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From BuiltToSell.com:

“Do you want your business to grow and prosper without

sacrificing the freedom to live the lifestyle you want? Do you

want to build a company that you can cash out and sell one

day so you can retire comfortably or go after your next big

idea?

In Built to Sell, we discover that these two ideas are not

mutually exclusive. The idea that you have to work your

fingers to the bone for years to build a sellable company is

flawed. In fact, the opposite is true. If you want to sell your

business for the maximum amount of money, it needs to be

designed to thrive without you – so the next owner can

continue to grow and profit from your hard work when you’re

gone.

Inside Built to Sell, you’ll find out just that: how to create a fast

growing, profitable, scalable business that will give you the

flexibility and freedom you became an entrepreneur for in the

first place. And how to leverage that automation and

profitability into a big cash buy out when you’re ready to move

on to your next endeavor.”

www.BuiltToSell.com

CREATE A STANDARD

SERVICE OFFERING

CREATE A POSITIVE

CASH FLOW CYCLE

HIRE A SALES TEAM

STOP ACCEPTING

OTHER PROJECTS

LAUNCH A LONG-TERM

INCENTIVE PLAN FOR

MANAGERS

FIND A BROKER

TELL YOUR MANAGE-

MENT TEAM

CONVERT OFFER(S)

TO A BINDING

DEAL

To transform a service firm into a sellable company, follow this 8-step process. Before you start the process, engage a good accountant

with experience in helping entrepreneurs with succession planning. Do not wait until you have an offer to see an accountant.

Click on any of the steps below to get more details.

i. Brainstorm all of the services that you provide today.

ii. Plot them.

iii. Eliminate services that clients need to buy only once.

iv. Among the remaining, pick the one that is plotted closest to the top right corner of the diagram. This becomes your Standard Service Offering.

v. Experiment with bundling services together.

FIND A SERVICE YOUR CLIENTS FIND VALUABLE THAT YOU CAN

TEACH SOMEONE ELSE TO PERFORM

DOCUMENT YOUR PROCESS FOR EXECUTING THIS TYPE OF

PROJECT

NAME YOUR STANDARD

SERVICE OFFERING AND EACH STEP

WRITE A SHORT

DESCRIPTION OF THE

FEATURES AND CORRESPOND-ING BENEFITS OF EACH STEP

REVAMP ALL YOUR

CUSTOMER COMMUNICA-

TIONS TO DESCRIBE

YOUR PROCESS

• It will move you away from commditized service.

• You will be able to set the price and payment terms.

i. Define each step so that you can repeat the model in the same way each time.

ii. Write an instruction manual. Instructions need to be specific enough for someone to follow independently by using examples and fill-in-the-blank templates.

iii. Test the instruction manual by asking someone to deliver the service without your involvement.

• It will give you the cash you need to operate without diluting yourself with other shareholders.

• You might not be able to charge for the entire amount in advance.

• Your company valuation will be higher when you sell it because they will not have to commit

as much of their own capital to your company.

REMOVE YOURSELF FROM SELLING

THE BEST SALESPEOPLE WILL BE THOSE USED TO SELLING A

PRODUCT

FIND PEOPLE WHO ENJOY SELLING FIRST AND THE

PRODUCT SECOND HIRE AT LEAST 2 SALESPEOPLE

• Avoid salespeople who come from professional services companies.

• They are competitive and an acquirer will want to see that you have a product that can be sold by salespeople in general.

• You won't have to worry about cash flow because you're charging up front for your service.

• Employees will test your resolve, and clients will ask for exceptions. Be strong and resist the

temptation.

• Create a two-year run of increasing business and financial performance:

• Be patient and remember that it will increase the cash you get up front and minimize

your reliance on an earn out.

• Drive the model as far and fast as you can.

• Avoid the temptation to get personally involved in selling or delivering your Standard

Service Offering. When you get asked for help, diagnose the problem and fix your

system so the problem doesn't recur.

• The year when you make the switch will be bad financially on paper. The accountant

will need to change the way he/she recognizes revenue by spreading it out over the

life of the delivery period of your Standard Service Offering.

• Most business owners get improved quality of living in those two years. You might

like it so much that you decide to run it like that in perpetuity. If you still want to sell

your business, continue on to the next step.

• You need to prove that:

• You have a management team who can run the business after you're gone;

• The management team is locked into staying with your company after acquisition.

• 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 pool each year after a three-year period.

• Make sure your broker appreciates what you have done

to transform your business.

• Create The Book. It describes your business and its

performance to date along with a business plan for the

future.

• Your broker will typically charge a percentage of the

proceeds of the deal in the form of a success fee. Find a business broker Find a boutique mergers &

acquisitions firm with experience

in your industry.

Ask other entrepreneurs you

know who have sold their firm for

recommendation.

• Emphasize that, by being acquired, your managers will be more likely to hit the personal

bonus targets.

• Offer key employees a simple success bonus if a deal goes through:

• Offer to pay it in two installments - one 60 days after the close, and the other at some

point in the future.

• Your advisor will be trying to sell the benefits of offers to you because they get paid if the

deal goes through and they want to remind you of the hard work they have done to justify

their fee. Do not be swayed by it, study the offer.

• Ask for an amount of money up front (+ another chunk tied to performance targets).

• An earn out is a way for an acquirer to minimize their risk in buying your company.

• Walk when things get nasty.

• The due diligence period is about 60-90 days

• The Letter of Intent is usually not a binding offer - deals often fall through in the due

diligence period. Present things in the best possible light but do not lie or hide the facts.

• After due diligence, the Letter of Intent might be discounted. If the new discounted offer

meets your target cash up front, then agree. If the discounted offer falls below the threshold,

walk away no matter how much the acquirer promises to help you hit your earn out.

• Closing meeting. This is where formalities are handled (signing documents). It is typically

held at the acquirer's law firm.

Visual Facilitation supercharges your thinking, brainstorming, and problem-solving.

Visualization brings clarity and order to your thought processes, allowing you to explore

and keep track of complex and non-linear ideas. The entire process is captured in a

document deliverable that you can refer to in the future, and use to help others

understand your ideas.

matt@FluentBrain.com / 514 831-6414 / FluentBrain.com