In this week’s episode of Life After Business we hear from the speaker, author, entrepreneur, and current owner of The Value Builder System: John Warrillow. John shares his story and the lessons he learned after building and selling multiple businesses as well as the inner workings of his pioneering value builder system. John wanted to fill the role of “Robin Hood” for business owners in a sea of “mercenaries” (buyers) by helping them maximize the value of their company and helping them to level the playing field.
If you’re pushed for time, don’t worry – you can still benefit from some of John’s advice below:
Understand the key drivers of a company’s value:
Like anything in life, a company value can be dissected into separate parts and analyzed individually, i.e. revenue, growth potential etc. Understanding what a financial buyer looks for when they buy a company puts you on the same page and takes away the advantage that the buyer has. You can focus on the key drivers and eliminate the reasons a buyer would discount the price of your company.
Be mindful of a business that is too dependent on you personally:
However good your numbers may look; what are the chances of the buyer being able to achieve the same profits once you’re gone?
Have an intermediary to run the business exit planning process for you:
Use someone who specializes in exit planning AND the merger and acquisition process. Even if you’re confident in your business skills, because exiting your business is most likely a one-time event, an intermediate usually pays from themselves. They do if for a living, therefore, they have many experiences to pull from that could save you TONS of money. Worst case scenario, they help eliminate (or minimize) your emotion from the deal, which is usually the top deal killer.
Use a specific ‘deal lawyer’:
However good your own legal team may have been during your incorporation and the current day-to-day operations of your company, getting an M&A deal over the goal line is a significantly different skill set. Also keep in mind that your current lawyer may want to keep you as a client. How does this affect their motives and would they be 100% all-in during the sale of your business to a third party when they are potentially working themselves out of a job?
Be wary of low-price offers that leave you with equity:
It’s easy to be seduced by a big company offering to acquire you and promising that you will generate vast increases of wealth in future revenue. Can they really back those claims up? What markets or services will they be tapping in to that you haven’t already?
What did he do after the sale?
When John sold his research company to a big public conglomerate, he convened everyone in the boardroom with the buyer and tried to spell out the benefits to the employees, i.e. opportunities for career progression at a bigger company.
He continued to run the business as its own division and became an employee of the wider group for about a year.
He eventually developed The Value Builder System: a statistically proven way of improving the value of a company by up to 71%. In his research study of over 20,000+ businesses, companies that achieve a Value Builder Score of of 80+ (out of a possible 100) go on to sell at a 71% premium compared to the average-scoring business of 59.
What does a successful exit from your business look like?
A business owner that exits their business and gets a fair market value or premium over the market value.
The seller has something else fulfilling to do with their time in life after business.
Wise words for the road:
“One of the great benefits of being an entrepreneur is being able to step off the hamster wheel. The skill set of being able to identify a unique gap in the marketplace, being able to assemble a team to address the gap, raise money, sell the product… that is a timeless set of skills. Technical skills will age, but not the core skills of entrepreneurship.”
“Do it sooner than you think is natural…. when you’re desperate to get out, you’ll get prayed on.”
John Warrillow show links