Archive for category: Book Club

The subtitle of Aaron Muller’s book is “How to Buy a Business, Grow Your Profits, and Make it Run Without You.” While entrepreneurship has perhaps never been more in the public consciousness, the phrase “lifestyle business” is still not commonly known in the general public, and this book goes a long way to addressing that gap while sharing some important lessons along the way.

Let Your Business Be Your Business

For those who are considering buying a business, there’s often some soul-searching: is this my passion? Muller’s response to that query is one we tend to agree with: “Finding meaning and purpose in your life is hard enough. Finding a profitable business that also gives your life the unique meaning and purpose you are looking for is doubly hard.”

It’s a lot to ask of a business to offer meaning and purpose for your life. Rather, you should focus on:

• Soundness of the business.  Are the taxes and paperwork in order? Are the financials up to date and do they show promising trends?
• Role in the business.  Are you being asked to be an owner-operator (someone working on the business each day or at least each week) or an absentee owner (someone who only periodically checks in on the business or if there is a major decision to be made)? Do you think this role would suit your talents and current desire to work?
• Growth potential.  Is this something that you can build on in the next 3-5 years to give yourself more options, i.e. build from owner-operator to absentee or from absentee to another exit.

Leverage Previous Mistakes

In a previous article we shared that a buyer of a business was able to more than double his income simply because he fulfilled the orders that the previous owner failed to do. The author shared a story about a business he once bought which had alienated many customers: “In fact, I even put up a banner on the building that read, “New Owner. Friendly Service.” Within one year, revenues increased by over 65 percent.”

Sometimes previous owners have made mistakes they haven’t told you about just because it’s too personally embarrassing. One of them might include poor attitudes with clients or times they simply could have done better on the customer service side of things. Never underestimate the power of a restart and the second chance a customer might give to a new owner.

Bring Your ‘A’ Game… and Teach It

“Whatever it is that is causing your customers to come, you need to transfer that skill to your employee,” Muller opines. He’s right. Whenever you are able to bottle your value-adds into training and company manuals, you’ve created a better asset for a future customer.  

At the heart of a lifestyle business is the unique proposition of creating a schedule you determine and an income you’re responsible for. Don’t be beholden to a 9-5 office paradigm. You can work the hours you want on the days that you want… as long as you set up the proper systems to do so. While the lifestyle you build for yourself may limit scalability and growth for your company, this will be a conscious choice you make that will also make the business an attractive acquisition for someone in the future, who like you, wants a lifestyle business.

We offer businesses of all “speeds” here at Apex, including lifestyle businesses.  Learn more today!

There are some books out there that can tell you the financial side of how people exited their businesses, but there’s not too much literature on the emotional process of selling.  

Bo Burlingham often refers to a sale as just another “phase” of the business. Dan Andrews and his business partner experienced a seven-figure exit some years ago.

Rather than feeling content, they felt something unresolved, and this book, Before the Exit, Thought Exercises for Entrepreneurs, is an extended reflection that resolved those thoughts.

The book is divided into two parts.  The second part is the one we’re used to – the origin story of how someone went from wage slave to plucky business owner.  But that story takes a turn as Dan honestly explains mistakes they made along the way to an exit.

The first part is a fascinating set of exercises. They’re meant to push an owner who is either currently considering a sale or who hasn’t thoughtfully considered an exit at all.  

The goal isn’t to tell you all the exercises (as the book is under 100 pages and we want you to discover them for yourselves) but to get you started thinking about the bigger question of why and not just how when it comes to an exit. Here are two of them:

Lifestyle Ladder

Dan discusses (in a Dave Ramsey sort of way) how an entrepreneur progresses forward in income.  At first, it’s simply a matter of getting out of debt to zero. Then there’s a certain amount of income in the bank – say $20-40k liquid.  

It’s the stage at which money is less of a worry, but you can still be a prisoner of your thinking when you were at a lower stage of the lifestyle ladder and severely deplete this cushion.  

Further up the ladder, you have 10 times that liquidity plus an income-producing asset that means you don’t have to touch the liquidity. At each stage Dan continues to probe the reader…What is it that you want? Will this business be a vehicle to take you there? Why or why not?

So many people just have their foot on the gas for so long that they seldom stop to think what it’s all for and what real numbers interest them when it comes to lifestyle or an exit.

Boredom?  Or incompetence?

Seth Godin famously advised a woman who asked how to grow her $10M business to $100M: “Find someone to run your business, go and apprentice under someone who runs a $100M business for two years, then come back and do it yourself.”  

We’re all familiar with the idea that “what got you here won’t get you there” but sometimes we’re masking our own inadequacies.

What’s going to take you to the next level?  

Will it require you to do some things or learn some practices you don’t know?  

Will you need to bring in some outside help?

Maybe you’ll need to reinvest?

Sometimes these possibilities don’t occur to the business owner who is tired of the fight and looking for the door.  

But if he/she is willing to do the work of thinking it through, there could be an even more valuable exit after more work has been put in. It all depends on what you want long-term and has to contextualize the pain of the short term.

As noted above, the book is a lonely one in a space not often discussed. The ideas and challenges it offers in such a short read make it very much worth your time.

We’ve already spoken about a John Warrilow book before, namely The Automatic Customer, which is all about how creating subscription streams of income is something incumbent upon (and doable for!) most businesses today.

But before he wrote that, he wrote a book called Built to Sell, which uses the story-telling devices used in The E-Myth and The Goal to drive home precisely what’s needed to build a company that can be sold.

We’ve said it here numerous times before – many businesses don’t sell, and many aren’t even eligible for sale, because the owners haven’t put in the work to build something that can be turned over to a complete stranger. But that’s precisely what’s required. It starts with getting rid of YOU.

