Waterfall in Aix-en-Provence, France. (Photo: Mat3270)
“Didn’t you write that you believed BrainQUICKEN couldn’t be sold?”
The question — a common one — was from writer John Warrillow and for an article in Inc. Magazine.
The embarrassing answer was “yes.” In 2005, I had assumed it was impossible to sell my then start-up and, as with most assumptions, I was dead wrong. I sold BrainQUICKEN in 2009 and learned volumes in the process.
For example: counter to expectations, I ended up caring more about lack of strings than maximizing price…
Several chess moves into price negotiation, after the suitor and I had arrived within 10% of each other, I offered to reduce the asking price 20% in exchange for the elimination of most “reps and warranties.” This would give me a clean break, financially and emotionally, and it would dramatically speed up the sales process. I don’t regret that apparent “concession” and would make the same decision in a heartbeat. If I’d been tied to the business, I doubt The 4-Hour Body would have been written.
Lessons learned, part deux: branding and customer databases are sometimes worth as much as defensible “hard” intellectual property. This realization eluded me for years, and in retrospect, it was ridiculous self-denial. Trademarks and distribution relationships can be sold at a handsome profit, both of which I’d undervalued, blinded by my own hands-in-the-air resignation related to lack of patents.
John, on the other hand, provides the contrast. He has dodged these bullets multiple times, and done so by design.
John, you see, does more than write. He has started and successfully exited four companies, most recently a subscription-based research business sold to a publicly traded company in 2008.
From the standpoint of lifestyle design, John lives in Aix-en-Provence where he’s struggling to master French, “despite listening to more Michel Thomas than any one man should have to endure.” He’s built a location-independent life full of adventure for his family, rather than signing on to miserable consulting gigs or “earn-outs” pegged to acquirers.
How does he do it?
Moreover, how do you ensure your start-up or muse is sellable from the outset? Is it possible to create something “built to sell”?
That’s what this post hopes to answer, and it will discuss the recipe John has used for himself.
Enter John Warrillow.
How to Turn Your Muse into a Sellable Company
When I first heard Tim had sold his muse, I was intrigued. Here was the swashbuckling lifestyle designer who has told us all to create a muse to finance our new lifestyle, and yet he was selling his.
I had to know more, so I interviewed Tim for a column I write for Inc. He explained: “Even though BrainQUICKEN was only taking a couple of hours a week to run, it felt like my brain was constantly running antivirus software, and I wanted to free up those cycles to think about other things.”
If creating a muse gets you into the Lifestyle Olympics, building a muse you can sell gets you a gold medal. In this post, I’m going to talk about how you can turn your muse into a sellable company so that you have the world by the tail: you can sleep well at night knowing you’re sitting on a valuable asset, indulge in Ferriss-like “mini-retirements” while your business spits off cash and, when you’re ready, sell your muse to a third party—because, as Tim will tell you, the only thing better than a low-maintenance muse generating cash to fund your lifestyle is a no-maintenance bank account doing the same.
Turning your muse into a sellable company
I’m going to define a “sellable business” as one that is not dependent on you to thrive. For anyone to want to buy it, your business has to be valuable even after you’ve left. I’m also going to assume you have a muse up and running. If not, refer back to Tim’s advice for creating a muse in The 4-Hour Workweek.
The first step in turning your muse into a sellable business is to reengineer your offering to ensure it meets three criteria important to acquirers:
1. It’s teachable
You need to be able to teach employees or suppliers (or be able to program technology) to do most of the work. That means the delivery of your product or service can’t be dependent on you showing up. If you have developed a yoga DVD and teach yoga classes, you can probably teach others to fulfill DVD orders, but your yoga classes need you. To create a sellable muse, focus on the part of your muse that can run without you.
2. It’s valuable
To create a sellable company, you need to have something others couldn’t easily replicate, which means you need to find a quiet niche without a lot of competition. Recently Tim highlighted Guerrilla Drum Making as a muse that provides customers a video on how to make a drum kit out of everyday products available at Home Depot. While there are a ton of on- and offline music stores, Guerrilla Drum Making has carved out a unique spot in the musical instrument market by helping handy parents and aspiring musicians build a drum kit that is both professional-looking and unique. It’s a nice little niche, one that will allow the owner to control how he gets paid, which is critical to increasing the overall value of a business—more on that in a minute.
3. It’s repeatable
The hardest yet most important part of turning your muse into a sellable company is building a recurring revenue model. When potential acquirers look at your muse, they’re going to want to understand how revenue is going to come in after you are gone. There are six basic models of recurring revenue. In order of least to most valuable in the eyes of an acquirer, they are as follows:
– Consumables: Tim highlighted Hewley shampoo in a recent post. This is a classic “consumable” product since most people need to buy a new bottle of shampoo every month or so. Once customers become loyal to a brand, the company begins to enjoy some recurring revenue.
