service was

performed first and then you paid your

bill right products are paid for before

you use them Ted told Alex that now that

he was offering a product instead of a

service he needed to start charging

Upfront for it when someone buys a

company they look at the amount of

capital they need to tie up to buy the

business if your business generates cash

they'll be willing to pay more because

they don't have to invest more of their

own money to run the business Ted told

Alex that right now he had a negative

cash flow on a typical project it takes

four to 5 months to get paid Ted If you

charge up front you'll get to use their

money while you're doing the work

imagine you have 10 clients for your

five-step logo design process now you

have $100,000 of your client's money to

finance your business Alex realized that

the more logos they sold the more cash

they'd accumulate they'd never need a

loan Ted and a potential buyer will look

at your business as a Cash Generator

rather than a cash suck had then offered

his instructions for the week he told

Alex to keep pitching his five-step logo

design process this time he told him to

include the price on the cell sheet with

the words build upon signing letter of

agreement when it's your product you get

to decide how and when to get paid to

recap tip number six avoid the cash suck

once you have standardized your service

charge up front to create a positive

cash flow cycle Ted's tip number seven

don't be afraid to say no to other

projects the next time Alex met with Ted

he reported that he had eight meetings

with prospects and Spring Lake homes

agreed to a logo for their new

condominium project Alex added that an

old client had also asked for a proposal

for an advertising campaign Alex was

tempted to accept the advertising

campaign but Ted was strongly against it

Ted Alex if you're going to commit to

creating a business that can run without

you and can be sold you need to stop

accepting other projects even if you

need the money clients will never know

you're serious about your five-step logo

design process until you say no to other

work if you're going to be the world's

best logo design shop you can't also

sneak in a few ad campaigns it's why

heart surgeons don't set broken ankles

Ted explained that if Alex turned down

other projects and favor of promoting

his five-step logo design process he'd

instantly become more referable when you

offer a general service like advertising

or marketing people will have trouble

describing why you're special because

you'll be just like everyone else if

however you're the world's best logo

creator you'll be memorable and

referable Ted assured him that for every

advertising project he turned down he'd

win a logo project to recap tip number

seven don't be afraid to say no to other

projects even if it's very profitable

prove that you are serious about

specialization by turning down work that

falls outside your area of expertise the

more you say no to people the more

you'll get referred to those who truly

need your product or service Ted's tip

number eight two sales rep are better

than one Ted explained that if Alex

wanted to show that he had built a

valuable company he would need to show

that he wasn't the only one who could

sell logos Ted told Alex that he needed

to hire two sales reps to start he

explained that salespeople are

competitive and will compete with each

other and this meant more money for them

and for Alex plus two sales reps would

signal that you have a scalable business

model not just one good sales rep Alex

wondered how he could find one

salesperson with experience selling

logos no less two of them Ted's tip

number nine hire people who are good at

selling products not Services Alex

interviewed two prospective sales reps

the first one was Blake he had attended

a prestigious University and for the

past two years worked at a big

advertising agency he also interviewed

Angie Angie had been a top salesperson

selling mobile phones she reached the

top 10% of sales reps nationally the

next time he met with Ted he described

these two candidates had recommended

that he hire Angie Alex wasn't convinced

Blake was well educated his father knew

many CEOs in town and he worked at one

of the top agencies in the country Ted

explained that Blake was used to working

in a service business he was good at

Custom Tailoring Solutions Blake would

try to convince you to tailor the

five-step logo design process to meet

each client's unique needs Angie however

was used to selling products a product

salesperson doesn't have the luxury of

changing their company's product to suit

a customer's need instead they try to

make their product fit the needs of the

client Ted that's exactly the kind of

person you want selling your product he

hired Angie who recommended another

sales rep she had worked with before

Sheamus together they made a great team

soon Angie had sold her first logo Alex

was thrilled not only had he built a

process others could deliver but someone

else other than he could sell it later

that week Alex told his biggest account

that he would no longer accept projects

other than logos it was a big decision

but he felt it was the way to go if Alex

kept doing work other than logos he

wouldn't be giving his new process a

chance to thrive time proved him right

the next month Alex reported to Ted that

Angie and Sheamus had sold 27 logos to

recap tip number nine hire people who

are good at selling products not

Services Ted's tip number 10 estimate

your Market potential Ted explained that

to sell his business Alex needed to

demonstrate to a buyer that he had a

sales engine that would produce

predictable recurring Revenue to do this

they had to figure out how many sales he

needed to drive his sales engine they

also need to know how many companies are

in their target market Ted did a little

research online and discovered there

were 210,000 businesses within a 100

mile radius he figured that about 58,000

of them earned enough to afford Alex's

$10,000 logos until now Alex had closed

two out of the 80 prospects he'd

contacted this represented a 2.5 closing

rate with a closing rate of 2.5% and a

market potential of 58,000 he could sell

1,450 logos assuming One logo per

company which is conservative given that

most companies create logos for new

divisions and products regularly Ted at

$10,000 per logo that's $14.5 million in

Market potential here in town and we're

not even counting how big you could grow

if you opened offices in other cities

Alex smiled Ted explained that potential

buyers would want to see the model for

his sales engine including how many

opportunities he had and his historical

closing rate Ted was sure they'd love

these numbers to recap tip number 10

determine how many prospects typically

turn into sales this figure is crucial

when selling your company as it helps

potential buyers estimate the market

opportunity Ted's tip number 11 use

product oriented language in the next

meeting Alex reported that things were

going quite well an old client Natural

Foods had returned for a logo for their

line of organic chocolate milk Ted

there's something I want you to think

about I noticed you used the word client

to describe Natural Foods I want you to

replace the word client with the word

customer when you talk about the

companies that buy your logo process

Alex why does that matter Ted explained

that service firms refer to their

customers as clients and product

businesses refer to them as customers

using words like client signals that

Stapleton agency is a service business

rather than a product business with a

standard and repeatable process a

product business is more valuable and

sellable buyers no processes are in

place and the company can run without

you this will get you more money when

you sell it Ted also recommended that

Alex stop calling the Stapleton agency a

firm and start referring to it as a

business instead Ted said it was

important to communicate to a buyer that

Stapleton agency is a real business not

just a collection of service providers

this was the last tip I learned from

this book in my opinion of those 11 tips

we just discussed the most important and

the hardest one to implement is tip

number five make the business run

independently of you until you achieve

that you don't have a business you just

have a job and it's the worst kind of

job if you want to make your business

run like a well-oiled machine then check

out the video you see on your screen

it's the summary of a book titled the

the emth Revisited thanks for watching

and I hope this was a useful video