Note: While reading a book whenever I come across something interesting, I highlight it on my Kindle. Later I turn those highlights into a blogpost. It is not a complete summary of the book. These are my notes which I intend to go back to later. Let’s start!

  • Don’t generalize; specialize. If you focus on doing one thing well and hire specialists in that area, the quality of your work will improve and you wil stand out among your competitors.  
  • Relying too heavily on one client is risky and will turn off potential buyers. Make sure that no one client makes up more than 15 percent of your revenue.  

  • Owning a process makes it easier to pitch and puts you in control. Be clear about what you’re selling, and potential customers will be more likely to buy your product.

  • Don’t become synonymous with your company. If buyers aren’t confident that your business can run without you in charge, they won’t make their best offer.

  • Avoid the cash suck. Once you’ve standardized your service, charge up front or use progress billing to create a positive cash flow cycle.  

  • Don’t be afraid to say no to projects. Prove that you’re serious about specialization by turning down work that falls outside your area of expertise. The more people you say no to, the more referrals you’ll get to people who need your product or service.

  • Take some time to figure out how many pipeline prospects will likely lead to sales. This number will become essential when you go to sell because it allows the buyer to estimate the size of the market opportunity.  

  • Two sales reps are always better than one. Often competitive types, sales reps wil try to outdo each other. And having two on staff will prove to a buyer that you have a scalable sales model, not just one good sales rep.

  • Hire people who are good at selling products, not services. These people will be better able to figure out how your product can meet a client’s needs rather than agreeing to customize your offering to fit what the client wants.

  • Ignore your profit-and-loss statement in the year you make the switch to a standardized offering even if it means you and your employees will have to forgo a bonus that year. As long as your cash flow remains consistent and strong, you’ll be back in the black in no time.

  • You need at least two years of financial statements reflecting your use of the standardized offering model before you sell your company.

  • Build a management team and offer them a long-term incentive plan that rewards their personal performance and loyalty.

  • Find an adviser for whom you will be neither their largest nor their smallest client. Make sure they know your industry.  

  • Avoid an adviser who offers to broker a discussion with a single client. You want to ensure there is competition for your business and avoid being used as a pawn for your adviser to curry favor with his or her best client. A Blank Check for Growth Once hired, Peggy asked Alex to provide a three-year business plan for the Stapleton Agency. She wanted Alex to include financial projections along with a description of the target market and the overal opportunity Alex envisioned for the business of creating logos. Peggy explained that Alex’s plan would become the foundation for a lot of her work and it was important for the plan to be solid.

  • Think big. Write a three-year business plan that paints a picture of what is possible for your business. Remember, the company that acquires you will have more resources for you to accelerate your growth.

  • “Strategic buyers will typically pay more because you’re worth more to them than you would be to a financial buyer. A strategic buyer will model how you would perform as a business if they owned you and applied all of their resources to your business. A financial buyer is simply looking for a return on their investment and wouldn’t bring much more than their checkbook to a deal. With few synergies to exploit, financial buyers will typically offer you a lower price to ensure they get a good return on their money.”  

  • If you want to be a sellable, product-oriented business, you need to use the language of one. Change words like “clients” to “customers” and “firm” to “business.” Rid your Web site and customerfacing communications of any references that reveal you used to be a generic service business.

  • Don’t issue stock options to retain key employees after an acquisition. Instead, use a simple stay bonus that offers the members of your management team a cash reward if you sell your company. Pay the reward in two or more instalments only to those who stay so that you ensure your key staff stays on through the transition.

  • Of the three criteria for a scalable product or service—teachable, valuable, and repeatable— I found the single most important factor in driving up the value of my companies was ensuring my revenue was repeatable, meaning customers had to repurchase somewhat regularly.

  • To create a positive cash flow cycle, charge your customer in full or in part for your product or service before you pay the costs of whatever it is you provide. For example, when you subscribe to a magazine, you send the magazine company your check and then, a few weeks later, you receive the first of a year’s worth of magazines. The magazine company gets to use your money (along with that of its other subscribers) al year to hire writers, editors, and photographers to produce the magazine.  

  • “Your job as an entrepreneur is to hire salespeople to sell your products and services so you can spend your time selling your company. You make a few hundred or thousand dollars when you sell your product, but if you turned those same skills to selling your company, you can make exponentially more. You have the right skills, but you’re selling the wrong product.”

  • In my research company, we set out to own the de facto conference in our industry. By owning the most important trade show in our space— one that both companies and vendors wanted to attend—we created a moat that was hard for a single employee to replicate. In fact, I did have one employee leave to set up a competitive shop despite having signed a noncompete agreement. She claimed to offer the same service we did, but we had a five-year head start on creating the “go-to” conference for the industry. More than just hawking hours, we had a moat that proved more than difficult for a single former employee to re-create. Wondering what your moat could be to protect you against employee defection? Here are a few ideas to get you thinking:
    • Own the annual ranking study for your category: Interbrand does the ranking of brand equity among marketers, making it tough for a one-person brand consultancy shop to compete.
    • Own the annual awards program for your category: Ernst & Young created the Entrepreneur of the Year awards program, and it has solidified its position with fast-growth entrepreneurs, which gives the company a real advantage over a disgruntled former employee who hangs out his or her shingle at tax time.
    • Own the event for your industry. New York–based investment banking company Allen & Co. organizes the annual gathering of media and technology executives at Sun Valley, Idaho.
    • Own the benchmark: Fred Reichheld is the founder of Bain’s loyalty practice and the creator of the Net Promoter Score methodology as a way to predict repurchase and referrals for businesses. His firm owns the database of benchmarks. Companies using the Net Promoter Score want to know where they stand with other companies, so they go to Bain for the benchmarks and strategy for implementing a loyalty program. Bain has a barrier to entry that would take years and many millions of dollars for a single aggrieved employee to replicate.