– “Sunk-Money” Consumables: When you buy a Gillette Sensor razor, you’re much more likely to buy a five-pack of Gillette Sensor blades every month than to buy another brand because you have “sunk money” into the razor and have become invested in a platform.
– Renewable Subscriptions: More valuable than simple consumables in the eyes of an acquirer are subscriptions. In this video of Tim highlighting successful muses, he mentions Everyday Genius, where customers pay first and then get the product over the life of the subscription. Acquirers prefer the predictable nature of subscription revenue over the consumable model of recurring revenue.
– “Sunk-Money” Renewable Subscriptions: A muse ascends to the next rung on the value ladder when customers make an investment to become subscribers. I recently bought an Apple TV box and a $9.99/month Netflix subscription. I’m more likely to renew my Netflix subscription because I have sunk money into the Apple decoder.
– Automatic-Renewal Subscriptions: As valuable as a subscription muse is, an auto-renewal subscription business that has the right to bill customers until they say stop is even better. Unlike a traditional magazine subscription, an auto-renewal subscription means subscribers don’t have to make a conscious re-up decision each year, so the business is more likely to keep them around longer. For example, when you store documents with Iron Mountain, it just keeps billing you until you say stop.
– Contracts: The most valuable form of revenue is guaranteed into the future in the form of a contract. If you are lucky enough to get long-term contracts from your customers, include a “survivor clause” in them to ensure that the customer’s obligations “survive” a change in ownership of your company.
Think of the recurring revenue model as a ladder you want to climb to get the highest possible price for your muse when you’re ready to sell.
Once you have developed a recurring revenue model for your niche product or service that can be delivered without your involvement, the next step in getting the highest price for your muse is to rework your cash flow model so that your business stops sucking cash and instead starts blowing it out.
Here’s why: When acquirers buy your business, they need to write two checks: one to you and a second to fund your muse’s “working capital,” the everyday cash your business needs to meet its immediate expenses. The smaller the check they need to write for working capital, the larger the check they’re willing to write you for the purchase.
You want to change a negative cash flow cycle into a positive cash flow cycle. If you’re paying for inventory before you sell it, your company has a negative cash flow cycle. Try to shift your model so you charge up front or on a subscription basis so that your business generates cash as it grows. This will make it more valuable when you sell it.
Track your statistics like Joe Mauer
In March 2010, Joe Mauer of the Minnesota Twins signed a contract that will pay him $184 million over the next eight years, making him one of the best-paid athletes of all time. One of the amazing things about Mauer is he combines two attributes rarely found in one player: a knack for both getting on base and hitting for power. The combination of these skills is expressed in a statistic called on-base plus slugging (OPS), which merges on-base percentage and slugging percentage—in Mauer’s case, an almost unheard-of 1.031 during contract negotiations. Mauer’s OPS—along with his three Gold Glove Awards and three batting titles—helped his agent Ron Shapiro sell Mauer’s value.
When you go to sell your business, like Mauer, you will need a set of statistics that will help make the case for how valuable your company is in the hands of someone else. Tim has hammered us on this blog about the importance of metrics when growing your muse, so here are a couple of others to track as you shift your muse to the status of “sellable.”
– Addressable Market Size: How many people in your geographic market buy what you sell? For example, let’s say you have developed an English-language subscription for a yoga DVD series that is easy to ship within the United States. Your customers get four new instructional yoga DVDs per year, and you charge $99 annually. If three million Americans participate in yoga at least once per year, you could argue that your addressable market is three million people.
– Market Penetration Rate: What proportion of the target market have you sopped up, and how much is left for the potential acquirer to go after? Let’s say you have sold 3,000 subscriptions since you started your yoga DVD muse. Therefore, your market penetration rate is 0.1%, and an acquirer would realize there is still plenty of field left to plow.
– Cost per Customer Acquired: How much does it cost you to acquire a new customer? Cost per customer acquired further breaks down into cost per lead and your conversion rate. For example, let’s say it costs you $8 to get a lead from Google Adwords, and for every three leads you get, you close one subscription. In this example, your cost per lead is $8 and your conversion rate is 33%, so your cost per customer acquired is $24.
Think about what your business is worth in another’s hands
These statistics become the raw material you need to make the case of what your business will be worth in the hands of an acquirer. For example, let’s imagine a hypothetical magazine called Fit Girl has 800,000 subscribers. The publisher has heard about your yoga DVD subscription and is keen to diversify Fit Girl’s revenue away from the traditional magazine business. She calls you to see if you’re interested in selling your business.
