Creating a SMALL Business That Doesn't Need YOU - Built To Sell.

Here is a brief summary of the key points from the transcript: - Alex owns an advertising agency but is frustrated because he has to do all the work himself and has inconsistent cash flow. - Alex seeks advice from his mentor Ted, who says Alex's business is currently worthless because it relies too heavily on him. - Ted gives Alex 11 tips to transform his business into something sellable that can thrive without him: 1. Identify your most scalable service (logo design) and focus only on that. 2. Don't generalize - specialize in your most scalable offering. 3. Diversify your client base so no single client makes up more than 15% of revenue. 4. Own a standardized process and productize your service. 5. Make the business independent of you by training others. 6. Charge upfront to improve cash flow. 7. Turn down non-logo projects to prove your focus. 8. Hire multiple sales reps to show scalability. 9. Hire people good at selling products, not services. 10. Calculate your sales conversion rate and market potential. 11. Use product-oriented language like "customers" not "clients." - The key decisions are to focus on only selling logo design based on a standardized process, and to build a business model and team that does not rely on Alex.

Whether youre a freelancer trying to start a small business or a business owner looking to build something you can sell, your goal is the same. You want a business that runs smoothly without you. When your business runs on its own, it becomes a valuable asset. Youll have choices. You can take vacations, explore new hobbies, or just relax. Freedom is something that every small business owner dreams of, including myself. While looking for ways to get that kind of freedom in my business, I found this book built to sell creating a business that can thrive without you by John Wearlow. John shares his lessons through the story of a small business owner named Alex Stapleton. I will share eleven of those lessons that really stood out to me. Meet Alex. Alex owns a company called the Stapleton Agency. He offers lots of different advertising services and has plenty of clients. But there's a big problem. Alex is doing almost all the work himself because his clients only want to deal with him. Alex is tired. Hes always running from one problem to the next. His employees, theyre below average. Theyre not good at what they do. And then theres the money. One month hes making good money, and the next hes struggling to pay the bills. When Alex started his agency, he dreamed of hiring the best people, paying them well, getting big name clients, and one day selling the business for a lot of money. In reality, he's dealing with average employees, tough clients, and stress that never goes away. His income, it's all over the place. Up 1 minute, down the next. Alex was frustrated and tired of all that and decided to sell his company. He turned to Ted Gordon for advice. Ted was a family friend and a serial entrepreneur who had started, built, and sold four successful businesses. If anyone could help, it was Ted. They made an appointment, and Ted asked Alex why he wanted to sell his business. Alex talked about his problems with his clients, his average team, and how clients always wanted to deal with Alex himself. He also complained about his inconsistent cash flow. Alex was shocked when he heard what Ted said next. Ted said that his business was worthless and he wouldn't be able to sell it. Alex was devastated. He'd spent eight years building stapleton agency, and now the man he most respected in the business told him it was worthless. Ted explained that the number one mistake entrepreneurs make is to build a business that relies too heavily on them. As a result, many business owners find themselves trapped in an unsellable business. Customers constantly ask to deal with the owner. The cycle repeats, and the owner stays stuck. A business reliant on its owner is unsellable, even if it's profitable. But Ted added that if Alex wanted to create a business that could run and thrive without him, he'd need to make some changes. It wouldn't be easy, but Ted could help him. Ted asked Alex if he was prepared to follow his advice. Alex said yes, and they agreed to meet every Tuesday at nine in the morning. Ted's first tip? Isolate the product that has the potential to scale. Ted gave Alex his first assignment. He asked him an important question, a question every entrepreneur needs to what kind of projects are you really good at? The reason Ted started with this question is because the first step in creating a business that can thrive without you is identifying the right product to sell. And the right product is the one that has the potential to scale. Scalable products meet three key criteria. They are teachable, valuable, and repeatable. Teachable means you can train others to build and sell them. Valuable products are something your customers will pay for because they solve an important problem for them. Repeatable means customers come back for it again and again, just like their favorite brand of coffee. Often youll find that the most teachable products are the ones that customers value the least. Alternatively, products your customers value the most are the least teachable. This is normal. When Alex met with Ted the following Tuesday, he was ready with his answer. Alex had thought about it and realized that their best work was designing logos. They had a system they followed. Clients liked their work and they could charge good money because clients know a product logo is something they'll use for a long time. And once they nailed one logo, they had their foot in the door. Clients often came back asking for more logos as they launched new products. Ted asked Alex to explain the system and in the end they came up with a five step logo design process. Step one, visioning. Step two, personification. Step three, sketch concepts. Step four, black and white proofs. Step five, final design. Ted recommended Alex to focus his business only on logos. Logos were something Alex's company was good at. Plus it was scalable. Ted's tip number two don't generalize specialized. Once you find the right product, focus on that. Alex didnt like the idea of focusing only on logos. He explained that he couldnt build a business on logos alone. His biggest client didnt even use Stapleton agency for their logos. And most of their other clients needed many other types of projects. TeD didnt sugarcoat it. Thats the problem, Alex. Youre trying to do too many different things. That means you need specialists, but you cant afford them. So you're stuck with a team that's just average