Republished with permission from Built to Sell Inc.

Much is made of analyzing the personality traits of successful entrepreneurs.

Some appear outgoing. Others are introverts. Some lean right, others left. Some are flashy. Others are monk-like with their money.

Their diversity can lead one to the conclusion that there are no common personality traits among successful founders.

Rather than trying to understand who they are, let’s look at what they do.

We’ve had the opportunity to help many businesses improve their value, with some going on to exit their business for seven, eight, or even nine figures. As such, we have a unique vantage point from which to observe the owners who achieve the most financial success. This point of view has allowed us to observe three things the most successful owners do differently:

1. They read business books.

Our most successful customers are voracious consumers of business content. When a new business book hits the bestseller list, most have either read it or summarized its central point.

It’s not just the printed word. Many get information through audiobooks, webinars, or podcasts, others via YouTube.

The actual medium is less important to these successful founders. What’s consistent is their continuous learning pattern and the desire to leverage other people’s smart ideas and put them to work in their own company.

2. They join masterminds.

In the absence of having a board of directors or a boss, successful founders often use a peer board to hold themselves accountable and gain an outside perspective when they’re stuck.

Initially popularized by Napoleon Hill in his class book, Think & Grow Rich, a mastermind gathers a small group of peers to act as one another’s board. Often led by a chair, these groups become lifelines for owners as they navigate big decisions in their businesses and personal lives.

3. They ask questions.

The character trait that makes successful entrepreneurs inclined to read business books and join peer groups is their natural curiosity. They have an unquenchable thirst for knowledge. No matter how successful, they never get full.

You may be surprised not to see the stereotypical attributes of successful entrepreneurs. Many founders are also action oriented, competitive, tenacious, etc., but all those common personality traits are who they are. Our interest is what they do.

Actions are the measure of a person. Take a look at what a founder does to stay sharp, and you’ll see a consistent pattern among the most successful entrepreneurs you know.

For more free information on Creating A Business Owner’s Dream Financial Plan, you can listen to a free, eight part series we did exclusively for business owners. The show is also available to subscribe to for free via iTunes.

Republished with permission from Built to Sell Inc.

Why did you decide to become an entrepreneur?

If you’re like most owners, you aspire to have the freedom that comes from owning your own business:

• The freedom to decide how you spend your time
• The freedom to choose whom to work with and to avoid people who drain your energy
• The freedom to make as much money as you deserve

This desire for freedom often leads owners to aspire for a bigger business, which they think will give them what they want. Unfortunately, most owners who strive for more revenue or profit as their primary goal often have:

• Less time because it’s spent managing an ever-expanding set of offerings.
• Less freedom because complexity inevitably leads to conflict.
• Less money because any available cash is reinvested in growth.

So, in many ways, growing a larger business gets you further from your ultimate goal of freedom.

Instead of thinking of your business as something to push harder and faster, there’s an alternative that may get you closer to what you want. Think of your business as a child, and your role is to guide her into becoming an independent, thriving adult.

If your goal is to create a business that can thrive without you, you will start to make different decisions. That demanding customer who wants your attention on their project no longer looks so attractive. That exciting new product that’s going to require you to sell no longer looks worth it.

By focusing on the role of parent rather than business driver, the demands on your time lessen as your employees pick up more of the load. You may also find your business selling more as you build a team of salespeople rather than relying only on yourself to drive the top line. The ultimate irony is that your business may end up being more valuable than a larger peer where the owner is still mostly responsible for sales.

Acquirers want businesses that will survive the loss of their owner. In many cases, they will pay a premium for companies where the owner is in the background. Consider the case of Damian James, who sold his network of mobile podiatry clinics generating $11 million in revenue for $13.2 million. He credits much of the sale to the fact that he was no longer running the businesses day to day and had reduced his time commitment to just one or two days per week.

David Hauser started Grasshopper, an Internet-based phone system he built to $30 million in annual revenue before he sold it to Citrix for $165 million in cash and $8.6 million in stock. Hauser was down to working just one day per week at the time of the sale of his company.

Growing revenue and profits will be valuable to an acquirer, but if you make them your only goal, you may find yourself with less of what you want. Treat your business like a child who needs guidance to become a thriving adult, and revenue, profits, and ultimate value will come as a by-product.

For more free information on Creating A Business Owner’s Dream Financial Plan, you can listen to a free, eight part series we did exclusively for business owners. The show is also available to subscribe to for free via iTunes.

Republished with permission from Built to Sell Inc.

How’s your workload these days?

If the pandemic has forced you back into the weeds of your business, you’re not alone. Many owners are again doing tasks they haven’t done in years because they have had to lay off front-line staff or their employees have fallen ill or are caring for someone in need.