Along with figuring out what she thinks your business is worth on the open market, she is also going to estimate what your business is worth to Fit Girl by making some assumption using the numbers you have been tracking:
– If 1% of the U.S. population likes yoga (your 3 million market size divided by the total U.S. population), then chances are at least 1% of Fit Girl subscribers—physically fit women—are into yoga. In fact, given the readership, Fit Girl might conservatively project its total immediate market for your DVD series to be more like 2% of 800,000, amounting to 16,000 subscribers.
– If you’re picking up subscribers through Adwords for $24 each without your brand being a household name, Fit Girl will reasonably assume it can do at least as well with the power of its name. So the publisher might conservatively use your $24 cost per customer acquired to model out what her cost will be to get the 16,000 subscribers: $24 x 16,000 = $384,000.
In this hypothetical example, Fit Girl would conservatively pick up $1,584,000 worth of subscription revenue at a minimum. And if the stock market is valuing magazine companies at two times their revenue, buying your DVD series would give Fit Girl an easy $3,168,000 ($1,584,000 x 2) bump in market capitalization, which might lead to how the publisher would think about what your business is worth in her hands.
Acquirers will, of course, want to use low-ball industry comparables to value your company. To get the highest price for your business, you’ll have to use your statistics to paint the picture of what the business is worth to them.
The last question you need to answer
With a recurring revenue model for your niche product, you’ll be in a position to sell your muse. The only question left to answer is: when?
That’s a toughie, and only you can answer.
Maybe you’ll run your muse for years, indulging in amazing travel knowing you could sell when you’re ready. That’s a powerful position to be in. Maybe you’ll decide that, even though your muse is profitable and low stress, it is worth more to someone else than it is to you—which is when you’ll get the highest price for your business and minimize a soul-crushing earn-out.
Having all the cards in your hands starts by transforming your muse into a sellable company.
Welcome to the Lifestyle Olympics. Who’s shooting for the podium?
John Warrillow is the author of Built To Sell: Creating A Business That Can Thrive Without You to be released by Portfolio/Penguin on April 28, 2011.
You can take his “Sellability Index Quiz” to find out how much your business is worth at www.BuiltToSell.com.
The Tim Ferriss Show is one of the most popular podcasts in the world with more than 900 million downloads. It has been selected for "Best of Apple Podcasts" three times, it is often the #1 interview podcast across all of Apple Podcasts, and it's been ranked #1 out of 400,000+ podcasts on many occasions. To listen to any of the past episodes for free, check out this page.
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108 Replies to “Built to Sell — Making Your Company Sellable”
There are no books about this very topic. Time for someone to write one.
…. What about “Built to Sell,” the book written by the author of this post?
oops, i mean its about time!
Great post Tim & John! And timely, as I am putting the final touches on an expansion program to my business which will remove me from the day-to-day operations and make it ‘repeatable’.
I like the thought-provoking questions and statistic calculations examples.
Great Michelle, good luck
Awesome! It’s good to start with the end in mind.
Another awesome post Tim! And it’s funny that I just finished “The Monk And The Riddle” after you recommended it in the 4HWW and here we’re talking about some of the same issues. One question: isn’t this a lot like what “Lenny” was trying to do in that book? If not, how is it different?
Great question. The Monk and the Riddle is a great book. Lenny was trying to scale up and sell at any cost. A Built to Sell business is different. It has repeat, happy customers which is the key. Lenny was trying to build and flip without really creating anything of value.
Thanks John! That helped me understand it much better.
The teachable part is what I find hardest. What I find very easy, most other’s find very hard. This is good in a way because it discourages competition and may drive the selling price up.
Another Great Post Tim!
This just really goes to show how much more important execution is than the initial idea. A fantastic idea will get you some press, maybe some one-time paying customers, maybe a profit! But recurring business is what makes a valuable business.
It’s so easy to get fired up by an idea and forget about the fact that you’ll actually need a way to make money for it to be valuable at all.
Drew: so true. “One percent inspiration, ninety nine percent perspiration” (don’t know who said it but it is so true)
John, funny you say that! I recently found a blog all about the 99 percent perspiration. I have no affiliation with the blog or anything; I simply feel Tim’s readership would benefit from this information. All about taking ideas to reality.
As for recurring revenue, I am in the process of developing my first muse and I have the fantastic idea, like Drew mentions. However, I have not had the epiphany for how I will turn the business model into one with recurring revenues. I’m glad to have read this post. You reminded me how important it is not only to win customers but also keep them coming back.
So the gears in my brain continue to turn…
I think the quote is by Thomas Edison.
