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The Art of Selling Your Business (Episode 39)

John Warrillow is the founder of The Value Builder System™, simple software for building the value of a company used by thousands of businesses worldwide.

Offered by a global network of independent advisors known as Certified Value Builders, The Value Builder System™ incorporates several diagnostic tools, including the Value Builder Score. Those businesses that achieve a Value Builder Score of 90 or greater are worth double the average-performing business. 

His best-selling book Built to Sell: Creating a Business That Can Thrive Without You was recognized by both Fortune and Inc. as one of the best business books of 2011 and has been translated into 12 languages. 

John is the host of Built to Sell Radio, ranked by Forbes as one of the world’s 10 best podcasts for business owners. 

In 2015, John wrote another best-selling book, The Automatic Customer: Creating a Subscription Business in Any Industry. Prior to founding The Value Builder System, he started and exited four companies, including one acquired by a public company. He lives with his family in Toronto. 

He is releasing his new book “The Art of Selling Your Business – Winning strategies & Secret Hacks for Exiting on Top” on January 11, 2021. 

We have put together a set of gifts for people who pre-order his new book and you can find them here: BuiltToSell.com/selling

You can also follow John’s work by signing up at BuiltToSell.com.

What you will learn

  • How to design and build a company that you can sell
  • Why growing a business is like raising a child
  • Why you need to create a company that thrives without you
  • The insights on the trifecta of scale which is Teachable, Valuable, and Repeatable. The TVR Model
  • The importance of recurring revenue
  • The powerful business model you shouldn’t ignore
  • The importance of the onboarding process for the subscription business model for reducing churn
  • The magic of the 30-day onboarding window and why you should focus on its retention success 
  • Examples of the things you should do in the first 30 days to succeed in a subscription model business
  • The importance of keeping things simple
  • What “De-Risking” and the Switzerland model are
  • Why you shouldn’t be too dependent on any single customer, supplier, or key employee
  • If you are at risk of having your company being worth “zero” if you don’t sell by a black swan event
  • Why selling your company is an art and not a science
  • The importance of company positioning. Eg. From just a website company to an e-learning niche
  • The crucial tactic of positioning your company in a “Trending” niche 
  • What the standard operating procedure is for your company and why you should have one
  • How to double the value of your business
  • Who’s a certified value builder and where can you find one


Jeff Bullas: Hi, everyone, and welcome to Jeff Bullas Show. Today I have with me, John Warrillow. Now, he's the founder of the Value Builder System. Now, I initially heard of John, because I downloaded his book a few years ago, called Built to Sell. It's a fascinating book, and he's got a new book coming out, The Art Of Selling Your Business. So it's really about, I think a lot of the conversation we'll have today is about the art of being the entrepreneur right from building the business to exiting the business. So just a little bit more about John. Basically, the Value Builder System is a simple system for building the value of a company used by thousands of businesses worldwide, by a global network of independent advisors known as Certified Value Builders.

Jeff Bullas: The value builder system incorporates several diagnostic tools, including the value builder score. These businesses achieve a value builder score of 90 or greater and are worth double the average performing businesses. So I'm sure a lot of our listeners are going to want to discover a bit more about that. His best selling book written around 2011, which I would highly recommend, Built to Sell, creating businesses can thrive without you. That sounds fabulous to me. I've been trying to do that for quite a few years. And it mostly has worked. John is the host of Built to Sell radio, ranked by Forbes, one of the world's 10 best podcasts for business owners. And so here is a podcast owner on a podcast. That's really nice, isn't it?

Jeff Bullas: In 2015, John wrote another best selling book, The Automatic Customer, creating a subscription business in any industry, which is another area of interest to myself personally. He started and exited four companies, including one acquired by a public company, and lives with his family in Toronto. And you can see by the scenery behind him, that it's dark over there, because it's now officially winter. You can see, I think you're wearing a hoodie and I'm wearing a sort of a short-sleeved shirt.

John Warrillow: Don't rub it in, Bullas.

