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Saying Goodbye to a Golden Goose

This week in Built to Sell News we’re covering:

  • 7 reasons to sell a business that funds your lifestyle
  • Why sell a company with sticky customers? (listen now)
  • How a birthday helped one owner decide to sell
  • The Platinum Rule
  • The ultimate trophy for any business builder

🤔 Why Sell When You’re Making Good Money?

If you’ve built a successful business, deciding when to sell it can be gut-wrenching.  You’re making good money. You don’t need to sell and your business acts like a giant, tax-efficient slush fund to pay for just about anything you want to buy. Nobody likes living off their capital, so why on earth would you sell the goose that laid the golden egg? 

Fair question.

A business that cash flows well can be a great lifestyle enhancer, but there are still seven reasons you might want to sell a great business:

  1. You Never Know When The Music Will Stop

As an entrepreneur, you’re hard-wired to be optimistic. It’s in the gene pool. Why else would you start a business in the face of such long odds?  But your penchant for optimism also means that when you’re on a roll, you’re inclined to think it will last forever. As we found out in the months after the pandemic was announced, Lehman Brothers failed and airplanes flew into the Twin Towers, nothing lasts forever.  Not convinced? Just listen to Rand Fishkin explain how he lost $200 million by waiting too long to sell.

  1. You Are Breaking The First Rule of Investing

If you started your business from scratch, it didn’t amount to a significant portion of your net worth in the early days, but if you have been successful, your business may have become an outsized portion of your net worth and you may be unintentionally breaking the golden rule of investing: diversify. If your business makes up more than half of your net worth, you’re the equivalent of the blackjack player who is “all in” on every hand. That’s why Rory Fatt sold Royalty Rewards.

  1. ‘Heavy is The Head That Wears The Crown’

A while ago, John asked Tim Ferriss why he sold BrainQuicken despite the supplements business only took four hours per week to run. Tim explained that although his business largely ran itself, it did take up a disproportionate amount of his mental energy. Tim described the feeling as similar to operating a computer when the antivirus software starts using up available memory. You can do other things while it runs in the background, but it consumes a ton of mental energy. That’s one reason Jodie Cook sold her marketing agency even though it was running without her.

  1. Because You Own The Risk

You may have gotten your business to run well when you’re not around, but if something goes terribly wrong, you will likely inherit the mess. That means if someone gets hurt on the job or a customer cries foul, your name will be on the subpoena. For example, after a clerical error temporarily cost John Whiting the ability to process payments, he decided to sell his business.

  1. You’re Unconsciously Sabotaging It

In the early days, you were likely your company’s biggest asset. You supplied the capital and energy and took all of the risks. But if you’ve built a successful business, you may become more risk averse. It’s natural to want to conserve a good thing and if your company makes up the lion’s share of your net worth, it may be critical to preserving your lifestyle. But the more conservative you become, the less opportunity your company has to achieve its full potential. That’s one reason Laura Roeder sold her social media scheduling software, MeetEdgar.

  1. You Want The Best For Your People

If your employees feel like family, there may come a time when they need to fly the coop. Every day you stroll into the office, your team sees the top rung of the ladder inside your company. Your most ambitious employees need a bigger canvas to paint on, and selling your business to a larger enterprise gives them a chance to reach their potential. That’s one reason Natalie Nagele sold her business to Active Campaign last year.

  1. Business May Get Personal

If you have signed a personal guarantee to collateralize a business loan, you know the feeling of being beholden to a bank. No matter how long the odds, there is nothing more stressful than knowing that — if things go pair shaped — a bank can take your company and your home.

🍯 Why Sell a Company With Sticky Customers?

Speaking of selling a cash spigot, this week, we released John’s interview with Lori Morton. Lori built a software application that allowed property managers to have easy access to architectural drawings of the buildings they oversee. Lori started the business in 1998 and by 2022, she had lost just two customers in the life of her business. Why would Lori sell a business with such sticky customers? Listen Now.

🔧 Tools To Leverage if You’re Thinking of Selling

If you’re planning to hit the eject button, it’s a good idea to document your systems for the new buyer so they can run your business when you’re not there. VidGuide is the world’s best way to create Standard Operating procedures because your instructions pop-up inside the software you use to run your business. Grab a free, 7 day trial.

📽️ Clip of the Week

Here’s Lori describing how turning 60 impacted her decision to sell and which acquisition offer she picked.

🏆 The Ultimate Trophy for Any Business Builder

Post-company sale, Lori plans to immerse herself in woodworking in her new workshop, where she’s already built two tiny houses, a topic she elaborates on at the 56:35 mark in the episode.

📣 Quote of the Week

”  Treat others the way they like to be treated”.

–  Lori attributes her minimal customer loss over 24 years to the ‘Platinum Rule’—a variant of the Golden Rule emphasizing empathy, adaptability, and consideration of others’ perspectives.

Shout out to Barry Newkirk for nominating Lori. If you want to nominate a founder, you can do so here

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