Good stuff I am working on my first book and third business. What I have learned along the way you can’t put a price on.
Making sure the muse doesn’t depend on one person is key. It’s a common mistake to see that a business is solely based on one person and his/her brand, which makes it very hard to sell the business.
Also, from my own experience, most companies aren’t tracking their data properly. If they don’t know what the cost is per new customer, they are missing out on very important data.
One thing that isn’t mentioned in this post is brand power. How does that affect the “sell-ability” of a company / muse? I know it’s a tough thing to quantify, but I would love to hear others opinion on this.
Brands are valuable if customers show an interest in purchasing things because of the brand. For example, Harley Davidson can plaster their logo on anything and someone will buy it makes the Harley logo — and company — valuable.
Great article, bookmarked for future reference.
Another book that might interest you is Strategic Entrepreneurism, by Jon Fisher. It comes at this from a slightly different but complimentary angle: building a business with selling it as an up front exit strategy. How to build a business with a specific buyer / buyers in mind. How to craft a business from day 1, so that it is designed to be sold to another company.
PS. While I have no vested interest in the book myself, in full disclosure, Jon Fisher is a friend of mine.
Given to your experience with BRAINQUICKEN, were you ever tempted to just press rinse and repeat and create another muse like it? I’m guessing you could immediately due to non-competition regs in the contract you signed to the buyer and now you wouldn’t because of the book. But still, did the thought ever cross your mind?
I think one thing that is missing is the legal aspect. I recently went to a lecture that discussed how many businesses in the beginning to not keep track of their paper work well. Also, sometimes the right documents are not filed which makes selling the company more difficult when that time comes several years later. Great post though!
What an amazing layout of the formula. I wonder, as I develop my next muse, if I should start to lay these ideas out before I get any further with it. Maybe that’s an investment of time that tells me if I should invest further in developing it…
Awesome post buddy. Clarified so many questions that never would have occurred to me. You answered questions I wasn’t knowledgeable enough to ask yet.
This is great! I’ve always wondered about this issue and worried that I might build some dumb issue in as I built a company. Thanks for another awesome article.
Easily one of the best posts I’ve read on this blog. Was already thinking about the next exciting step!
Great post that every small business owner should read. The “adventure” of starting your own business can often become the “trap” that never lets you out. John’s advice is excellent to remind us that we should build with the aim of selling. Even if you don’t sell you will have a business that is less demanding on your time and more lifestyle friendly.
Some valid points for the aspiring or even seasoned business owner. What springs to mind is how do you get into the groove of keeping your company profitable thus sell-able while exerting minimal effort? If this is not possible is it even feasible to sell? Also, since i’ve never sold a business, i wouldn’t know this, but that personally fulfilling concept of building something from scratch….and letting it go….beyond monetary value, won’t it eat at you?
Regarding the personal fulfillment issue, i think of it like parenting: my goal as a dad is to create kids who can fend for themselves one day. When you sell a business, you get that satisfying feeling of knowing you have brought up something that can low be self sufficient.
Another great blog post! I love the idea of repeating the process once you find success vs. reinventing the wheel.
Although I am still building up the branding for my books, I am expanding the offerings and looking to add to the sale after the purchase of the book(s). Your blogs have been a huge part of my success, and I can’t thank you enough for all the advice.
I wish I had the means to attend the Open Kimono event coming up, but at the moment, I need to get a little closer to your sales rank on Amazon before I can take advantage of that. I hope you offer something similar in the future.
I am waiting to hear if I manage to win another Independent Publisher Award this year. I guess I find small colsolation that I have this one over you. But trust me, I’d rather have a fat publisher contract than the medal hanging in my living room. 🙂
Independent Publiher Award winner
I always appreciate the insight and the levelof expertise that you and your guest bloggers bring to the table. It is invaluable to have this insight as I continue to grow my own brand and business.
I had hopes growing up on a combined on base percentage and slugging percentage that would command one of the largest contracts in sports, but alas the genetics were not there to support the dreams. So, I will have to do it the old fashioned way: hard work and a brilliant idea.
Since my books are a new concept for their genre, and being a male author in a largely female genre, I think I have found a niche in which making a mark is possible. I appreciate the insight your books and blog have provided; I use your advice often.
2010 IPPY Award winning author
I really like the points on ‘cost per customer aquired’ – very important to think about I guess…something I haven’t done yet!!
Tim, thank you so much for your continued efforts at clarifying and adding to the body of work you created with 4HWW – it is this ongoing communication that makes you so special. The hints, tips and interviews you come up with are incredibly helpful and motivational because it helps show that success does indeed leave clues. Thanks again for the value you add!
Thanks for this post Tim. I swear each blog post is more informative and evergreen than the last.
