Building a Company to Sell with John Warrillow

Build your business smart, and you can make a lot of money when you sell it.

In today’s episode of Business Lunch, host Roland Frasier sits down with John Warrillow, founder of ValueBuilder, author of three great books, and all-around good guy, to talk about building and selling businesses.

Each of his books is geared toward a different phase of your business. Built to Sell is for anyone feeling trapped in their business and shows you how to create a business that can thrive without you. The Automated Customer is for anyone looking for a recurring revenue stream. And The Art of Selling Your Business is for anyone on the last chapter of their entrepreneurial journey.

He also has an exclusive offer for Business Lunch listeners who want to apply the lessons from his latest book to their own businesses.

Listen in as Roland and John dig deep into how to build and sell your business well.

Building a Company You’ll Eventually Sell

John has a radio show called Built to Sell where he interviews a different entrepreneur each week about their exit strategy. He says there are a few dozen people out there playing at a higher level, out-maneuvering and outthinking the other side. They were the inspiration behind his most recent book. What tactics can we learn from these people? What mistakes can they help us avoid?

The biggest issue entrepreneurs face when they go to sell their business is: what do you want for it? John says if you put a super-high number out there, you’ll lose people before you even start the process. On the other hand, if your number is too low, you’re cheating yourself. There’s virtually no good answer to this question, but this is a decent one: “Hey, I’m a reasonable person. I’m happy to review any offer you think is reasonable.”

He tells them that he’s willing to look at an IOI (indication of interest) if they want to put that together. An IOI is not the same as an LOI (letter of intent). An LOI gives a specific price and includes a no-shop clause where you agree not to market your business to anyone else. That’s a dangerous document to sign. You’ve lost leverage. You want a process to try to get multiple bids from multiple people at a time.

The Importance of Building Your Own Media

A lot of Business Lunch listeners own ecommerce companies, and right now FBA (Fulfillment By Amazon) roll-ups are all the rage. They’ve raised over $1 billion in funds and hold workshops on how to get the most for your business. They create a deal flow mechanism—How to Sell Your Amazon Business—then go in and buy at low multiples. They’re like the fox in the henhouse. How would John advise someone who gets an offer from one of these groups to proceed?

He asks the question: who owns the customer? If Amazon is seen as the ultimate owner of the customer, and you’re a fulfillment house with a 3rd party product you sourced, you don’t have a direct relationship with the customer. This puts you in a weak negotiating position.

If you own the brand, the customer list, and you have multiple marketing channels, one of which is Amazon, you can do a lot better. You don’t want to be dependent on the traffic from one platform, and you want access to your clients.

John tells a story about Ben Leonard who built a cool workout platform, Beast Gear, selling weight lifting straps and gloves. He started selling on Amazon and, in the package he included a note that says, “Make sure you tag us on IG when you get a PR. I’d love to know about it.” Then he DMs anyone who posts, says something like, “I can’t believe you dead lifted that many pounds!” and builds rapport. On top of that, he gives them a $20 gift card for the Beast Gear website.

This lessens his dependency on Amazon, which is always a good thing.

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