Your Business Is Worthless if It Depends on You

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The title of this post might sound like fighting words for some, I mean, you work and sweat and pour your life into this thing and I have the nerve to suggest it’s not worth anything? According to my guest for this week’s episode of the Duct Tape Marketing Podcast, John Warrillow, author of Built To Sell, only 1 in 100 business owners is successful in selling his or her company each year.

It’s the biggest shame in the entire small business world to think that people slave away at something, often times sacrificing far more in terms of health, family and wage then those employed by BigCo, only to discover that there is nothing to sell at the end.

Creating a business that’s an asset is done intentionally and doesn’t happen automatically, even for very profitable businesses. As Warrillow and I discuss in this session, one of the first keys is to think in terms of building a business that can run without the owner. Any potential buyer is going to look beyond a P&L to discover if the business is really run by the relationships of skills of the owner. If that’s the case, if the owner can’t walk away without any dip in productivity, then the asset is significantly downgraded.

If you find yourself thinking, I want to start a business or I might want to slow down a bit in five years, now is the time to add Built To Sell to your strategy and planning must read list. It’s essential to start setting the value building process and tactics into motion and nurturing a view of your business as a potential.

The first step in this process is to find a way to remove yourself from sales and marketing and product innovation. Until you can successfully do that, you’ll have a hard time convincing outside buyers,

The next very important step is to focus on creating positive cash flow. I know every business has that as a goal, but if you began to look at cash flow as something over and above the debt service the buyer just took on to buy you out, it might look a little different.

Built To Sell is the first book I’ve come across that speaks about building a business to sell in the practical, simple terms that any small business owner can access in a systematic way.

My favorite quote from our interview – “Most small businesses run their business like they watch a movie, they have no idea what the ending will be.”

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Posted by: John Jantsch on Feb 16, 10 | 3:03 pm
Category: Duct Tape Marketing, Marketing Plans, Podcast | Tags:

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Gregg Brown

Hey, did the world ever decide if "Apple" could survive with out Steve Jobs?
Patti Bunker

I was having this exact conversation this morning; too many small businesses are not investing in their asset and won't be able to sell it or pass it on when they are ready to retire. Part of the investment needs to be in technology and innovation.
Elizabeth B.

While reading this post, I actually thought of the E-Myth as well. It really nails the point of creating blueprints of all the processes that make your business run. In order for it to be profitable to you, it needs to be able to be duplicated by others. If you're constantly doing everything for your business all of the time, then the money you're making really doesn't make it worth it. Additionally, And as you said, if you can't make the business run without you, it's worthless when you try to sell it.
Christine Wilson

Thanks! This article gave me lots to think about while developing my own business. It is often very confusing trying to handle all the different aspects and I constantly have to ask myself what goals I am trying to attain with everything I'm doing. I do try to automate my business wherever I can to save myself time and money. But I didn't think about the advantages of automating to sell the business in the future. This helped give me a longer term perspective.
Joy Johnson

This is one of the topics covered in the first session when I meet with people starting businesses. It's built into the long term goal and affects every aspect of how the business is created in the first place - right down to the name. You ought not name a business "Joe Smith and Sons Plumbing" if you want to build value at the point of sale some years down the road. If a business is well along it may still be worth looking at changing the name while under original ownership so goodwill transfers to the new brand. The other thing this approach does is constantly keep in mind the idea of making the business a more valuable asset. It's amazing how many small family owned businesses - with competent accountants - have never addressed this issue. I've met with dozens of business owners through the years who come in seeking tax advice for closing a business that they've been winding down. When I ask them why they didn't try to sell it, they say they intended that their children would take over but Suzi moved to Memphis, Joe's in the Navy, and Tommy's on drugs so they are just going to close the doors. If they do sell, they generally wait until the business is in a state of decline and doesn't command top dollar.
ndasika

Thank you for the post. I had not thought about the whole idea of business buyer looking beyond the owner and P&L. I always thought if the business is profitable enough the buyers will come, but your arguement has put everything into perspective. I will also read the book "built to sell". Thanks for all these info.
uscsb

Once again you have covered a universal small business problem. In over 15 years of advising small business owners, it is rare to find an owner who has not created a "job", even if well paying, rather than a business. The E-Myth was an early pioneer in making owners aware of the issue. Any tool that can give additional information on creating a business that does not need you to run, especially one that will help provide that road map to get there, is well worth the time invested.
accounting services makati

Yes its true. The business is nothing if you do nothing. Always make an innovation on your product for example. Then always let your customer satisfied all the time. As a business owner, do hands on, so that you can monitor all the things that happen in your business.
cardiogoop

EYE OPENER!
Bruce

"from out interview". Huh?

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