HOW TO BUILD A BUSINESS AND SELL IT FOR MILLIONS

by

Jack Garson

Book Discussion Guide

Chapter 1 Planning to Sell; Page 1

Jack Garson sums up his approach to building a business by advising readers to “put the horse in front of the cart”.  From the very beginning, build your business so that it is desirable for a purchaser.  How would this approach change the form of entity you chose, as well as your hiring, equipment and systems purchase, marketing, and contracts?  How do things change when you know you’re going to turn the reins over to a buyer?  Will you have the discipline to avoid hand-shake deals and instead enter into contracts that are meaningful to the purchaser?  What’s harder and what’s easier when you design a business with the goal of selling it?  

Chapter 1 Planning to Sell; Page 2

Jack says that while it may be difficult to sell a company now, it’s always easy to sell a great company. What’s keeping your business from being attractive to buyers? Are you positioning your company for a successful sale? Why do you think some of the most successful businesses were formed during recessions? What qualities does a business need in order to succeed in a downturn?

Chapter 2 Profitable Business Model; Page 6

Keep in mind that a profitable business model requires your revenues to consistently exceed your expenses and you must keep generating profits throughout various business cycles. How do you turn a profitable business plan into a profitable business model? What can we learn from the character Alex who starts his own billboard company and how can you apply those lessons to your company?

Chapter 2 Profitable Business Model; Page 6

You need to be profitable virtually every time you sell your goods and services. What key employees do you need? Who are your potential customers? How will you let people know you exist and how will you sell to them? Explain your sources of capital that you will need to start and continue your business, as well as contingency plans for cash reserves, lines of credit and/or raising additional funds.

Chapter 3 Your Competitive Edge; Page 15

Once you’re profitable, you’re going to attract competition.  So you need a competitive edge to fend off aspiring copycats. The character Carl didn’t having a competitive edge.  What steps could he have taken to give his bagel business a chance to succeed in the long run? What’s your competitive edge? 

Chapter 4 Scalability; Page 17

Scalability is the ability to grow your business.  It’s many different things for different businesses, but it is always a mind-set. It’s about constantly making decisions that create bridges, not barriers, to growth. What barriers will prevent you from growing your business? What steps can you take to overcome them?

Chapter 4 Scalability; Page 20

Jack discusses how the Founder’s Dilemma will hurt your company’s scalability. Are you a “Derek”? Have you ever worked for a boss who micromanages and undermines his employees? Is the Founder’s Dilemma hindering your business? If so, how can you learn to delegate and build a team that will help you grow from a small company to a medium-sized business?

Chapter 5 Bench Strength; Page 25

What is “Bench Strength” and why is it important to your company? What are the most significant steps in building your own executive team? Who should you hire next and why?

Chapter 6 Sustainability; Page 32

Sustainability is all about your company’s ability to get through the worst of times.  It means starting with enough capital to get you to the point where you are consistently profitable.  It requires persistence, foreseeing pitfalls and protecting against them. Have you considered how your business can be sustainable? In your industry, what are the potential problems that might sink your business?  How can you protect against them?

Chapter 7 Personal Sustainability; Page 41

Just like you need a sustainable business, Jack recommends that you beef-up your own personal energy and endurance. What can you do to create that extra edge that will make you a top performer—a regular run, yoga, hitting the weights, cutting out all of the stress eating?  For each of us it is something different.  But for all us, it can give you an edge that will help you and your business thrive.

Chapter 7 Personal Sustainability; Page 41

Building and selling a business is rarely a sprint. With any luck, you will be in business long enough to have some bad luck. Will you have the persistence to make it through the challenging times? Is there advice you would share from previous experiences that might be helpful to others?

Chapter 8 The Vision Thing; Page 48

When you communicate a vision to your employees, it propels the growth and sale of your company. Despite enormous resistance from his employees, Freddy followed his vision to sell tickets over the Internet. Do you have a vision for your business? If so, how do you plan on achieving it and what steps will you need to take to get there? What obstacles will you have to overcome?