I find this advice particularly relevant to me as my fully-automated online company, selling legal contracts and will kits, is reaching a point where I’d like to make a sale. This entire post will be completely invaluable to me as I undertake that process. Thank you
Nice post Tim 🙂 Straightforward and to the point.
Why has nobody so much as mentioned the famous book on this topic? I read “The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It” and it covers everything here and then some.
Wow, great timing, I am going through the process of structuring my business as we speak. Thanks John/Tim. Plenty of notes taken!
Tim and John,
Great article. Clear and well explained.
Except for the fact that you left something out. My muse does not fit a recurring revenue model. It is a physical object that you buy once and use for a lifetime.
Would that make my business unsellable? I suspect not. How would this type of business be structured for sale?
Thanks in advance.
Not an expert, but do you have upsell, cross-sell, or backend sale opportunities?
I’m sure that this would increase your sales AND your company valuation overnight.
I’m not SUPER knowledgeable on the subject, But I know the great marketer Jay Abraham considers the customer of “Lifetime customer value” to his most profound marketing concept.
Is there now way to make your company more than a 1 shot sale?
There it is. Great answer.
You’ve just helped me define my approach. Ever since I wrote the original question yesterday I’ve been pondering the larger question, “why buy my product?” I am beginning to see that the object itself is just a beginning.
Support for the object and a venue for people to meet who purchase and use it is going to be of tremendous value.
I completely agree with Logan. Maybe you could find a way to morph your business/ idea into the “Sunk Money” type model. They’ve already dropped cash for your product that lasts a lifetime, now sell them additional products or services that revolve around your original product.
When I had my restaurant I bought a Register system that promised to upgrade my system if it ever had a problem (lifetime guarantee), when I out grew the old system I’d have to buy a new system (up selling). They had recurring subscription revenue because they’d offer tech support at a ridiculous $/hr amount or I’d buy into a tech support plan yearly that had unlimited hours. A quite brilliant business model I thought.
Just a few thoughts, thanks for your comments! (you too Logan) I learn almost as much from the comments as the posts.
New book by Tim : 4-Hour Company? 4-Hour Start-up? 4-Hour Entrepreneur?
I would read this right away. How does he do it all?
I think it’s important to distinguish between sale-able and ‘built-to-sell’. Many businesses fail not because the underlying premise is bad, but because there is way too much premature focus on the take-out and far less on the business model. Love the points about making the process simple, learn-able, etc. but, in my experience, when the basics are right and the $s are pouring in, the end play suddenly appears.
Keep up the great work Tim. I hope to see you in wine country!
The thoughts of selling a muse are the next step in the 4HWW. From niche lifestyle financial support to actually selling the muse is a concept gladly seen on this blog. Will there be a seminar with the two of you on this topic in the fall?
John I like your point of selling a muse similar to being a parent. When sold you get the pleasure of knowing your creation can run on its own with you being in the picture.
Thanks Len. Yes, I’m running a worksop for 16 readers in September in Chicago. Check my website next week for details.
Very interesting stuff…
Tim can I get a ‘muse’ consultation for my website?
I don’t plan to sell now… but I’m in a position where I think each of my customers (though tough to acquire), once acquired, is worth 10x to people downstream of me in the business and there must be some way to capitalize on that either by structuring my assets as an acquisition target or working on bus. dev and joint ventures to make some sort of rev split.
Just to add that it is bucket loads easier to start out with a sellable model than to have to change your business model once you are up and running.
I’ll be buying John’s book to make sure I don’t make any more mistakes next time.
Good post, the creation and selling of business — even ideas can be a profitable business (or muse) in and of itself.
Great post! Thanks 🙂 I’ll be checking the book out of the library.
Hi Tim, Mr. John and the world
I’m like ‘Wow dude! There’s the idea for your muse!’. On-line market research may just prove doable for me … need to research (sic!) more on the subject.
Another great post, another great author, another great collection of valuables. You guys are amazing!
Thank you very much! Keep up the good work and never let us give up!
“If I’d been tied to the business, I doubt The 4-Hour Body would have been written”
Why? Didn’t the business require only four hours a week?
Totally agree — thank you for good post. ***To create a sellable company, you need to have something others couldn’t easily replicate, which means you need to find a quiet niche without a lot of competition.***
The real key here is to create a recurring subscription model. Many people I have talked tend to focus on the single sale when the real leverage power begins to appear in the passive income. Once your brand or service has proven its value to your niche that is when the real autopilot really gets switched on.
I think the hard part for the average person is trying to figure out what they have to offer – if anything at all – and what they could possibly produce of unique value. How many weight loss gurus and programs does the public actually need?
