Book SummaryBuilt to Sell, by John Warrillow

1-Page Summary1-Page Book Summary of Built to Sell

In Built to Sell, businessman John Warrillow provides advice on how to make your small business sellable. The best way to do this, according to Warrillow, is to build a business that can run on its own—a business that can function without you, the owner. Even if you don’t plan to sell your business anytime soon, or ever, it still benefits you to build a valuable company that can be sold to the highest bidder.

John Warrillow is an expert in small business and entrepreneurship, and he has firsthand experience selling a business. As a radio host,...

Built to Sell Summary 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. In the first place, 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,...

Built to Sell Summary 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...

Built to Sell Summary Step 1: Find Your Scalable Specialty

Warrillow claims the first step in building a sellable company is to determine which service or product to specialize in. Many small companies spread their efforts too thin over a variety of products or services. This may be good for business in the short term, but it makes it much harder to grow as a company because you won’t have the time or resources to expand in several different areas simultaneously. Instead, find one product or service that you not only excel at, but that is scalable.

A scalable product or service should have three attributes:

It provides unique value. Your specialty should be something that’s both valuable to customers and differentiates you from your competitors. For instance, you may be good at creating functional ecommerce websites, but so are countless other companies. Instead, find a service that only you provide: You might decide to design websites specifically for companies that sell sports equipment. Though this is a smaller addressable market, you’re more likely to separate yourself from competitors.

(Shortform note: Differentiating your company as Warrillow recommends means finding a niche—a [narrow segment of a broader...

Built to Sell Summary Step 2: Generate Positive Cash Flow

Once you’ve chosen your specialty, Warrillow says you next need to focus on generating positive cash flow. Positive cash flow means your business is bringing in more money than it’s spending, and it’s a key to creating sustainable growth and freeing up enough cash to implement the rest of Warrillow’s process.

(Shortform note: Though similar, cash flow and profits are not the same. Profit is the amount of money left over after expenses. Cash flow is the net amount of...

Built to Sell Summary Step 3: Hire the Right Salespeople

Now that you have cash on hand and a service you can provide without being personally involved, Warrillow recommends hiring a sales team. With a sales team, you can remove yourself from the process of selling the service or product.

According to Warrillow, you want salespeople with experience in selling products, not services. Even if your company provides a service, a salesperson who can sell products has experience selling a specific, unchangeable item. Because of this, they’ll know how to sell a customer the exact specialized service you provide. On the other hand, a salesperson who’s used to selling services will want to modify your product or service to cater to each customer’s needs and desires. This will make it more...

Built to Sell Summary Step 4: Build a Team of Managers and Incentivize Them to Stay

Warrillow argues that if you want to sell your business, you need a capable management team that is likely to stay with the company after the sale. Your management team, whether it’s a single manager who knows the ins and outs of the business or several managers with a variety of expertise, should be able to oversee every aspect of the company without you and deal with any potential issues.

(Shortform note: In The Making of a Manager, Julie Zhuo mentions versatility as one of the qualities of a good manager, which aligns with Warrillow’s advice on having a manager who understands all aspects of your company. She also states that a good manager should be accountable, team-oriented, and work well with others.)

Potential buyers of your business will also want to be sure that the management is likely to stay with the company long term. Warrillow argues that as the owner, it’s your responsibility to incentivize managers to stay after you sell the company. The most effective way to do this is to create a bonus account that they can...

Built to Sell Summary Step 5: Find the Right Company to Help Sell Your Business

Once your company is in a good position to be sold, you need to find a professional adviser to help with the sale. When searching for an adviser, Warrillow says there are two key aspects to consider: the size of the firm and their knowledge of your business specialty.

Finding a broker or firm that’s the right size for your business is important because it ensures they’ll have the right contacts and appreciate your specific needs. Warrillow advises using a business broker if your company does less than $2 million in annual sales, and a merger and acquisition firm if it does more than that. If a broker is too small for your company, they might not be able to find the companies that would give you the highest offer. If a firm is too big, they might view your business as less important than their bigger clients and not put in the effort to find the most suitable buyer. Instead, they’ll simply look to sell your...

Built to Sell Summary Step 6: Inform Your Managers

According to Warrillow, telling your managers you plan to sell the company can be a tricky and uncomfortable situation. If you own a small business, you’ve probably worked closely and built a relationship with your management team, and they may not be happy to hear you’re selling the business. The best time to tell them will vary depending on your situation, but Warrillow recommends letting them know once you find a potential buyer. The potential buyer will want to set up a meeting with you and your managers to get a feel for the company. Obviously, you don’t want your managers to be blindsided by this meeting.

(Shortform note: Other business experts cite additional reasons to inform managers early of a potential sale. The National Federation of Independent Business (NFIB) recommends you [involve key managers in the process early...

Built to Sell Summary Step 7: Accept an Offer

The final step in selling a business is to accept an offer. Warrillow recommends knowing exactly what you want from a deal. This will make the decision easier. For example, have a minimum amount of money you’ll accept up front, with any performance fees or add-ons seen as a special bonus. If most of your compensation is based on how the company performs in the future, you may be forced to continue working for the company to ensure you get a proper payout. Knowing exactly what you want will help you stand firm if your business broker pushes for you to accept a less-attractive deal just so they can get paid and move on.

More Advice on Selling Your Business

In The Hard Thing About Hard Things, Ben Horowitz contends [there are two sides to consider when selling a company: your rational side and your emotional...

Shortform Exercise: Find Your Specialized Product or Service

In this exercise, you’ll find a product or service your business can specialize in that’s also scalable, as Warrillow recommends.

List your (or your company’s) strengths and weaknesses. For example, if you run a store that repairs and sells electronic devices, you might be good at repairing equipment, but bad at selling used computer parts.