Chapter 9 Values and Culture; Page 51

Values are the rules you live by.  They guide how you do things—from who you hire and promote to how and when you reward your employees. Culture is the environment you create when you live by those values.  Your values and culture can support your growth—or tear at the fiber of your business. Have you considered your company’s values and culture? What needs to be improved? How will you pick the right values and create a successful culture for your company?

Chapter 9 Values and Culture; Page 58

In chapter 9 Jack discusses how a company’s culture and values involve how you treat your customers and employees. If a company takes care of its employees, in turn they will take care of the customers and those customers naturally take care of the business.  It’s one thing to “talk the talk,” but are you “walking the walk”?  How will you get to the point where your business has the right values and culture?

Chapter 10 Overcoming Self-Destructiveness; Page 62

Self-destructive behavior, like Hank’s actions in Chapter 10, can destroy a business. At the roots of self-destructive behavior is a lack of self-worth that encourages you to sabotage your own success. Can you identify your own self-destructive behaviors?  Do you have a game plan for tackling your inner demons or you want to keep it all locked up in Pandora’s Box?

Chapter 11 Inc., LLC, or Partnership; Page 71

When creating a business entity you have many entity choices, including a limited liability company, corporation or partnership. Herald and his brother Tommy formed their company as a special type of corporation, one that made a Subchapter S election.  That gave them short term tax benefits, but later they learned that it devastated their ability to sell their business.  How did the S election interfere with their plans to sell the company? What type of entity should you use for your company and why? Do you know the advantages and disadvantages of the different types of entities? Why should you leave sole-proprietorships to the kids with paper routes and Kool-Aid stands?

Chapter 12 Financial Reports and Finance; Page 85  

In order to run a successful business, Jack says you need to assess key financial data by looking at your company like your driving a car.

1. You need a rearview mirror for business—most importantly, a Balance sheet and Operating Statement to show you where you’ve been. Explain how in Chapter 12, Sam could have used the balance sheet, operating statement and the key metrics these reports provide to tell if his mortgage business was in financial trouble.   Are there reports that you are not creating or following for your company?
2. What does your dashboard (Net Profit Margin, ROI and Inventory to Sales Ratio) currently tell you about your company?  
3. The windshield helps you see where you are going. Sam’s business used home loan interest rates as a key forecasting metric.  What metrics can you use as an indicator of future demand for your products and services?

Chapter 13 Payday; Page 89

Most companies struggle with how much to pay their employees, especially when it comes to executives.  If you’ve hired someone and you’ve overpaid them, you can always get rid of them.  Don’t be penny wise and pound foolish when it comes to hiring. Have you hired someone where it hasn’t paid off and would be beneficial to downsize? The last time you went through a hiring session would you have profited from spending more money to get a better qualified candidate?

Chapter 14 Risk Management and Compliance; Page 104

All businesses face risks and legal requirements that cannot be avoided. What particular risks does your business face? After measuring the significance of these risks, how will you protect against each one? In short, how will you assess risks, assign probabilities, predict harm, and respond to those potential situations?

Chapter 17 Marketing; Page 123

Marketing is all about promoting your products and services by branding, advertising and using public relations. What’s missing from your marketing strategy? What can you do for your company that no one else has thought to do? How can you get free media?  

Chapter 19 Don’t Be a Competition Factory; Page 131

You don’t have to be a competition factory. How can you use non-compete agreements, confidentiality agreements, computer restrictions and non-solicitation agreements to protect your company?

The key people at your company should be bound by non-compete agreements. Do you see the risk of someone taking vital information out of your company? What steps are you taking to protect your company?

Chapter 21 For Sale; Page 141

Out of nowhere, you just got a real offer from someone who wants to buy your company. The problem is you don’t know the first thing about selling your business. But if you hesitate, you may lose the opportunity forever. What actions should you take? What issues should you consider? Are you willing to sell all of your company and if you sell would you want to stay on and work for the purchaser?

