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How to Build a Business Worth Buying with John Warrillow, Ep #262

How do you build a business worth selling? How do you find the right buyers—without falling victim to the “ego-stroke?” John Warrillow joins me in this episode of Negotiations Ninja to answer every entrepreneur’s nagging question: How do I exit my business successfully?

John Warrilow is the founder of “The Value Builder System™” and is a business expert sought out for his proven methodology in adding millions to the value of a business. He’s the host of a show called “Built to Sell Radio,” with 300+ episodes. He’s ranked by Forbes as one of the world’s top 10 podcasts for business owners.

Outline of This Episode

  • [2:34] Learn more about John Warrillow
  • [3:14] Don’t fall victim to the ego-stroke
  • [8:17] What is a roll-up?
  • [11:15] Build a business that’s worth selling
  • [16:12] Find the best fit for your business
  • [19:34] Are ridiculous valuations a sign of the times?
  • [24:08] The importance of pull factors
  • [28:53] Consider the freedom point

Don’t fall victim to the “ego-stroke”

Thriving businesses may suddenly get a call from someone who wants to buy your company. John notes that it can be intoxicating. They woo you into a relationship and shower you with accolades. They ask about the company, financials, and more—which puts you into a reactive position.

Acquirers use your fragile ego to get a proprietary deal (i.e. buying your business without competition). But competition breeds a higher deal price and better terms. They go out of their way to contact owners before they can proactively put their businesses on the market.

They often have you sign a letter of intent with a no-shop clause, which means you can’t negotiate with anyone else. They do this intentionally to get your business for less than it’s worth. Don’t fall victim to the ego-stroke. It’s one of the most common mistakes John sees.

Build a business that’s worth buying

Most businesses start because the entrepreneur has technical expertise that they’re able to sell. But those businesses deeply depend on the owner—which makes it worth far less to anyone else. What should you be doing instead?

Entrepreneurs need to structure their businesses so they can succeed without them. If you’ve got a business that can thrive without you, it won’t stress you out. That means you’ll be more willing to walk away from a bad offer, which is the “ace up your sleeve.”

If you bring in a manager to run your business every day, it allows you flexibility. You can sell to a private equity group and create some liquid wealth. You can cherry-pick projects you want to be involved in.

Many owners confuse entrepreneurship with growing top-line revenue. Most entrepreneurs would be better served to think of their role as a parent. A parent wants their kids to be happy functioning independent adults. That means you’ve done your job as a parent. Your job is to create your business to succeed without you.

Find the best fit for your business

You don’t have to wait for someone to approach you to buy your business. You can approach them. You just need to be aware of the options available. There are three types of buyers:

  1. Individual Investors: They buy small businesses with less than $1–2 million in revenue. They’re buying a job.
  2. Private Equity Firms: They’ll ask you to roll some equity in and won’t pay as much for a business.
  3. The Strategic Acquirer: They’ll pay the most for your business because they have a strategic asset that will make your business worth more in their hands.

Stephanie Breedlove built a business solely to help do payroll for parents with nannies. She built it up to $9 million in revenue with 10,000 customers over 25 years. When she was ready to exit, she looked for someone with a strategic reason to buy her business. She came across Care.com.

At the time of her acquisition, Care.com had 7 million subscribers. If 1% of their customers used her payroll service, that’s 70,000 customers. She was making $9 million in revenue on 10,000. Imagine what they could make. They gave her an offer of $40 million. She said it wasn’t enough. In the end, she sold her company for $54 million—an unbelievable outcome. She found a buyer who had far more to gain than she did and negotiated her case to make a truckload.

To learn more about valuations, building a sellable business, and the importance of pull factors, listen to the whole episode!

Resources & People Mentioned

Connect with John Warrillow

Connect With Mark

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Why You Need to Develop Positive Risk Tolerance with Patrick Tinney, Ep #260

Pat Tinney has been in sales and negotiation training for 14 years. Before that, he worked in Media Sales, Product Development, and Training and Sales Management at Southam Newspapers, Hollinger Newspapers, and Canwest Newspapers. What did he learn in 20+ years in sales? Sometimes you have to take risks to reap the rewards. Pat works with people looking for unique perspectives on sales, negotiations, and a way to be above average. In this episode of Negotiations Ninja, he shares how a positive risk tolerance was a game-changer for him.

Outline of This Episode

  • [3:03] Learn more about Pat Tinney
  • [4:09] Pat’s latest book—The Bonus Round
  • [7:51] The concept of positive risk tolerance
  • [19:13] The creativity component
  • [24:53] How to connect with Pat Tinney

It’s important to differentiate yourself

While at Canwest, Pat was the first sales rep in Canada to become a certified print production practitioner. He memorized the textbook and got 93% on his final. After completing the certification, one of his senior managers called him in, worried that he was leaving the company. The rest of the sales team was focused on marketing, and he went his own direction because he didn’t want to be like everyone else.

He told his manager he wasn’t leaving, but management wanted to know “why.” Pat wanted to be able to speak intelligently with his customers. If something went wrong, he wanted to be able to explain it in the moment. He didn’t want to run to someone else, wait to get an answer, hope it was right, and then take it back to the customer. And he told his manager that.

Differentiate yourself by building your risk tolerance

Pat looks at any industry as an ecosystem. When he worked at Canwest, he wanted to see how many different ways he could repurpose what they already made. That led him to launch “Print, Plan, and Distribute.” As a newspaper, they were one of the biggest printers in Canada. When his concept went to market, their first order was 6 million pieces across Canada. His initiative led to millions of dollars of revenue for his company.