Jeff Bullas: Yeah. So it's really such a pleasure to have you on the show. And I'm sure we're going to dive into a few interesting areas. Welcome.

John Warrillow: I hope so. It's great to be with you, Jeff. Thanks for having me.

Jeff Bullas: All right, so let's go. Let's sort of go back in time. What got you into being an entrepreneur? It's a question I ask many of my guests. But how did it all start? Were your parents entrepreneurs? Was it you just hated authority and didn't like working for anyone?

Tell me how it all started.

John Warrillow: It's funny, you know. My dad was a corporate guy. He worked in a big company. But I think he always was a little jealous of entrepreneurs, the freedom that entrepreneurs seem to have. And I think secretly, he wanted me to be an entrepreneur, because he exposed me to stuff. He was involved in magazine publishing, and they published and sponsored an event for entrepreneurs. So when I was about 17, or 18, trying to figure out the world trying to figure out where I was going to go, what I was going to do. He took me to this big annual Black Tie event that was for celebrating entrepreneurs. And I just fell in love with these stories. These were the best entrepreneurs in the country, and they just had these incredible rags to riches stories. I think in a funny way, that's where the spark sort of started. And then I had a job after uni, but it didn't last very long.

John Warrillow: I started a company after that and haven't had a real job for a while. I should thank my dad. I haven't done that. I haven't said directly that I don't know. I should sit him down and ask him, "Were you somehow in the background trying to manipulate things, my career choice?" But I should thank him because it left a big mark on me, a big impression.

Jeff Bullas: Well, maybe he was just trying to live his life through you by promoting you to be an entrepreneur, maybe.

John Warrillow: "Get out of the house. Go. Leave, please."

Jeff Bullas: Well, I think that's what a lot of parents are trying to do. I think it's a parent's job to make the children slightly uncomfortable. So they do leave.

John Warrillow: That's true.

Jeff Bullas: And let them into the wild. I know, I certainly, it's one of my techniques, and it seems to work generally quite well.

John Warrillow: Well, you Aussies are good, because you're known for having to walk about, right? I mean, everybody leaves for a year. And you kind of force everybody to go and go to Whistler and be a lifty for a while or do whatever you do. And that's kind of part of the DNA of the Australian culture, isn't it?

Jeff Bullas: It is very much here. A lot of the children, well, a lot of teenagers leave University, before they sort of start their course, some do it as a gap year, I suppose. And because Australia is a long way from anywhere, we're not quite sure what the rest of the world looks like. We've seen things about Hollywood, and we've seen Europe and Paris, and they like these mythical places that attract us. I think Australians have got one of the highest ownership per capita of passports. I think the English lead, but I think Australians are number two or something. And the Americans are actually one of the lowest in the whole OECD, apparently. That's a bit of useless information for you. But so, you did uni, and what did you study?

John Warrillow: Oh, I screwed up. I was sort of enamoured going to this university that my sister had gone to. It was called Queen's University, quite popular. And I couldn't get into the business school, I had astronomical grades, my grades weren't great. And so I chose communications, and it was this terrible program that was run by these really left leaning professors, sort of real socialists, and it was just terrible. And from the moment I got there, I went, what, what have I done, this mistake? And I was supposed to be there for four years. I left after three, I never got my full degree as a result, what's it called? A bachelor's degree. Big mistake. It's funny, because my kids are now getting the age where they're starting to think about University. And I find myself trying to just wheel them not to make the same mistakes that I made, "Pick something you're interested in studying, not because you've heard the school is good, or that you think, the reputation of the school, et cetera. Just find something you like and you're passionate about."

Jeff Bullas: I think you've hit the nail on the head. I went through a journey where I decided I wanted to be a doctor. That never happened, because I hated the sight of blood, so obviously, that wasn't going to work. Then I decided I wanted to be trained as an accountant, and I hate detail and I got no attention to detail.

John Warrillow: What were you thinking?

