Built to Sell Chapter 2: Finding Out Your Business Is Worth Nothing
Imagine you spent eight years building something. You put in the long nights, dealt with difficult clients, hired people, lost people. And then someone you respect tells you straight to your face: your business is worth nothing.
That is what happens to Alex in Chapter 2 of Built to Sell.
Alex Goes to See Ted
After the disaster with MNY Bank and Sarah quitting (see Chapter 1), Alex decides he wants to sell his business. So he calls Ted Gordon, a family friend who has built and sold four businesses by age fifty-nine. Ted is the real deal. He sold an insurance agency, a consulting company, a commercial real estate business, and more. Net worth in eight figures. Still married. Kids still talk to him. Annual ski trips.
You know the type. The guy who actually figured it out.
Alex drives to Ted’s fancy office overlooking the water and tells him straight: “I want to sell my business.”
Ted listens carefully. He asks Alex to describe his business. Alex says they’re a marketing agency that does brochures, print ads, and websites.
Then Ted asks about competition. Alex starts listing other agencies, freelancers, big firms with regional offices.
And Ted summarizes everything in one brutal sentence. He basically says: so you run a service business that depends on a few big clients, everyone wants you personally involved, and you compete with tons of other shops doing the same thing.
Alex says yes.
Ted says: “Your business is virtually worthless today.”
Why It Hurts (And Why He’s Right)
I remember reading this part and thinking, man, that must sting. Eight years of work and someone calls it worthless. But here’s the thing. Ted is not being mean. He’s being honest.
Think about it from a buyer’s perspective. Would you buy a company where:
- The owner does most of the important work
- 40% of revenue comes from one client
- The team is made of generalists who are okay at many things but great at nothing
- Clients want to work with the owner, not the company
Why would you pay money for that? The second Alex walks away, the whole thing falls apart. You’re not buying a business. You’re buying a job. And not even a good one.
This is a problem I see a lot in IT too. I worked with many small consulting shops over the years. Same pattern every time. One or two smart people do all the real work, everyone else is support. The company name means nothing. The person means everything. Try selling that.
The Homework Assignment
Ted doesn’t just crush Alex’s dreams and send him home. He gives him homework. He says: go think about what kind of projects you’re really good at. Come back next week.
Meanwhile, Alex goes back to his office and the chaos continues. His copywriter Tony is writing garbage. His junior designer Elijah wants a raise because he knows Alex can’t say no (his mom works at the biggest client). The web guy can’t crack Google’s ranking algorithm. Alex is putting out fires everywhere.
This is the typical founder trap. You are so busy doing everything that you never step back to think about what you should actually be doing.
The Five-Step Logo Design Process
When Alex comes back to Ted the following week, he has an answer. After looking through client thank-you letters, time sheets, and profit numbers, he figured out that logo design is where his agency is best.
They have a process for it. It was informal, something they did naturally, but Ted helps Alex put it into words:
- Visioning - Ask the client about their product vision and how they stand out from competitors
- Personification - Fun questions like “if your product was a famous actor, who would it be?” or “if your product was a cookie, what kind?” This forces clients to think about personality
- Sketch Concepts - Hand-drawn sketches, not computer drafts. Because when you show people computer mockups, they focus on tiny details instead of the big idea
- Black-and-White Proofs - Design in black and white first so clients judge the design itself, not the colors
- Final Design - Add colors, deliver files and a brand guidebook
I actually love this process. Step 3 especially. As a former science professor, I used to tell my students: start with paper and pencil. The computer makes you focus on precision too early. Same principle here.
The Scary Part: Specialize
So Ted looks at this nice five-step process and says: what if you only did logos?
Alex freaks out. “There’s no way we could build a business on just logos!” He says MNY Bank barely uses them for logos and they’re 40% of revenue. Other clients see them as a full-service agency.
But here’s the problem. By doing everything, Alex’s small team has to be generalists. And generalists at a small shop can never compete with specialists at big agencies. You end up being mediocre at many things instead of excellent at one thing.
Ted gives two key pieces of advice in this chapter:
Tip 1: Don’t generalize, specialize. Focus on one thing. Hire specialists. Your quality goes up and you stand out from the competition.
Tip 2: No single client should be more than 15% of your revenue. Having 40% of your business from one client is a red flag for any buyer. Too risky.
My Take
This chapter hits a nerve for me. I spent years in IT watching companies try to be everything for everyone. “We do web development, mobile apps, cloud infrastructure, data science, AI, and also we make coffee.” No you don’t. You do one or two things okay and everything else is held together with duct tape.
The hardest thing in business is saying no. Saying no to a paying client who wants something outside your specialty. Saying no to revenue that’s right there for the taking. But every time you say yes to something outside your focus, you dilute what makes you good.
Ted’s advice is simple. Pick the thing you do best. Build a process around it. And then have the guts to focus on just that.
Easy to say. Very hard to do. We’ll see how Alex handles it in Chapter 3.
Previous: Chapter 1 - When Your Business Is a Total Mess Next: Chapter 3 - Building a Process That Works All posts in this series: Built to Sell