Being back in the middle of things is neither healthy for you nor your business long term. Personally, it’s a recipe for burnout, and professionally, your business will be less valuable with you doing all the work.

Now is an excellent opportunity to retool your company so that it can start running without you again. These three steps should help:

Step 1: Sell less stuff to more people.

Most companies become too dependent on their owner because they offer too many products and services. With such a full breadth of offerings, it’s hard to find and train employees that can deliver. The secret is to pick something that makes you unique and focus on finding more customers, not more things to sell.

Take Gabriela Isturiz as an example. She cofounded Bellefield Systems, a company offering a timekeeping application for lawyers. Over the next seven years, Bellefield grew to 45 employees. Although many businesses bill by the hour, Isturiz focused exclusively on timekeeping for lawyers, which is one of the reasons she was able to integrate with 32 practice management platforms used by lawyers—a big reason Bellefield’s product was so sticky. It worked out well for Isturiz as she was growing 50% a year with EBITDA margins of more than 25% when she sold her company in 2019.

Step 2: Systemize it.

Next, focus on creating systems and procedures for employees to follow. For example, Nashville-based Bryan Clayton built Peachtree, a landscaping business. Most lawn care companies are mom-and-pop operations, but Clayton built Peachtree up to 150 employees before he sold it to LUSA for a seven-figure windfall.

What made Peachtree so unique? Clayton focused on documenting his processes. For example, one of his customers was a McDonald’s franchisee who owned 40 locations. He was frustrated by how many people discarded cigarette butts in his drive-through, so Clayton offered to clear the debris from the lanes as part of his lawn care process. He then trained his employees on the drive-through clean-up process he had created so it was followed across all 40 of the customer’s locations.

Step 3: Outsource it.

Next, consider outsourcing what you’re not very good at. For example, David Lekach started Dream Water, a natural sleep aid bottled in a five-ounce shot similar to the famous 5-Hour Energy Drink.

Lekach built Dream Water to almost $10 million in annual revenue before selling it to Harvest One, a cannabis company, for $34.5 million in cash and Harvest One stock. Lekach saw his role as “selling Dream Water, not making it.” That meant he outsourced the manufacturing, packaging, and distribution of Dream Water to a co-packer, ensuring Lekach and his team could focus on selling Dream Water.

It’s natural for a leader to step in during a crisis, but that’s not sustainable for the long term. Pull yourself out of the doing, and you’ll build a valuable company for the long term that’s a lot less stressful to run along the way.

For more free information on Creating A Business Owner’s Dream Financial Plan, you can listen to a free, eight part series we did exclusively for business owners. The show is also available to subscribe to for free via iTunes.

Republished with permission from Built to Sell Inc.

Post-Traumatic Stress Disorder (PTSD) is a mental health condition triggered by experiencing a terrifying event. Although not at the level of enduring a war zone, the events of March 2020 may leave you feeling similar symptoms.

If you’re like most business owners, the first quarter of the year was progressing like any other.

Then…bang!

A superbug started terrorizing the world. Professional basketball was cancelled. One by one, the world began to close its doors.

A significant blow impacted your business, unless you offer an essential service. Perhaps you’ve stabilized your company, or you might still be experiencing the worst of it. Either way, you’re probably a different person as a result of this pandemic.

Now, as things begin to slowly reopen, you may notice a change in your outlook. The Mayo Clinic reports four symptoms of PTSD:

1. Intrusive memories: recurrent, unwanted thoughts
2. Avoidance: trying not to think about the trauma
3. Negative changes in thinking and mood: destructive thoughts about yourself and other people
4. Change in physical and emotional reactions: being easily frightened, overwhelming guilt, or substance abuse

Any of those sound familiar?

If so, you may be experiencing the psychological toll a catastrophic event can have on your psyche. There are three constructive things you can do now.

Option #1: Talk to Someone

Soldiers deal with PTSD by talking to a psychotherapist. Speaking to an advisor about how this pandemic has impacted your business can be therapeutic, and we’re here to help.

Option #2: Rebuild a More Durable Business

Another constructive reaction to this crisis is to commit to building a more durable business that can better withstand shocks to the system in the future.

Option #3: Sell

Many owners—especially those that experienced the brunt of the 2008–09 global financial crisis—have been so traumatized by this pandemic that they don’t have the stomach for another disaster. As a result, they’ve decided to start planning their exit proactively.

If you find yourself choosing option 2 or 3, your immediate action plan will be the same. There are some things you can do now that will make your business more durable in the long term as well as more sellable:

1. Focus on your products and services where you have a point of differentiation. You’ll have more pricing authority in the short term, have better cash flow, and be more attractive to an acquirer in the long run.
2. Create recurring revenue streams that generate sales while you sleep. These can be in the form of service contracts, subscriptions, or maintenance plans. Aim to get the majority of your revenue automatically.
3. De-risk your business, ensuring you’re not too reliant on a single customer or supplier.
4. Create an employee handbook and systematize your processes to lessen your dependence on a key employee (or you calling all of the shots).
5. Clean up your bookkeeping.
6. Generate as much cash as possible from customers up front to create a positive cash flow cycle.

