Built to Sell: Your Step by Step Implementation Guide

The story of Alex Stapleton is over. Now comes the part you actually need. The implementation guide from Built to Sell is where Warrillow stops telling stories and starts giving instructions. Eight steps. Each one builds on the previous. Skip one and the whole thing falls apart.

I have read many business books that end with “now go do it” and nothing else. Warrillow does better than that. He gives you a real plan and backs each step with his own personal experience of selling companies. That matters. Theory is cheap. Experience is expensive.

Here is what you need to know.

Before You Start: Get an Accountant

Warrillow says this first and I agree with him completely. Before you do anything, find a good accountant who has experience with succession planning. Tax strategies need to be set up early. If you wait until someone makes you an offer, it is too late. The tax bill can eat a huge chunk of your sale price.

This is one of those boring pieces of advice that saves you the most money. Do not skip it.

Step 1: Find Your Scalable Product or Service

This is the foundation. Everything else depends on it. You need to find one thing in your business that meets three criteria:

1. Teachable. You can train employees to deliver it, or technology can deliver it. If only you can do it, it does not scale.
2. Valuable. Customers actually want it and will pay good money for it. If it is easy to get somewhere else, you are stuck competing on price.
3. Repeatable. Customers need it again and again. Think razor blades, not razors. One-time purchases do not build a sellable business.

Warrillow suggests making a simple chart. Put “Teachable” on one axis and “Valuable” on the other. Plot everything you sell. Then cross off anything that customers only buy once.

Here’s the thing. You will probably find that your most valuable services are the hardest to teach. And the easiest to teach are the least valuable. That is normal. The trick is combining things to create something that hits all three criteria.

The Recurring Revenue Ladder

Warrillow ranks six types of recurring revenue from least to most valuable. This list alone is worth the price of the book:

1. Consumables (like toothpaste). Customers buy regularly but can switch brands easily.
2. Sunk money consumables (like razor blades). Customer already invested in your platform. Switching costs money.
3. Renewable subscriptions (like magazines). Customer pays up front for a year. Revenue is predictable.
4. Sunk money renewable subscriptions (like Bloomberg Terminal). Customer invested in hardware AND pays a subscription. Very sticky.
5. Auto-renewal subscriptions (like document storage). Customer gets billed until they say stop. Most people never say stop.
6. Contracts (like wireless phone plans). Hard commitment for a defined term. Most valuable of all.

The higher you climb on this ladder, the more your business is worth. Period.

Name It and Own It

Once you find your scalable thing, document the process for delivering it. Write it down step by step so someone else can follow it without asking you questions. Then give it a name. A real name, like Alex’s “Five-Step Logo Design Process.”

Why does naming matter? Because when your thing has a name, it stops being a generic service. Nobody can comparison shop against something unique. You set the price. You set the terms.

Warrillow learned this from running focus groups. When he sold generic focus groups, clients sent RFPs and the lowest bidder won. Margins dropped from 58% to almost nothing. So he created something called “customer advisory boards,” documented the process, named the steps, and suddenly he was back in control of pricing.

Stop responding to RFPs. Start creating things that do not need RFPs.

Step 2: Create a Positive Cash Flow Cycle

Charge your customers before you deliver. Full payment or at least partial payment up front.

This does two things. First, it gives you the cash to make the big changes in the next steps without panicking about payroll. Second, it makes your business more valuable to a buyer.

Here’s why that second part matters. When someone buys your company, they write two checks. One to you. One to the company for working capital, meaning the money the business needs to operate day to day. If your business burns cash, the buyer has to set aside more for working capital and less goes to you. If your business generates excess cash because customers pay up front, the buyer needs less working capital and can pay you more.

Warrillow shares a story about getting two offers for his company. Offer A had a higher purchase price. Offer B had a lower price but a better working capital calculation that let him withdraw the cash his business had accumulated. Offer B ended up being worth 15% more than Offer A.

The lesson? When you get an offer, the purchase price is not the only number that matters. The working capital calculation can change everything. If the offer does not spell out how working capital is calculated, do not sign anything until it does.

Step 3: Hire a Sales Team

You need to stop being the person who sells. If you are the rainmaker, any buyer will demand a long earn-out because the business depends on you bringing in revenue.

Warrillow tells a story about an entrepreneur named Stephen Watkins who told a room full of business owners: “Your job is to hire salespeople to sell your products so you can spend your time selling your company.” You make thousands selling your product. You make millions selling your company. Same skills, different target.

When hiring salespeople, Warrillow has specific advice:

• Hire at least two. Salespeople are competitive by nature. Two of them will push each other. Also, a buyer wants to see that your product can be sold by salespeople in general, not just one star.
• Avoid people from professional services firms. They will want to customize everything for every client. That kills your scalable model.
• Look for people who enjoy selling and like your product. In that order.

Warrillow also admits something honest. For years he could not get salespeople to succeed at his company. He thought they were bad salespeople. But the real problem was he kept offering too many different services. His salespeople were trying to learn a dozen different pitches. Once he narrowed down to one product, the same people started making sales. Less to sell means more mastery. More mastery means more sales.

Step 4: Stop Selling Everything Else

This is the hardest step. Warrillow says it directly and I believe him.

Once your sales team is running, you have to stop accepting projects outside your core offering. No exceptions. Not even for big clients. Not even when the money looks good.

The temptation is real. Random projects bring cash. But they also destroy focus, invite customization requests, and force you to hire people to deliver things outside your process. Every exception trains your customers to expect more exceptions.

Here’s the thing Warrillow found surprising. Most customers actually respect the change. Many buy more once you standardize. Customers are smart. They know when you are overreaching. They would rather buy something you are great at than something you are okay at.