at a lot of things, but not great at anything. And that's why your results are weak. If you focus on doing one thing well and hire specialists in that area, the quality of your work will improve. You'll stand out among your competitors, and you will become more efficient in delivering your product. Efficiency and improvement come when you are focused on one thing. For example, there's a reason Southwest Airlines only uses the Boeing 737 airplanes. This way, their crew can learn one piece of equipment and maintenance teams can quickly spot problems with one diagnostic routine. To recap tip hash two, don't generalize. Specialize. Focus on selling one product or service. Teds tip hash three, diversify your client base. Alex still wasn't convinced. If they did just logos, they'd have to stop working for MnY bank, his biggest client. Ted explained that relying on MNY would provide cash flow, but it would make it difficult to sell the company. Nobody wants to buy a business where 40% of the revenue comes from one company. It's too risky. Ted told him that if he wanted to sell his business, Alex needed to have a diverse group of clients where no one company made up more than ten to 15% of the revenue. Ted suggested that the Stapleton agency become the world's best logo design shop. He told Alex to write down the five step process and start talking to prospects about his offer. He told him not to fire his other clients yet, but to start talking about the five step logo design process to new prospects. He instructed him to create a one page description of his approach to creating logos and find ten people to pitch it to. Ted. Come back next week and tell me how youve made out. Back at the office, Alex focused on teds assignment. He created a one page sheet and emailed it to 24 clients he hadnt spoken to in a while. The next week, Alex reported to Ted and said that from 24 emails he got six meetings and made one sale. Alex was super happy about the sale. He added that he also felt more confident pitching his new process. He felt like an expert. To recap Ted's third tip, relying too heavily on one client is risky. Make sure no one client makes up more than 15% of your revenue. Teds tip number four own a process. Become a product company, not a service company. Ted explains that when you own a process, you're in control. Your unique process becomes your product. Alex but designing logos is still a service. Ted, your unique method for designing a logo is your product. You're not customizing your approach to solve every client's problem. Your product is your process. Which isn't dependent on specialists or you. A service company is simply a collection of people with specific expertise expertise who offer their services to the company. Good service companies have some unique approaches and talented people. However, as long as they customize their approach to solving client problems, there is no scale to the business and its operations are dependent on people. This is why you need to own a process and become a product company. To recap tip number four, owning a process makes it easier to pitch and puts you in control. This shift from customizing your approach for every client to offering a unique and consistent method helps you move from a service company to a product company. Teds tip number five make the business independent of you. When people are the main assets of a business, the business becomes dependent on them and therefore not worth very much because these people can come and go. Ted told Alex that what he needed to do next was train people to handle each of the five steps of the process so he wouldn't have to be the only guy piecing every project together from scratch. TED don't become synonymous with your company. If buyers aren't confident that your business can run without you in charge, they won't make their best offer. This is why your job is to build the Stapleton agency up to a point where the business is independent of you. To recap tip number five, don't become synonymous with your business. Make it independent of you. Ted's tip number six, charge up front. Alex was worried. He was expecting a big check from his biggest client MNY and they were late. He needed money for rent and payroll in a couple of weeks. Alex's concerns seemed like music to Teds ears. Ted Alex, these are all the more reasons to think of your five step logo design process as a product. When you have a product, people expect to pay for it in advance. When you go to a store to buy an orange, don't you have to pay for it before you eat it? Were used to paying for products upfront and services after theyve been done. The last time you had your windows cleaned, the service was performed first and then you paid your bill, right? Products are paid for before you use them. Ted told Alex that now that he was offering a product instead of a service, he needed to start charging upfront for it. When someone buys a company, they look at the amount of capital they need to tie up to buy the business. If your business generates cash, they'll be willing to pay more because they don't have to invest more of their own money to run the business. Ted told Alex that right now he had a negative cash flow. On a typical project, it takes four to five months to get paid. TED if you charge upfront, you'll get to use their money while you're doing the work. Imagine you have ten clients for your five step logo design process. Now you have $100,000 of your clients money to finance your business. Alex realized that the more logos they sold, the more cash they'd accumulate. They'd never need a loan. TED and a potential buyer will look at your business as a cash generator rather than a cash suck. Ted then offered his instructions for the week. He told Alex to keep pitching his five step logo design process. This time he told him to include the price on the sell sheet with the words build upon signing letter of agreement. When it's your product, you get to decide how and when to get paid. To recap tip number six, avoid the cash suck. Once you have standardized your service, charge up front to create a positive cash flow cycle. Teds tip number seven don't be afraid to say no to other projects the next time Alex met with Ted, he reported that he had eight meetings with prospects and Spring Lake homes agreed to a logo for their new condominium project. Alex added that an old client had also asked for a proposal for an advertising campaign. Alex was tempted to accept the advertising campaign, but Ted was strongly against it. Ted Alex, if you're going to commit to creating a business that can run without you and can be sold, you need to stop accepting other projects. Even if