Notes from Built to Sell by John Warrillow

Hire a sales team to do the selling. By team, I mean at least 2 people, because sales people are competitive in nature and two people doing sales can bring in some healthy competition (and more sales).

The salesperson should be someone who enjoys selling (duh) and also loves the product.

Even if you’re bored of running your business and selling because you desperately need a break, don’t use that as an answer to “Why are you selling your company?”. Nobody wants to hear a founder leaving their business which they built from scratch. Instead talk about why you think the business will grow well under someone else, its potential, etc. and also say that you’re willing to stay for the transition. Details could be worked out later and you could convince them later on your exit.

Things to have clarity on with the buyer before selling your company: What happens to the working capital / cash in the bank

Product-focused companies are more sellable and can fetch a higher multiple than service-focused companies. A product can also be a specific workflow or template that you follow while giving a service. Think of your company as selling products, and use jargons accordingly — company, not firm. Customers, not clients.

The founder/CEO should try to make themselves as dispensable as possible. If a team can run and grow a company without them then that is the business a buyer would be most interested in, and it also ensures a smooth exit for the founder.

Document processes and build systems inside your company. Even creative work, like creating a logo, can be documented step-wise and made into a system. If you want to scale then systems and processes are essential.

Stop doing everything and focus on few things. As a company, becoming known for a few things might work in your favour. That also helps your sales team become experts in that niche and sell it well.

Stop accepting work that’s outside of your scalable product/service/focus. This is easier said than done and there will be a lot of temptation. But in the long-term, this will work in the company’s favour.

If you’d like to have a business you could sell, you need to prove to a buyer that you have a management team who can run the business after you’re gone. What’s more, you need to show that the management team is locked into staying with your company after acquisition. Avoid using equity to retain key management through an acquisition, as it will unnecessarily complicate the sale process and dilute your holdings. Instead, create a long-term incentive plan for your key managers. Each year, take an amount equivalent to their annual bonus and put it aside in a long-term incentive account earmarked for each manager you want to retain. Allow the manager to withdraw one-third of the account’s balance each year after a three-year period. That way, a good manager must always walk away from a significant amount of money should he or she decide to leave your company.

You may also choose to “top up” the balance in a long-term incentive plan with a one-time special bonus in the event of the sale of your business. That way, your key managers will have an increased incentive to help you sell your business and stay with your company after the sale to get their share of the proceeds.

When choosing a broker or an M&A firm, remember that they should work for you and get you competing offers. If you get a whiff of the fact that are in bed with a buyer and usually make their money by helping them buy companies for cheap then you should sever ties from the broker/banker immediately.

Don’t issue stock options to retain key employees after an acquisition. Instead, use a simple stay bonus that offers the members of your management team a cash reward if you sell your company. Pay the reward in two or more instalments only to those who stay so that you ensure your key staff stays on through the transition.

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Abhijeet Mukherjee is an entrepreneur who built and ran a digital media company profitably for years. Here he writes about enhancing your outlook & skills in order to stand out and do great work. He loves exploring the world of content creation, entrepreneurship, productivity and personal growth.