This article is an excerpt from the Shortform book guide to "Built to Sell" by John Warrillow. Shortform has the world's best summaries and analyses of books you should be reading.
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What are the reasons to sell a business? Should you hand over the responsibility to someone else?
Built to Sell by John Warrillow takes you through the process of running and selling a profitable small business. One of the biggest reasons why you should consider selling your business is because it gives you multiple options in life.
Let’s look at a few reasons why you should consider selling your business to the highest bidder.
Why You Should Build a Sellable Business
Warrillow argues that no matter the position you or your company is in, you should strive to build a business that you can sell. One of the reasons to sell a business is that a sellable business is a valuable business. The qualities investors look for when purchasing a company—high-profit margins, low risk, room for growth—benefit any business or business owner.
Another reason to build a sellable business is the options it gives you. You may not want to sell your business now, but a lot can change quickly in the business world and in your personal life. You may, for whatever reason, suddenly need the money from the sale. You might one day realize you don’t enjoy running the business anymore and want out. Knowing that you can sell your company on short notice leaves these options available to you.
(Shortform note: Though you want to build a business you can sell, that doesn’t mean you should start a business with the sole intention of selling it, as the authors of Rework argue. They write that first of all, the chances you create a sellable business are small—in fact, 45% of small businesses fail outright within their first five years. Second, you’ll be more focused on selling the business than building a strong brand, which might even lead you to neglect the facets of your business (like growing profits and lowering risk) that make it sellable. So, ironically, starting a business only to sell it might make such a sale unattainable.)
What Makes a Business Sellable
Warrillow claims that the main attribute that makes a business sellable is its ability to flourish without the owner. A business that doesn’t rely on the owner, or any other single employee, will look much more attractive to potential buyers.
Many small business owners become so intertwined with their company that the company can’t function without them. When customers are used to dealing with the owner, and employees can’t do their job without the owner present, it can be hard for the owner to leave for a week’s vacation, much less leave it altogether. No buyer will be willing to purchase a business so dependent on one person.
To build and sell a company that can run without you, Warrillow lays out a step-by-step process, which involves finding the right product or service to sell, generating a positive cash flow, and hiring and training the right employees and managers.
The Personal Toll of Running a Business
Another reason to build a business that can function without you is that carrying sole responsibility for its health can take a toll on your health. In The E-Myth Revisited, Michael Gerber writes that in the early stages of opening a business, many entrepreneurs become burnt out trying to do everything themselves. As owners try to keep their new business afloat, they’ll often become overworked and disillusioned by the realities of being a small business owner. Many businesses fail at this stage because the owner can’t keep up.
Instead of working yourself to exhaustion, it’s better to take a strategic view of your business. Be honest with yourself about how much you can handle and where you might need help. As a business owner, you need to remember that the goal is to grow the business, and usually the best way to do that is to hire help when you need it. Don’t fall into the trap of feeling like you have to do everything yourself because it’s your business.
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Like what you just read? Read the rest of the world's best book summary and analysis of John Warrillow's "Built to Sell" at Shortform.
Here's what you'll find in our full Built to Sell summary:
- A step-by-step process for building a business you can sell
- Why you should build a sellable business even if you don't intend to sell it
- How to manage the selling of your business and all the headaches that come with it