It took me a couple of years of *entrepreneurial block* to come up with my muse.
Great Post Tim & John.
Looking forward to reading Built to Sell.
I am very interested in the work/live abroad lifestyle. For those of you out there who are already working abroad, what were you biggest logistical problems (for both business and living)? I’d like to find anything I might over look when I make the jump.
Thanks. We focused on making sure our kids were happy and making friends. Once they were settled, it made it a lot easier for us to enjoy.
Also, if you are moving anywhere in Europe, buy a scooter. It’s the only way to navigate the traffic any tiny roads!
Best of luck!
Im a succesful chiropractor , I love what i do make a great income on 13.5 hours a week . I have trouble geeting away for long periods of time . when i leave the practices tends to drop because my associate dr is not as effective at communications as i am . how do i do mini retirements when im the product?
Amazingly good content at a perfect time. I just ordered the book for Kindle when its released. This should be the first primer in any truly great class on Entrepreneurship. Is there anywhere where you detail the businesses you’ve built and sold, i’d love to hear the stories!
Thanks. I write about my experiences and war stories in Built to Sell so you should be all set. Thx again for your note.
From what I know of several people that had their own business; the real money came after they sold it.
One of them got over $10 million for his electronics distribution company and he was still able to keep ownership of the warehouse where he get’s $26K in rent monthly. Sweet Deal.
Great post! I love learning about creating new muses and how to leverage your muse. How do you leverage a muse that is a software product? Something similar to the 4-Hour Template? Should something like this be a subscription based model or a one-time purchase model?
Whenever possible, opt for a subscription model like Salesforce.com or Constant Contact; nothing beats the annuity revenue of a monthly fee. This assumes of course your customer needs and values your product on an ongoing basis. Best of luck
I’ve read Tim’s stuff so give me your take. How do you find a niche market to tackle? Are there a series of questions you typically ask yourself that lead you to an idea, or do they attack you spontaneously?
Gotta run, tornado sirens going off 😛
I like focusing on what you would buy yourself. For example, if you are a surfer, what products do you buy that suck (either too expenses, don’t work right or too hard to find). Make a list of ideas and then score them all against the “Teachable, Sellable Repeatable” tri-fecta. Good luck.
Good God! Great post..
My only problem is I’ve got 1 muse which is not yet automated although I only spend a few hours a week on it; but I’ve got like 4-5 other potential muses I want to get started on!
I wish there was 4 of me and the copies of me could share information and experiences learned… Imagine the things I could do..
I don’t fully understand how you square your estimate of 2 hours a week working on your muse whilst at the same time explaining “If I’d been tied to the business, I doubt The 4-Hour Body would have been written.”
Hey Jim, I think he means that it has more to do with mental cycles then hours worked. I’m the same way, my business takes < 4 hours/week to run and provide my income, but that doesn't mean I'm not thinking about it much more often then that. In order to clear your mind and focus on a new time consuming project you sometimes have to clear your mental buffer 🙂
Along the same lines, check out Michael Gerber’s “The E-Myth Revisited” for a great primer on building a business that runs on systems without your intervention.
Nice blog Tim! I never get bored listening to that bit on your audio book!!!! m/
This is definitely something I’ve been thinking about.. i really have been tracking the actual value of my site, and consider at sometime, what I want to sell it for. Thanks for putting this post together.
Makes me want to start-up something just to sell!
How about expenses… do you suggest cutting back on travel, meals and other quasi business expenses in an effort to strengthen the financial statements? If so, start cutting them 1 year before attempting to sell?
Yup, strip out any unnecessary expenses; one year is good but two or three would be even better (most buyers look at three year’s past performance)
Having completed over $750+ million in Mergers and Acquisitions transactions successfully (and seen at least that much worth fall apart from a wide range of issues), this is a very interesting post for me. Exit strategies is something that many business owners, particularly small business owners, don’t think about until they are ready to exit the business, which can leave significant value on the table.
It’s crticial to begin thinking about an exit many years before you actually plan to exit the business to get your “house” in order and to maximize value. One thing to think about as you expand your product and service offerings is “who is the likely buyer?”. If it’s a strategic buyer, you want to make sure that your services or products aren’t in too many different niches, verticals or distribution channels as only pieces may be attractive to certain buyers (e.g. a healthcare focused company may not want to acquire a consulting business that does healthcare, financial services and retail consulting). This can mean your business isn’t sellable at all, or that you have the difficult task of trying to piece out the business to more than one buyer.
There are some compelling nuggets in this post and some sage advice. Do keep in mind that selling a business is an art, not a science and both parties (the buyer and seller) factor into the equation.
