How To Sell Your Company

In: Education|How To By: Brian Armstrong

4 May 2010

John Warrillow sent me a copy of his book recently (one of the perks of having a business blog) and it was surprisingly good.

The book is titled “Built To Sell” – which actually turned me off a bit at first. It reminded me of “Built To Last”, the famous business book by Jim Collins, except quick flips have a negative connotation to me.

So I started it with a bit of skepticism. But this quickly disappeared as I got into the story. Built To Sell is told in a parable format (somewhat like Rich Dad, Poor Dad or The E-Myth Revealed) which made it really easy to read and very engaging. I finished it within 24 hours.

The book goes through the story of Alex, a small business owner who decides he wants to sell his company one day and realizes he can’t because he has built a service business that is dependent on him.

Luckily he has a mentor named Ted, who takes him through the process of converting his company to one that can be sold. This is based on mentors the author has had in real life, and it was clear from reading it that he has walked the walk.

It covers a bit of accounting, negotiation, business brokers, cash flow, etc. I guess I left with the feeling that this kind of information could only have come from long meetings with lots of real mentors. These are the kind of mistakes I wouldn’t want to have to learn the hard way.

Check it out if you get a chance. After reading it, I mailed it to a friend of mine in Houston who runs a service business. It was the kind of information I wanted to share.

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5 Responses

Chuck Cohn

May 4th, 2010 at 3:40 pm

Hey Brian, what was the key takeaway for you related to your businesses? I suspect the market value for a pure online company like the ones that you’re running would take into account the time you’re spending running the company. So the appropriate value would be a multiple of profit minus web development costs minus accounting minus legal. I’m curious if that was a takeaway from this book.

Best,

Chuck

Brian Armstrong

May 4th, 2010 at 6:17 pm

Hey Chuck,

Some of the main points where focused on taking a service oriented business where you as the owner are the central figure, and making it less dependent on yourself by moving to a product based business. Getting a management team in place. Using salespeople to show it can be sold by others. Using a manual to standardize the process. Turning down service related work that falls outside your core product. Getting two years of good financial statements. Collecting revenue up front. Then what to look for in a business broker, how to pitch it to potential acquiring companies. He said expect 3-4x EBITDA. Then they’ll rake you over the coals during due diligence and probably lower their offer.

Actually all stuff you are probably very familiar with :)

On the web based companies I’m doing, you’re right that they are much less service based. I think you’re right that my time would be an expense they’d factor in. It would probably be attractive for them to see all support and maintenance handled by someone other than myself at some point to prove I’m not some vital link holding it all together. That was one takeaway. And then his other point too was look for a buyer who will see it as a strategic opportunity (there is some synergy which makes it worth more) rather than a pure investment play.

I think the book is most valuable for those with service based companies as opposed to product based companies. You might enjoy it as a quick read but I’m sure you’re familiar with many of the concepts already.