- people on the move
Author and entrepreneur brings business value insight
John Warrillow’s system empowers business owners in true ‘Robin Hood’ fashion.
Valuable businesses operate without their owners.
That was the message delivered by John Warrillow as part of an event sponsored by The Alternative Board West Michigan, a business coaching services provider.
The entrepreneur and author presented “Built to Sell: 8 Things That Drive Your Company Value” last Tuesday at Watermark Country Club.
“We’re talking about how do you increase the value of a privately held business?” said Warrillow in reference to the TAB-organized event, which focused on key things that contribute to the value of a business.
Warrillow is the bestselling author of “Built to Sell: Creating a Business That Can Thrive Without You” and founder of The Value Builder System, which incorporates key themes from his book into a methodology to help business owners increase company value. His second book, “The Automatic Customer: Creating a Subscription Business in Any Industry,” was released earlier this year.
“The common denominator is about what drives the value of a small to mid-sized company, and so both of those books have the same core theme,” said Warrillow. “If you could distill it down to one main idea, in order for a company to have value, to be valuable, to be acquired as an asset … the business needs to operate without the owner. For a lot of owners, that is really difficult for them to get their heads around.”
The eight factors driving the “sellability” or value of any given business outlined by Warrillow’s system are: financial performance; growth potential; the Switzerland Structure, which looks at the dependence the company has on any one customer, employee or supplier; the valuation teeter-totter, or cash flow; proportion of recurring revenue; monopoly of control, or marketing differentiation; customer satisfaction; and hub and spoke, which is about minimizing the business’ dependence on the owner.
“We know those drive the value of the company because we have had 20,000 business owners go through and do a survey, a questionnaire called The Value Builder Score,” said Warrillow. “We asked each of them how they run their company, with a view of trying to isolate their performance on those eight key drivers.”
Companies were then asked if they had received an offer from a third party to buy their business and “at what multiple of their pretax profit,” according to Warrillow.
“Statistically analyzing the results of that data, we are able to see a direct correlation between those eight attributes and the value, or in other words, the offer those companies are getting in the marketplace,” said Warrillow.
The Value Builder System consists of 12 modules specifically designed to improve the value of the company and a team of advisors who work side-by-side with owners.
The approximately year-long program walks owners through assessing or benchmarking the current value, constructing a durable platform for growth, capturing the voice of the customer, creating recurring revenue streams, and breaking free of the daily business operations.
The comprehensive system also helps small to mid-sized business owners strengthen the foundation of the company, boost cash flow, pinpoint a list of strategic buyers and decide when to sell.
“I think we see ourselves as a company a little bit like Robin Hood,” said Warrillow. “Right now the Lords of Loxley in our economy, to use that analogy, are either very large private equity companies or Fortune 500 companies who deploy kind of mercenary corporate development executives to buy small companies for much less than they are worth.”
Warrillow said while a business owner is often the best operator of their business, many have not had an opportunity to sell a company before, and buyers from large corporations may “take advantage of the relative naiveté of business owners.”
“So our mission in life is to correct that, to help advise and empower business owners to they can fight back against these people. Our mission is to defend the rights of the business owners in what is today a fairly lopsided negotiation.”