you need the money, clients will never know you're serious about your five step logo design process until you say no to other work. If you're going to be the world's best logo design shop, you can't also sneak in a few ad campaigns. It's why heart surgeons don't set broken ankles. Ted explained that if Alex turned down other projects in favor of promoting his five step logo design process, he'd instantly become more referable. When you offer a general service like advertising or marketing, people will have trouble describing why you're special because you'll be just like everyone else. If, however, youre the worlds best logo creator, youll be memorable and referable. Ted assured him that for every advertising project he turned down, Hed win a logo project. To recap tip hash seven, dont be afraid to say no to other projects, even if its very profitable. Prove that you are serious about specialization by turning down work that falls outside your area of expertise. The more you say no to people, the more youll get referred to those who truly need your product or service. Teds tip hash eight two sales reps are better than one. Ted explained that if Alex wanted to show that he had built a valuable company, he would need to show that he wasnt the only one who could sell logos. Ted told Alex that he needed to hire two sales reps to start. He explained that salespeople are competitive and will compete with each other and this meant more money for them and for Alex. Plus, two sales reps would signal that you have a scalable business model, not just one good sales rep. Alex wondered how he could find one salesperson with experience selling logos, no less two of them. Ted's tip number nine hire people who are good at selling products, not services. Alex interviewed two prospective sales reps. The first one was Blake. He had attended a prestigious university and for the past two years worked at a big advertising agency. He also interviewed Angie. Angie had been a top salesperson selling mobile phones. She reached the top 10% of sales reps nationally. The next time he met with Ted, he described these two candidates. Ted recommended that he hire Angie. Alex wasnt convinced. Blake was well educated. His father knew many CEO's in town and he worked at one of the top agencies in the country. Ted explained that Blake was used to working in a service business. He was good at custom tailoring solutions. Blake would try to convince you to tailor the five step logo design process to meet each client's unique needs. Angie, however, was used to selling products. A product salesperson doesn't have the luxury of changing their company's product to suit a customer's need. Instead, they try to make their product fit the needs of the client. TED that's exactly the kind of person you want selling your product. He hired Angie, who recommended another sales rep she had worked with before Seamus. Together they made a great team. Soon, Angie had sold her first logo. Alex was thrilled. Not only had he built a process others could deliver, but someone else other than he could sell it. Later that week, Alex told his biggest account that he would no longer accept projects other than logos. It was a big decision, but he felt it was the way to go. If Alex kept doing work other than logos, he wouldn't be giving his new process a chance to thrive. Time proved him right. The next month, Alex reported to Ted that Angie and Seamus had sold 27 logos. To recap tip number nine, hire people who are good at selling products, not services. Teds tip hash ten estimate your market potential. Ted explained that to sell his business, Alex needed to demonstrate to a buyer that he had a sales engine that would produce predictable, recurring revenue. To do this, they had to figure out how many sales he needed to drive his sales engine. They also need to know how many companies are in their target market. Ted did a little research online and discovered there were 210,000 businesses within a 100 miles radius. He figured that about 58,000 of them earned enough to afford Alex's $10,000 logos. Until now, Alex had closed two out of the 80 prospects he'd contacted. This represented a 2.5 closing rate. With a closing rate of 2.5% and a market potential of 58,000, he could sell 1450 logos, assuming one logo per company, which is conservative given that most companies create logos for new divisions and products regularly. TED at $10,000 per logo, that's $14.5 million in market potential here in town. And we're not even counting how big you could grow if you opened offices in other cities. Alex smiled. Ted explained that potential buyers would want to see the model for his sales engine, including how many opportunities he had and his historical closing rate. TED was sure they'd love these numbers. To recap tip hash ten determine how many prospects typically turn into sales. This figure is crucial when selling your company, as it helps potential buyers estimate the market opportunity. TeD's tip number eleven use product oriented language. In the next meeting, Alex reported that things were going quite well. An old client, natural foods, had returned for a logo for their line of organic chocolate milk. Ted, there's something I want you to think about. I noticed you used the word client to describe natural foods. I want you to replace the word client with the word customer when you talk about the companies that buy your logo. Process. Alex, why does that matter? Ted explained that service firms refer to their customers as clients and product businesses refer to them as customers. Using words like client signals that Stapleton agency is a service business rather than a product business. With a standard and repeatable process, a product business is more valuable and sellable. Buyers know processes are in place and the company can run without you. This will get you more money when you sell it. Ted also recommended that Alex stop calling the Stapleton agency a firm and start referring to it as a business instead. Ted said it was important to communicate to a buyer that Stapleton agency is a real business, not just a collection of service providers. This was the last tip I learned from this book. In my opinion, of those eleven tips we just discussed, the most important and the hardest one to implement is tip number five. Make the business run independently of you. Until you achieve that, you don't have a business, you just have a job. And it's the worst kind of job. If you want to make your business run like a well oiled machine, then check out the video you see on your screen. It's the summary of a book titled the E Myth Revisited. Thanks for watching and I hope this was a useful video.