Jeff Bullas: I don't know. I wasn't, frankly. And then I became a teacher, and I discovered that my first practice teaching session, that should have been a warning sign that it was like herding cats. I should have done Riot Control 101 instead of Psychology 101, because teenagers are essentially just full of hormones, don't want to behave, they're testing limits, and right, Control would be a better skill, essentially in a high school. I hated it, frankly. The reality is, it took me a while to discover something I loved. So, technology, sales and marketing, it's where I eventually ended up and I've never really left, apart from a couple little distractions. But you hit the nail on the head. I think that doing something you love, and I think having some innate ability is the best place to start. And yet quite often, our parents in the past have taught us, "Take the safe job."

Jeff Bullas: So tell me more about how you discovered what you love doing and maybe what you're good at? Obviously, that's how you arrived here today. So tell us how you discovered that?

John Warrillow: Yeah, it's funny, I went to work out of university, I went to work at a radio station. And I had an idea for a show, which ironically, is sort of like your podcast, it was to interview entrepreneurs and ask them about their story and what they might do differently if they had to do it all over again. And I pitched this to, and in part, it was inspired by that conference that I went to with my dad, hearing these stories, and I pitched it to the station. They said, "It would never work. Forget it." And I said, to hell with you. I'm going to go do it myself. So I left, and I pitched it to a syndication company, a company that sort of puts these shows nationally. Syndicated gets different stations locally to pick them up. This was 25 years ago.

John Warrillow: And in any case, we got syndicated across the country in Canada. It was called Today's Entrepreneur. And literally, I did interview a different entrepreneur every day and said, "If you had to do it all over again, what would you do differently?" It's funny how things fall in full circle because now I do this podcast. And it's essentially the same thing 25 years later. There's a bit of stuff that I've done in the meantime, but the show sort of was an inspiration. We did three years of the show, did a different entrepreneur every day, so it lasted three years.

John Warrillow: I started to build up this sort of understanding of how entrepreneurs think because of, I was interviewing them all. And then I started to work with big companies, banks, phone companies. Telstra was a client. The big sort of telcos and technology companies and help them market to SMB, the small medium business market. In Australia, you would call them SMEs, but in any event, these smaller companies. And that parlayed into a market research company that I ultimately built and sold to a public company, and took some time off, and then started Value Builder after that. I mean, that's a 25-year journey, but entrepreneurship has been the sort of kernel or seed that sort of seems to weave through all those endeavors.

Jeff Bullas: Yes, obviously, you wanted to, and I came across a great quote by Wayne Dyer the other day, which is "Teach yourself and then teach others and raise the energy of the planet." And I think, wow, that's just it in a nutshell. And obviously, you are doing that. You went and taught yourself, then taught others, and you obviously are raising the energy of the planet. So you're doing this, and you came to write your first book, which is Built to Sell. Is that your first book?

John Warrillow: It was. Well, I wrote a book for my former company, but it was unrelated. Built to Sell was the first in the trilogy that makes up the kind of box set for entrepreneurs. So yeah, it was the first book for entrepreneurs.

Jeff Bullas: So let's just take a bit of a dive into Built to Sell.

John Warrillow: Sure.

Jeff Bullas: And let's maybe distill it into, I suppose, the major components. It might be the best way to do it, so we can, I suppose, simplify what it's about. So Built to Sell, what's the first step that you think is important in a Built to Sell model?

John Warrillow: I think it's a philosophy that you're trying to raise a child to become an independent adult. Think about as a parent, your goal is to have the kids leave the nest and be able to go and contribute to the world. In the same way, I think a Built to Sell company is being nurtured by the founder, to create something that can go on and live without them. So that's the essence of a Built to Sell company, that it would exist or could exist without the owner. And that gives you, the owner, the ultimate poker hand, right? You can sell it if you want to, because it can thrive without you. But you could also install a general manager and just make it a passive income thing. You could sell half of it to a private equity group and keep half of it. There's lots of options, if it can run without you. And then if it can't, it's really just a job.

John Warrillow: That's the polar opposite of a Built to Sell company, when it really depends on you to do the work. And so that's the philosophy about Built to Sell, is really to create a company that thrives without you essentially.