I hope this is a topic that continues to have dialogue around it.
Two important points in this post for me:
1. Your customer database is an asset. Once I finally “got” this concept, I’ve been able to turn my list into a cash generating machine.
2. Remove yourself as a bottleneck. Systems are more scalable and can stand the test of time better than any one “personality” or “business philosophy”.
Thanks for the post. Definitely a good tip in building something with exit in mind. (even if we don’t eventually, it is good to know that we can get out if we want to ). Like many people said, a book can be written on the subject. 🙂
Hi Tim and John
Thanks for the info on “making your company sellable”
I’ve just taken the Sellability index quiz – scored 42 however I’m not ready to sell my business yet (still growing and refining systems).
I would however like to submit a summary of my business for use as a potential case study (if you ever need any).
Niche market: Downloadable freestyle snowboarding tutorials
Recurring revenue model: Automatic-renewable subscriptions (yearly)
Not sure of the correct emails to use so I’ve sent them to the following:
Tim – amy (at) fourhourworkweek.com
John – John (at) BuiltToSell.com
I know both you guys and your assistants are busy so I’m not fussed if you don’t get the chance to reply. If there’s a better email address to send this to then please let me know.
My girlfriend and I are off on June 1st for a 5 month mini-retirement to South East Asia – our first mini-retirement. Made possible through Tim’s book.
I have just pre-ordered the kindle version of Built To Sell to read while away.
Look forward to meeting you sometime in the near future.
Sounds like you have a great business. You have my email address correct. Have fun in “retirement”
One of the muses that I am working on is going to need some angel capital to boost production capacity. Your input on market segments and size is very help.
Speaking of “Guerrilla Drum Making”…
I saw the case study posted here for about two hours then it was taken down… any chance that will be expanded on?
It closely resembles what I am trying to do (a narrow niche DVD- nothing to do with drums) and would love to soak up any how-to advise to get it going.
This is great stuff….keep coming Tim!
Just want to compliment John on the test (sellability index) http://www.builttosell.com/siq/.
I took it and got a 29. My business partner took the test and got a 23. Looks like we need to talk.
That’s impressive Nev,
Scored a 34 here… though I’m not happy with where the business is right now, maybe by the end of 2011 I’ll have more inspring stuff to share
So much to do …
The part about how to value a company is invaluable. I’m terrible at math so if someone did write a book about this and teach simple ways to do the math, I’d buy it.
Intergalactically awesome post!!! I’m still new to this game – in the process of finding my muse, but it sure helps to start with the end in mind!! Thanks again Tim and John…
Thanks Steve, I’ve never had an “Intergalactic”! Love it!
Thanks for the insight. The thought of selling your muse business for a large profit is very enticing. Keeping it as low maintenance and high return as possible does increase it’s value, especially if it cost very little money to run.
Hi Tim and John, great post. It is true that you can teach people to do the work for you which you know can work without you being there. In that way, you can be efficient with your time. I also like how you say track your statistics, in that way you know who are you targeted locations and audience. And lastly, will the business work if your out of it.
I think if you are going to build it to sell, or even have the thought of it at some point, then every time you build a new system for your business, add a new product, sell in a different way, whatever the case may be, you need to see if the decision you are about to make will keep you on track for building a sellable business. If the new business rule doesnt fit the guidelines, then maybe you should figure out a different way to accomplish the milestone, keeping the end goal in mind.
Does anyone know if Tim has any speaking events scheduled in the SF Bay Area. Can you share a source where I might find such local events?
Tim just discovered you from NT Times article Wow! Can you do us all a favor and write about Soy how it is estrogenizing men and making women fat…it’s in everything now including a lot of normally good supplements who should know better..Soy, sunflower, chamomile and lavender (I love those last two very upset about this) and pomegranites are hormone disrupters and there are others but soy is in everything big business. They are asking why girls are going into puberty at 7 and why men are being wimped out and feminized..SOY. Soy is big business. Read the book “The Whole Soy Story” and get this doctor to explain..She is up against a huge corporate conglomerate and the word is slowly coming out… Silk Soy milk goes down so smooth..it packs big weight on women and God knows what it is doing to our men!! Please be vocal and get people to stop Soy consumption!