Warrillow learned this the hard way. He tried to run a subscription model alongside his old consulting business. The A-clients would not switch. So he started offering customizations to convince them. Soon he was creating 102 unique reports for 17 clients with 20 employees. It collapsed.

Five years later he tried again. This time he gave customers an ultimatum: subscribe to the standard offering or end the relationship. It worked. The A-clients came around. The B-clients talked it up. New leads started flowing in. The business took off.

The takeaway: do not give customers a choice between old and new. Cut over completely.

After you make the switch, run the focused business for at least two years. Prove the model works. Do not get involved in selling or delivering personally. When problems come up, fix the system instead of jumping in yourself.

Step 5: Launch a Long-Term Incentive Plan

You need a management team that will stay through and after a sale. But do not give them equity. Equity complicates the sale process and dilutes your ownership.

Instead, create a long-term incentive plan. Each year, set aside a bonus amount for each key manager in a special account. After three years, let them withdraw one-third of the balance annually. If they leave, they walk away from a significant pile of money.

You can also add a one-time bonus that gets deposited when the company sells. This aligns your managers with the sale instead of against it.

Warrillow shares a painful story about a general manager he calls Jim. Jim got 12% of profits below $200,000 and 20% above that. Great arrangement. Until Warrillow decided to sell and needed long-term contracts with clients, which would reduce short-term profits, and therefore Jim’s bonus. Jim fought against every strategic decision. Eventually they split, and Warrillow had to delay selling by a year to repair client and employee relationships.

The incentive plan fixes this. Managers think long-term because their money vests long-term.

Step 6: Find a Broker

If your company has under $2 million in sales, use a business broker. Over $2 million, use a boutique M&A firm. Either way, find someone who specializes in your industry. They already know the buyers.

Your broker should understand that you have built something special. If they treat you like every other commoditized service provider, find someone else.

Warrillow’s warning here is real. He interviewed three M&A firms in Manhattan. The last one got excited and said “I know just the company to buy your business.” Sounds great, right? But at the dinner to meet the potential buyer, Warrillow realized his broker and the buyer were old friends. The broker earned most of his fees buying companies for this buyer, not selling them. Warrillow was being delivered as a gift, not represented as a client.

He fired that broker the next day.

Ask other entrepreneurs who have sold companies for broker recommendations. And make sure your broker is working for you, not for the buyer.

Step 7: Tell Your Management Team

Once your broker finds prospective buyers, you will need your management team for presentations. That means telling them you are selling.

This is stressful for everyone. Your managers will worry about their jobs, their routines, their futures. Make sure there is something in it for them. Career opportunities with a bigger company can help. A success bonus deposited into their long-term incentive plan helps more.

Warrillow also talks about building a “moat” around your business. This matters because if your business is just people selling their time, every trained employee is a flight risk. They can leave and compete with you.

A moat is something that takes years or millions to replicate. Some examples:

• Own the ranking study in your category. Interbrand owns brand equity rankings.
• Own the awards program. Ernst and Young created Entrepreneur of the Year.
• Own the industry event. Allen and Co. runs the Sun Valley media conference.
• Own the benchmark. Bain owns the Net Promoter Score database.

A moat protects you from competitors and from your own employees. Build one before you sell.

Step 8: Convert Offers to a Binding Deal

If the management presentations go well, you will get letters of intent. An LOI is not a firm offer. The buyer can still walk away.

Important things about the LOI:

• Your broker will push you to accept. They get paid only if the deal closes. Study the offer yourself.
• There will probably be an earn-out. This is money tied to hitting targets after the sale. Treat it as a bonus, not as part of the price. Most business owners have bad earn-out stories. If you need the earn-out to feel good about the deal, the deal is not good enough.
• Due diligence will last 60 to 90 days. It is not fun. Professional buyers will send MBA types to find every weakness in your business. Do not lie. Do not hide things. Just survive it.

Warrillow lists four tricks acquirers use during due diligence to figure out how dependent the business is on you:

1. Changing meeting times last minute. If you cannot accommodate, they wonder what part of the business requires you personally.
2. Asking employees about your vision. If your team gives different answers than you, the future lives only in your head.
3. Talking to your customers. If customers say they buy because of you personally, that is bad. If they talk about your product or company, that is good.
4. Mystery shopping. They may pretend to be a customer before you even know they are interested.

After due diligence, the offer will probably be reduced. Expect it. If the reduced amount still meets your target for cash up front, sign. If it does not, walk away. No matter what the buyer promises about the earn-out.

My Thoughts on This Guide

I have seen businesses sold in IT. I have seen the good ones and the ugly ones. Warrillow’s eight steps match what I have observed over 20 years.

The steps that matter most, in my experience, are Step 1 and Step 4. Finding your scalable thing and then having the discipline to stop doing everything else. Most business owners can figure out Steps 6 through 8 because that is just following a process with professional help. But Steps 1 and 4 require you to change who you are as a business owner. That is the hard part.

The recurring revenue ladder is something I wish I had seen earlier in my career. Every business I have worked with that was worth real money had some form of recurring revenue. Every business that struggled to sell was doing one-off projects.

One more thing. Warrillow mentions that many owners reach the two-year mark after Step 4 and decide not to sell at all. The business is running well, cash flows, stress is down. They just keep going. That is not failure. That is actually the best outcome. You built something that works without you, and you still own it.

Whether you sell or keep, these eight steps build a better business. That is what makes this guide practical and not just theoretical.

Previous: Chapter 14 - Crossing the Finish Line Next: Ted’s Best Tips All posts in this series: Built to Sell