Chapter 24 Surveying the Market; Page 160

Survey the market and find out who would be interested in buying a business like yours. Financial buyers are all about numbers—they want to buy for X and, three to seven years later, sell for Y.  In contrast, strategic buyers are looking for synergy. Do you have a competitor who’s looking to buy you out? Who are your prospective buyers and which type of buyer would be interested? How risky is your business and will it be more likely to attract an investment from angel investors or venture capitalists, or a purchase offer from a private equity firm?

Chapter 27 Dogs, Ponies, and the Deal Team; Page 183

Building a great company is not enough. To sell it, you need the right cast on the stage and behind the scenes. Both the show and the business must go on. The people on your deal team should not be folks who are critical to your day-to-day operations. How can you prevent your sales and revenues from decreasing once you assemble your deal team and put it to work? Who would you pick to be on your deal team and what qualities do they possess that made you want to put them there? Who will take over their responsibilities in the company while they focus on selling the company?

Chapter 30 Letter of Intent; pg 192

In the Letter of Intent the purchaser sets out the terms of their offer to buy your company: how much will they pay, when, and what do you have to do to earn it. Jack warns not to enter into exclusive negotiations with just one buyer too soon in the process. That’s just one trap.  There’s more. How can you prevent one buyer from “re-trading”—or renegotiating your deal? How can you make the early negotiations work to your advantage as the deal progresses?  

Chapter 31 The Deal; Page 200

Some sellers want a pile of cash, others want stock in the buyer, and some just want a job and a steady paycheck. What’s in it for you? If people want to buy your company, what are you looking to get out of it (Cash, a promissory note, earn-out, employment, stock etc.)?  In reality, your company may not be making enough money for you to get anything out of it. In that case, when you sell you have the opportunity to take part of the purchase price in stock. If you have exercised this option, do you know how to protect yourself from a variety of pitfalls, like massive dilution of your interest in the purchaser?  What other rights should you insist on?

Chapter 33 Post-Sale Terms; Page 208

When you sell, you need to take inventory of all the things that can come back to haunt you. Did you sign any personal guarantees like Bart in Chapter 33 or have any other loose ends that need to be tied up? What lurks out there when you no longer have your company to protect you?  Are there any lawsuits out there waiting to happen? Think in terms of past documents (leases, personal guarantees, and loans) you have signed.  Where are you still personally liable and what protection do you need against future lawsuits?

Chapter 34 Praying Over Commas; Page 213

If you’re lucky, some buyer will be shelling out a lot of money to buy your company.  But they don’t like taking big risks and they don’t want to lose any of that money.  So they are going to ask for sweeping protections and broad promises from you.  What exceptions do you need to bargain for?  Where are the bear traps in the tall grass? Make a list of potential problems and issues with what the buyer wants: this list should include an analysis of the risks and suggested counterproposals.

Chapter 35 Due Diligence; Page 219

Due diligence is necessary for both sides. Buyers have got to check out your business before they do the deal. Did anyone else ever consider buying your business but walked away? What concerned them and how can you prevent that with the next buyer? Are your records organized and are you ready to provide all the necessary material quickly to reduce delays and repetitive requests?

Chapter 36 The Deal’s Done Being Renegotiated; Page 224

If you’ve assembled the right deal team, one of the best things they you can do is avoid the wrong buyer. What are the warning signs of a bad buyer?  How would you find out if your buyer had a history of retrading? What are you going to do to maintain your bargaining power?

Chapter 38 Last Minute Surprises; Page 234

Great depressions don’t happen every day, but last minute surprises do. They can come at you from every angle. What can you do to protect against last minute problems in your deal?  How will you react if you hit a landmine, like losing a key contract at the last moment? Do you understand the toll a dead deal will take on your business? How will you bounce back from it?

Chapter 39 The Closing; Page 240

You’re closing the deal.  Do you know what you’re in for?  Do you know how to make the day special and thank the people who brought you to this dance?

Chapter 40 Now What; Page 241

You didn’t build your business in a day and you certainly didn’t do any of it without risk. Don’t let the reward for all of that hard work slip away. What do you plan on doing with the money from your sale? Make sure you have impulse control and money management skills.  Then there’s your head.  Many people feel lost and empty if they retire. How will you plan on staying occupied and happy?  How will you create a new identity and life for yourself?