Get out of your own way

Of course, you’re a big reason that the company has gotten to whatever level of success it currently enjoys. But for it to grow, and for you to be able to sell it one day, it can’t depend on you.

This means you can’t be synonymous with the business, and you have to have teachable processes in place, as well as products and services that can be sold and delivered by other employees.

Of course, you’re going to be one of the best, perhaps the best in your firm, in all of these areas, but that’s not the point. A potential buyer will be scared if he/she sees your name over all the sales, processes, and management. On the other side of things, how will you keep employees long-term if you never allow them to take on the big tasks you keep reserving for yourself?

Diversify your clients and your offerings

Warrilow really hammers home the idea of avoiding dependency on a single client. Any client who is responsible for an outsized portion of your revenues has implicit control over the direction of your company, yet they have no real risk. Warrilow recommends that no client should be responsible for more than 15% of revenues.

There are many other ideas he discusses, but two, in particular, we should focus on are:

• Avoiding price wars by doing one thing better than everyone else.
  If you’re a florist, perhaps you do wedding flowers particularly well and charge an excellent, non-customizable price. By creating a standard offering, you maximize efficiency in your workflows and also create a rallying point for your sales team. It’s also a great funnel for other services.
• Generate recurring revenue by creating products your customers need to repurchase.
  This is a theme he would fully develop inThe Automatic Customer, but it’s something that works well. Go back to our florist. Instead of offering one-off purchases only, what if she went to hotels and other places that always want flowers in their lobbies and offered a subscription service? It removes a sales cycle, guarantees a service for the client, and generates count-it-every-month income for the business.

The subtitle of the book is creating a business that can thrive without you. Note the word “thrive.”  If you know your business slows down or sags a bit while you’re away, you haven’t put in enough work into building your company to sell.  

Keep in mind, you don’t have to sell…BUT if you build to sell, not only will your life become easier, but your employees will make more money, and your company’s foundation will be more stable.

Ask most business school students and they will often nod their heads in recognition when you mention The Goal. 

It’s been a mainstay of business school curriculums for decades and despite the fact that it was published in 1984, it still retains relevance today.  

Firstly, unlike the overwhelming majority of business books, it’s a novel. Secondly, it’s written by a physicist.

The novel angle may be obvious to most – the story can help move the reading along – but a physicist?  Why?  Simple: the big idea at the heart of The Goal is the Theory of Constraints, which interests scientists plenty.

The Theory of Constraints

In any system, be it comprised of machines or humans, limits will be reached due to constraints. There’s almost always at least one constraint in a system, and by identifying constraints and restructuring processes around them, systems will necessarily become more efficient.

Understanding bottlenecks – constraints – in a system is vital for manufacturing and distribution businesses, hence it’s no surprise that The Goal is one of three required reading books Amazon’s Jeff Bezos gives to his top executives.

The Problem

Our protagonist, Alex Rogo, is a manager at UniCo who finally gets a transfer back to his (small) hometown. What he wasn’t prepared for was the fact that the factory is facing challenges and may get closed down unless he can turn things around in the next three months.  

Specifically, shipments are always late and the production backlog is growing, but inventories also keep growing. It doesn’t seem possible to ship on time with good quality at a reasonable cost.

The Professor

Alex manages to bump into his old college professor who listens to Alex’s story and begins asking questions to help him dive down to the root of the problems.  

As Alex and his team chase down the complicated answers to these difficult questions, they find the true problems all around the factory and begin solving them.  

As they do this, “the goal” keeps changing, from focusing on cost-effective purchasing, to hiring the right team, to the latest technology, to finally, making more money. The refinement of all the other issues necessarily led to more profits, as the factory began to run like a machine itself.

You don’t need an Annual Meeting to go over systems and processes. You start by asking the most basic of questions – where are we experiencing pain in our processes – either internally or externally?  

By seeking the true answers to those challenging and uncomfortable questions (which are not often immediately visible), you can start making the changes necessary to make your business hum – which will make your staff, clients, and of course, you, happier.

Seth Godin has been a prolific blogger and author for many years now. He is particularly dedicated to helping entrepreneurs grow their businesses and develop robust mindsets. 

The Dip, which has a subtitle that promises to teach you “when to quit and when to stick” develops a very specific theme across its 96 pages.

Seth explores a theme which was covered in a wildly popular Freakonomics Radio episode from 2011: quitting.  The premise that is questioned is simple: Is it true that “winners never quit”?  

Seth’s answer is quite emphatically “No.”  Winners quit all the time, and he gives stories about a number of famous business people to back up his argument.  

What is “The Dip”?

Simply, the dip is the hard and difficult road between being barely competent in something and being the best in the world (Seth argues that being the best in the world should be a primary goal).  

There are only a few spots at the top, Seth notes, and you should be okay with quitting if it’s not clear to you that a) you have the desire to get to the top or b) you have the ability to do so.

Now, while we don’t share Seth’s idea that “best in the world” is the only goal possible/desirable, we would argue that high levels of personal satisfaction and competence should be at the end of the road. You need to be okay with quitting, and quitting quickly, if those aren’t on the horizon. Hope is not a strategy.

Persistence is Overrated

Perhaps the biggest lesson in this short book apart from giving people “permission” to quit (against all the social pressure not to) is to remind us that persistence isn’t everything.  

People can keep pounding their heads against the walls for many years for nothing other than the alleged “virtue” of persistence for its own sake. Seth is reminding us to make sure we’re clear on what our “why” is.

If we know why we’re doing what we’re doing, combined with a realistic look at whether we can accomplish our goals, the persistence will make sense and be the best part of the journey. Otherwise, it can be the anchor that holds us back from so many other possibilities.

As one year closes and a new one opens, it’s a great time to audit our lives and ask if there are any things in our business or personal life that need quitting, once we’ve given them “the Dip” treatment.