If you’re like a lot of the owners we work with, your business is part of who you are. When that gets threatened, it’s natural to feel traumatized. If you can redirect that energy into building a more durable business, you may never have to experience something like this again.

For more free information on Creating A Business Owner’s Dream Financial Plan, you can listen to a free, eight part series we did exclusively for business owners. The show is also available to subscribe to for free via iTunes.

Republished with permission from Built to Sell Inc.

Does your business offer a service or a product that you differentiate through a higher level of service?

If so, you’re probably disproportionately impacted by the economic disruption caused by the coronavirus pandemic. Consumers are cutting back on services to avoid human contact and conserve cash, but we are still buying products that solve a specific problem.

Businesses are buying products like Zoom, and Slack for teleconferencing and consumers are dropping services in favour of products. Italy was the first western democracy to experience the brunt of the coronavirus pandemic, and it changed everything about daily life, right down to what people bought from Amazon. For example, in the week after the Italian government quarantined most of its citizens, there was a 236% increase in Italians buying sports gear, presumably to set up a home-based exercise routine instead of services like personal training.

Instead of going out to enjoy the service at a great restaurant, we’re buying more alcohol. According to a recent Nielsen survey, overall sales of spirits like tequila and vodka were up 75% from the same period last year.

Service Providers Are Pivoting to Provide A Product

Many businesses have reacted by turning their services into what appears to consumers as a tangible product:

• Los Angels-based Guerrilla Tacos typically serves up a lively dining experience and has recently pivoted to offering a product called their “Emergency Taco Kit,” a take-out survival kit for the taco lover.

• Spiffy, a US-based mobile car wash service, has switched to offering its COVID-19 “Disinfect & Protect” product.

• U.K.-based Encore has pivoted from a talent booking service to offering their “Personalised Music Message” product, which enables you to commission an artist to create a customized video greeting for a loved one.

To take advantage of our gravitation towards buying products, service providers can take the following eight steps:

Step 1: Niche Down

The first step is to narrow your focus to a single type of customer. Many people feel uncomfortable with this stage – in particular in times like these when you need more customers, not less. It’s counterintuitive, but the first critical move in turning your service into a product is niching down because services can be adapted and customized for a variety of customers. In contrast, products need to fit one type of buyer.
Picking one niche also helps you design a great product and efficiently reach potential customers through things like Facebook groups set up to serve a specific target.

Niche down further than you’re comfortable, then niche down some more. Consider:
• Demographics: (age, gender, income)
• Firmographics (company size, industry)
• Life stage (just married, retirement)
• Company life stage (start-up, mature etc.)
• Psychographics

Step 2: TVR-Rank Your Services

Once you’ve niched down more than feels comfortable, the next step in turning your service into a product is to identify the services you offer, which are Teachable to employees, Valuable to your customers who have a Recurring need for it. At The Value Builder System™, we call this finding your “TVR.”

Grab a whiteboard or blank piece of paper and make a list of all the services you offer the niche you picked in step 1. Then score each service on a scale of 1 to 10 on the degree to which you can teach employees to offer the service, how valuable it is to your niche and how frequently they need to buy it.

Pick the service that scores the highest and move to Step 3 (you can always come back to this step if you want to consider multiple products).

Step 3: Get Clear on Your Quarter Inch Hole

Harvard Professor Theodore Levitt was famous for saying, “people don’t want to buy a quarter-inch drill. They want a quarter-inch hole.” Be clear about what problem your product solves for your niche. For example, “The Emergency Taco Kit” makes cooking at home fun for quarantined Angelinos, while the “Disinfect & Protect” product sanitizes cars for essential service providers who need to keep driving.

Step 4: Brand It

With a service, you’re typically hiring a person. Still, with a product, you’re selling a thing. Unlike people who have names, something like the “Emergency Taco Kit,” “Disinfect & Protect” and the “Personalised Music Message” have brands.

Step 5: List Your Ingredients

Service businesses customize their deliverables in a unique proposal for every prospect, but product companies list their ingredients. Pick up any package at a grocery store — whether it’s a bottle of dishwasher detergent or a box of cereal — and you’ll see an itemized list of what’s inside the box, which is why your offering needs to list what customers get when they buy.

