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Built to Sell book summary

Built to Sell book cover


This book is split into 2 parts. The first half tells the fictional tale of an entrepreneur who learns from his mentor, on how to transform his service-based business into a product-based company that is capable of being sold without a long earn-out period. The second half is an "implementation guide" that summarises the learning lessons from the story so that the reader is able to easily apply it to their own business. Anecdotes from the author's real-life experience of building and selling numerous companies are also interjected throughout.

Takeaway points

  • Figure out your product or service that has the potential to scale.

    • Needs to be specific.
    • Should be high value and teachable.
    • Should not be customisable.
    • Write up a sales pitch for your product.
  • Create a positive cash flow cycle.

    • No one customer should make up more than 15% of your total revenues.
    • Recurring automatic renewals with a high degree of upfront investment are golden (e.g. mobile phone contracts).
    • Customers should pay upfront for the product.
  • Hire a sales team.

    • As the founder, you should extricate yourself from doing the sales. You should be spending your time selling the company, not selling your product.
    • When you come to hire your first sales rep, hire 2 from the outset so they compete with one another.
    • Hire people who can sell products in a methodical way. Stay away from salespeople used to selling professional services as they may be less used to selling fixed, non-customisable products.
    • Figure out how many pipeline prospects will likely lead to sales. It allows the buyer to estimate the size of the market opportunity.
  • Stop selling everything else.

    • Remember - no customisation! It stops you from scaling. Resist the temptation to continually give your existing customers what they want!
    • End existing business relationships if they are not interested in buying your (new) product.
    • Run your newly focused business for at least 2 years to prove to a buyer the new model works.
  • Launch a long-term incentive plan for managers.

    • Avoid using equity as it can complicate the sales process unnecessarily.
    • Incentivise loyalty and ensure your managers' incentivisation are aligned with the company's objectives.
    • You need to show that your managers can run the company and will stick around over the longer term.
  • Find a broker.

    • Answers you need to nail include:
      • “Describe your sales cycle.”
      • “How many salespeople do you have?”
      • “Describe your cash flow cycle.”
      • “Who are your customers?”
      • “How do you know if they are satisfied?”
      • “How often do they repurchase?”
    • Choose a broker where you're not the smallest or largest client.
    • Choose a broker who understands that you're positioning yourself as a product business.
    • Make sure they know your industry.
  • Tell your management team.

    • Think about offering a bonus for the successful sale of the company, deposited in the long-term incentive plan.
    • To protect yourself from employee defection, think about your "moat". e.g. owning the event or benchmark for your industry. How do you make it hard for any individual employee to strike out on their own?
  • Convert offers to a binding deal.

    • Keep cool during the due diligence process.
    • Don't be surprised if binding offers are discounted from the offer in the letter of intent.
    • Beware of earn-outs. They are used by the acquirer to minimise their risk.

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