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The Partnership charter

The Partnership Charter by David Gage Millions of people co-own closely held companies, family businesses, and business partnerships, but establishing them and keeping them together is never easy. Here, finally, is the guide they have been waiting for.... Read More
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Built to Sell: Co-Founders and Co-Sellers

Posting by Stewart Christ, MBA, Principal at BMC Associates

John Warrillow creates a practical resource for business owners who might be looking to create value and exit their business in Built to Sell: Creating a Business That Can Thrive Without You. The book is based on a parable that provides an enlightening prescription for creating enterprise value and a process for preparing the company for sale.

Warrillow describes an ad agency founded by a single proprietor who struggles with the daily cycle of being beholden to controlling and conventional clients while delivering professional advertising agency services with a staff who are not the best at their craft, who are not motivated to deliver a high-quality product, or build any value in the company.

The prescription includes a focus on the one product that employees can be taught to deliver. Warrillow advises avoiding price competition by specializing and doing that one thing better than any other firm in the territory does. He suggests generating recurring revenue by creating products that customers are likely to repurchase. Value is created by identifying one offering that can be well done; even an advertising agency can design a standard service that becomes the signature “product.”

Warrillow suggests creating defined processes for business. If the operation of the company requires the involvement of the owner, the value will be reduced. A process must be built around the defined product and, as such, there must be a willingness to say no to products or services that are outside the defined scope. By creating a product and a process, the business can be separated from the owner, thus enabling the eventual sale.

A sole proprietor is the owner of Warrillow’s ad agency. In many instances, however, there are two or more company co-founders. As such, there are crucial business partnership considerations that are just as important to the successful growth and sale of the company.  The principles taught by Warrillow continue to apply when there are co-founders involved.

During the life cycle of a business, there are several points where the co-founders must come to agreement about the nature of their partnership. One point is at the inception when co-founders must negotiate their roles, authority, ownership, and governance among many other critical issues. There are also points during the growth of the company where the owners may choose to include senior management in the ownership. Finally, in preparing to sell the company the owners must be fully aligned, as conflict between owners may delay or derail a sale or drastically reduce the sale price. Built to Sell teaches important lessons about creating value in a business. If there are multiple owners involved, there are also important lessons in terms of communicating roles and expectations and documenting these understandings as an important part of preparing the business for sale.

 

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