Step 6: Pre-Empt Objections

When selling a service, you have the luxury of hearing your prospect’s objections first-hand, and you can dynamically address them on-the-spot. When selling a product, you don’t have the benefit of a person to overcome objections, so consider what potential objections customers might have and pre-empt them. When selling the “Disinfect & Protect” car cleaning product, Spiffy anticipated the four most common concerns customers raise and pre-empts each in their marketing material. For example, Spiffy assures prospects that they have:

• A money-back guarantee for people who aren’t sure
• Insurance in case they damage your car
• Trained technicians who know what they are doing
• Environmentally friendly cleaning products so they don’t damage the environment

Step 7: Price It

Services are quoted by the hour, day or project and usually come at the end of a custom proposal. Products publish their price.

Step 8: Manufacture Scarcity

One of the benefits of a service business is that you always have sales leverage because your time is scarce. You can’t make more hours in the day, so customers know they need to act to get some of your time.

With product businesses, you need to give people a reason to act today rather than tomorrow. This means you need to manufacture a reason to act through things like limited time offers, limited access products etc.

Service providers have been walloped, but if you make your service look and feel more like a product, you may be able to take advantage of our society’s flight to tangible products in uncertain times.

For more free information on Creating A Business Owner’s Dream Financial Plan, you can listen to a free, eight part series we did exclusively for business owners. The show is also available to subscribe to for free via iTunes.

Republished with permission from Built to Sell Inc.

Veterans refer to “the fog of war” to describe how difficult decision making can be when you’re on the battlefield with imperfect information.

Sometimes the obvious answer in retrospect is not so apparent when you’re in the throes of a crisis which is why we wanted to share the stories of three owners who took bold and decisive action at a time of deep economic uncertainty.

Back in September 11, 2001…

During the days that followed the terrorist attacks of September 11, 2001, most Americans believed they were at war. The crisis paralyzed owners who wondered what would become of the world. Spending stopped. The stock market tanked. At the time, Sunny Vanderbeck owned and operated a web hosting company called Data Return and had just seen a $1 billion acquisition offer from Compaq go up in smoke. Vanderbeck took stock. Data Return was burning cash, and Vanderbeck figured they had six months to get a deal done before they could face mortal danger. He continued to look for a buyer and soon received another offer from a technology consulting and software business rolling up IT services companies. Vanderbeck agreed to sell Data Return in return for stock in the IT services roll-up.

Soon after the transaction closed, Vanderbeck realized he had made a mistake. He recognized that his company’s acquirer was suffering the consequences of a buying spree, during which they had made forty recent acquisitions. Data Return’s acquirer had bitten off more than they could chew, and a little over a year later, they declared bankruptcy. Vanderbeck had fallen from being just days away from a $1 billion payday to owning shares in a bankrupt business. He still had his original Data Return partners and investors who believed in him, so Vanderbeck assembled his team again and bought the assets of his former company out of bankruptcy for $30 million. Four years later, Vanderbeck sold Data Return to Terremark Worldwide in a transaction valued at $85 million.

Listen to Sunny’s story

Back in 2003…

In 2003, the most common term used to describe the state of the economy was the “jobless recovery.” The year began with concerns about the war in Iraq. The Dow Jones Industrial Average fell below 8,000 in February. Mortgage rates plunged to 30-year lows, and homeowners rushed to refinance. George Bush cut taxes hoping consumers would start spending. It was against this backdrop that Joshua Dick took over his father’s company.

Urnex was generating less than $1 million in annual sales across seven product lines. Dick re-trenched and jettisoned six of the seven product lines to focus his limited resources on the one product that Dick thought had the potential to scale: cleaning supplies for commercial coffee makers. In other words, a niche of a niche. Dick poured all of his limited resources into becoming the best in the world at one thing and ultimately grew Urnex to more than $5 million of EBITDA, which is when he decided to sell for a double-digit multiple.

Back in 2008/9…

The Great Recession that began in 2008 was a time of massive disruption. Stock markets around the world were dropping hundreds of points a day. Banks were failing. Many, including John Moore, thought the world might be ending.

Moore is the founder of 3D4Medical.com, a company that created three-dimensional models of the human body, photographed them and licensed the images to textbook publishers. When the Great Recession of 2008/9 hit Ireland, Moore’s business took a significant turn for the worse, and he realized he needed to re-invent the company. Moore decided to offer an application that students could use to learn about anatomy. Instead of focusing exclusively on textbook publishers, they started selling their app directly to students, teachers and medical professionals. The business began to hum as more Universities – including the likes of Stanford and Cambridge – signed on. By 2019, 3D4Medical was up to 75 employees, including a reliable management team. Moore was making plans to continue to grow the business when one of the biggest textbook publishers in the world made an offer to buy 3D4 Medical for $50.6 million.

Listen to John’s story.

For more free information on Creating A Business Owner’s Dream Financial Plan, you can listen to a free, eight part series we did exclusively for business owners. The show is also available to subscribe to for free via iTunes.