But the only way you get to that point is by building your risk tolerance and understanding how much pressure goes with it. You can push back at senior management if they want an early launch when things aren’t ready. You want your concept to be so ready to go that people know it’s bulletproof when you say ”go.”

You can build your risk tolerance in unexpected ways

Pat grew his risk tolerance by playing no-limit sessions of poker. One year, his wife bought him a tour to play at Caesars. He rolled a natural royal flush at Bally’s. The odds of that are 1 in 2,598,960. He won the house prize and collected $2,500.

The longest session he ever played was 20 hours—most people can’t stay focused that long. But it trained Pat to stay in a risk bubble. You have to understand what’s happening at the table and observe how people deceive others or hide their emotions.

Pat has put real money on the table over and over, and he’s done it with his company, too. He takes gigantic risks that other people wouldn’t take. He believes that “You can never be called a fool for daring to try.” You may fail several times, and that’s normal. Pat prefers to call failures iterations. Edison failed many times, but he kept trying until he got a lightbulb, right?

If you can go to the marketplace with a new idea that gives the customer an advantage for four weeks, they will not let you leave the room. They want that idea before their competitors. That is positive risk, creativity, and—in Pat’s words—“being the box.”

Resources & People Mentioned

Connect with Patrick Tinney

Connect With Mark

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An important update from Mark, Ep #259

Hey friends! It’s Mark here to bring you some important news.

We are getting into some VERY big projects and we’re going to be focusing on driving even HIGHER quality content for all the listeners and readers at Negotiations Ninja. Hooray!!!

In order to do this, we need to pull back on the volume of content we’re producing.

So, starting in October, we’ll be going down to 1 new podcast every 2 weeks and 1 throwback every other week. This means that you’ll still get a show every Monday, but every second Monday will be a throwback episode.

I am REALLY excited about some of the amazing projects we have on the go and really excited about the content we’re going be producing.

More to come!

Why Women Have to Embrace a Social Style of Negotiation with Sara Laschever, Ep #258

Sara Laschever is an authority on the challenges that women face at work. Sara writes about women and work, with a focus on women in negotiation. Why do women struggle to negotiate for themselves? How can they do things differently, feel more comfortable, and be more successful? After writing their first book, “Women Don’t Ask,” Sara and Linda Babcock wrote another book, “Ask for It.” The second book is a how-to of sorts to help women learn to be better negotiators.

But it’s not just a confidence issue; it’s a systemic issue in the workplace. Books like Sara’s are important to help women feel like they aren’t alone—while giving them practical solutions to deal with the issues at hand. In this episode of Negotiations Ninja, we discuss practical ways women can become more effective and successful negotiators. Don’t miss it!

Outline of This Episode

  • [1:32] Learn more about Sara Laschever
  • [3:49] How to ask for the things you want
  • [9:43] Approach a negotiator as an ally
  • [12:57] Women excel at collaboration
  • [13:51] The difference between value proposition and resume
  • [16:58] Roleplaying as part of the preparation process
  • [21:42] As cultural norms adapt, will negotiation styles change?
  • [24:10] Place an emphasis on preparation and research
  • [25:49] Learn how to connect with Sara Laschever

How to ask for the things you want

Sara emphasizes that it’s not necessarily what you ask for but how you ask for it. The research is clear that to be persuasive and influential, women need to be perceived as likable. Men can just be competent and make a good argument, and people hear it. People don’t take in the request the same way when a woman is not smiling. It’s incredibly exasperating and feels like a step backward.

Worrying about whether the other person is having a good time in addition to making a strong argument places an extra burden on women. But Sara recommends viewing it as a tactic or strategy as opposed to a sell-out. The research is clear—it makes a difference.

If a woman is relaxed, makes eye contact, smiles, and is upbeat and cheerful, she will be more successful. It also makes the interaction more pleasant. It’s less likely that the other negotiator will feel threatened and get into a conflict spiral. It’s not a bad tactic for men to embrace either. Coming in guns-blazing isn’t always a great strategy, and people won’t love negotiating with you. It can be damaging to your reputation and isn’t the way to build long-term relationships.

Women have to embrace a social style of negotiation

A group of organizational psychologists wrote a script in which somebody tried to persuade other people to agree with a particular point of view. They hired a man and a woman and videotaped each performing the script in four different ways. They were asked to embrace a dominant style in the first recording. The second was more recessive, where the person leaned back, didn’t make eye contact, and didn’t speak confidently.

The third style was task-oriented, straightforward, and direct. The fourth was a more social style, where the actors made eye contact, smiled, and spoke in a relaxed manner. Everyone that saw the videos rated it by how persuaded they were by the argument. Interestingly, neither the man nor woman were persuasive with the dominant or recessive styles. What won? The man was equally persuasive between the task-oriented and social styles. The woman was found to be the most persuasive when she used the social style.

Embrace roleplaying to improve your negotiation skills

When you think hard, you tend to frown more and look hostile. You may tap your foot and seem impatient. Because of these mannerisms you may not be aware of, Sara encourages women to role-play a negotiation in advance and get feedback from someone they trust. That person can help you hone in on what you’re doing right and what you need to change. It can also help you navigate emotions that will come up in the negotiation so you aren’t surprised by them. You’ll be better prepared for whatever comes your way.

Resources & People Mentioned

Connect with Sara Laschever

Connect With Mark

Subscribe to Negotiations Ninja

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