Lisa (Soy Protein, Hydrolyzed Soy Soy Lecithin, Lecithan, Phosphodtytal Serine, Vitamin E in most forms sneaky)
Just finished doing my prelim layout of a projected muse when I read this. Having made many many products for others (three usa patents – should have been more) and deciding that I needed one or more for myself I found that I laid it out just as shown in this article. I am not a direct expert in this field but I have designed equipment for it and worked with the experts directly and at trade shows. My real expertise (other than creating fantastic products) is creating teams that work extremely well together and produce breakthru products on or under schedule and budget.
large highly active nitch market- def in the thousands
-heavy online, social media, and print media coverage. thousands of sites, a hundred or more print resources
-no competitor listed online or in print media classifieds or articles so currently virgin muse
-custom software required -use is for entry user to pro. This will also give the pros their own nitch to create a remote biz since the physical equipment is huge and expensive
-can be promoted synergisticly with existing companies at little or no cash out
-can be 100% outsourced
-no cultural bias in the product so foreign expansion is just translation
-foreign market appox equal tho a little less then usa for proportional population
-free and bonus features easy to develop as a draw to site and subscription
-a physical product can also be offered
The structure can then be used to create a second muse as a sister product. This one has all the same features as the original however the population is not as great and is more spread out in accessablilty. However that population covers a wider cultural dynamic then the original so has a wider base but more work to contact. It is just as outsource-able as the original and can be accessed anywhere there is internet for use and running the biz.
After the bottom dropped out of engineering I was left with little more than survival funds so I will not be able to develop this on my own. There is a couple of angel clubs in the area so I am going to drop in on them.
I’ve got a start-up company idea that im interested in persuing. Is there a market for start-up company ideas? can i get funding for the company through any means? Are there ways to get collaboration for the company?
new to the lifestyle design concept. Still getting use to the temperature of the water..
You may want to check out start up events like “Launch” or “Tech Stars” good luck
Nice post. I`m fat rightnow – but not any longer 😉
I was wondering if Tim/ 4 hour body and or followers know about the health supplement product PAGG by New Health Solutions is the real deal?? I was about to go out and buy all the ingredients and then I found this product.
Tim, I was talking to a business owner about the benefits of having that mid-level of management to make himself less important to the business. His reply was, “You want me to teach them how to run my business? So they can leave me and start competing against me? No thanks.”
I’m curious how you’d respond.
Tim, I tried your 30 lbs of fat in 20 days for a week, and gained 9 lbs! What should I do? I weiged myself on Monday and weighed 132 and then today, (my cheat day) I weighed 141 lbs. Is this because of my cheat day? What should I do?!?!
Nice. This was only a few hundred kilometers from where I cooked in France with a similar water feature—Le Source.
So I’m not one to beat around the bush. I’m a gluten free baker and chef and have been for nearly a decade. Have you ever experimented with or integrated a gluten free diet into your training? I just discovered you in the July issue of Outside, so if you have and I don’t know, this is why. I am curious nonetheless. With so many professional athletes opting out of gluten, I wanted to hear your thoughts on the matter. Thanks!
I like the line, “Think about what your business is worth in anothers hand.” I gather lots of significant learning here that I can add to in my real life. Very educational article! Two thumbs up! 🙂
Hi Tim & John,
great post! Always remember to focus on the main goal: Save time. Investing zero time for a muse is the best you can achieve, so sell your muse and let just your money work for you.
John’s book was a great read and I think as an entrepreneur the hardest thing about building a company to sell is the letting go part of letting the others do their job. As I have built my personal training business it took me at least a year until I decided to let go but it was the greatest thing I did because it allows you to sit back and think about what the big picture is.
This is such great advice. Years ago I mapped out a plan to sell our kitchen design business. Boy, was I naive. In that industry, you truly ARE the business. I should have gone into a different field years ago. Thanks for the article.
Really enjoyed this post, can I set it up so I receive an email every time there is a new post?
Each criteria in turning the muse into a “sellable” business is very important but I think it needs a lot of time and effort before say that we completely applied this things in our product.Thanks for this informative article Tim!
When you are trying to sell your muse, you have to make sure you are legally recognized to exclusive rights to creations of the mind. Selling though sometimes difficult especially when you are just starting. but when you are used to it, it won’t be difficult. Seeking help from experts like https://www.patexia.com/ip-research is not that bad at all.
Negative cash flow can be overcome with short term financing of inventory…. you pay the supplier with the proceeds of the loan. Then you repay the loan as you sell and collect your revenue.
Hello all, I’ve read the audiobook several times and am having a hard time trying to figure out when to quit my job as that would seem to be the only way to find the required amount of time to implement my creation of a product.
I have a few different ideas that I think could be very profitable in the eyewear industry.
The thing is I’m having to work a ton of overtime 6 days a week and commute to my new job 2 hours per day (zero time for my two boys or wife). The local optical laboratory I worked at for 25 years finally closed due to a competitor. I simply have no time for anything but trying to help my current lab dig out from the increased work in progress due to the Covid-19 backlog.
Any suggestions for first steps would be appreciated.
Any advice from people in similar scenarios would also be awesome.