Jeff Bullas: I love it. That's the underlying foundation, obviously, of the Built to Sell company. Writing a book, obviously, is a challenge. If you're going to sort of distill Built to Sell book into maybe four or five steps, so you basically want to create something that can live without you. So what's the first step into thinking about building a company to sell?

John Warrillow: I mean, the first thing is the most counterintuitive thing you can possibly imagine as an entrepreneur, because as an entrepreneur, you grow up and the idea is sell, sell, sell, right? Cash flow bringing, like buying something that someone will buy basically is the early days of a business. But once you build it to a certain point where it's sort of up on its knees and are starting to crawl, you need to actually sell less. And here's the reason, because when you sell a broad list of products and services, it's very difficult to get employees to do any of the work. You're a mile wide and an inch deep and therefore employees can't really follow your speed. And as a result, most of the business falls back on your shoulders because you can't train anybody to do the work.

John Warrillow: And so the opposite is to find something that meets the trifecta of scale which is teachable, valuable, repeatable, meaning you've got to go through all the products and services that you sell today and say okay, what of this hodgepodge menu of items can I teach employees to deliver their valuable TV valuable to customers and are reliable, or repeatable. Excuse me, they're things that customers need to buy on a regular cadence. And so that's the first step, is to actually winnow down the list of things that you offer to just the things that meet that trifecta of scale; teachable, valuable, repeatable.

Jeff Bullas: I love, that's really, really cool. Teachable, valuable, repeatable. I totally agree with you. I sort of came up as an entrepreneur, came up with a lot of ideas, and we offer a range of different things ongoing. And if I want to be doing it myself all the time, it's just not going to scale, is it? Because you've only got so much time in a day. So I think having a lot of ideas and going, what's the one thing we're selling? Well, what are the two or three things we're selling? Which is essentially what you're saying, isn't it?

John Warrillow: That's right. Yeah, that's the first step. And for a lot of us, it's the hardest step, because it requires so much discipline to say no. But a funny thing happens, I have found and I'd be curious to know if this has happened to you. When you start saying no and you say, "We're actually not in that business. We're really specialists in this business over here." All of a sudden, you become infinitely more referable, because as an expert in one thing, it becomes easier to refer you to friends or family. Your customers make it a lot easier for you to refer to you. If you're just a generalist, "Oh, he's an accountant, she's a window cleaner. He does architecture." It's just very difficult to refer you because you're just not an expert or a specialist or a guru in any one space. But if you are an architect who specializes in building museums, guess what, when you hear someone needs a museum designed, you're going to go, "Oh, yeah. I remember, there's a guy that does exactly that." And it just makes you that much more referable.

John Warrillow: Although it feels wrong to be specializing, it actually is, I think, the raw material to create the kind of flywheel of word of mouth that so many of us rely on. It's when you become that specialist, niched down, that you really start to pick up some more word of mouth.

Jeff Bullas: So what you're essentially saying is, instead of a mile wide and an inch deep, it's the other way around, it is a mile deep and an inch wide. I guess you've got that emerging. It's crawling now. What's the next, this beautiful child that you're trying to nurture, so it can leave. So what's the next step after that?

John Warrillow: I think the next step is to create recurring revenue. And that's why the R in the TVR model is so important because you have to find a product or service that customers have an ongoing need for. And once you do that, it really comes down to creating some sort of subscription, a newity service contract, something that takes you out of the transaction business model, where you've got to stimulate demand, and fulfill demand, et cetera, to the automatic customer model, which is where you have customers that are paying you on a recurring basis for a set of solutions, a set of offerings that they have to opt out of as opposed to opting into.

John Warrillow: And that's really the essence of a recurring business model. And it's obviously anyone who buy software these days, you're buying on recurring models. But now the savviest, I think entrepreneurs and those certainly that want to build a company that can thrive without them, are turning just about any business these days into a recurring revenue model. And I think that's the second step in this process, it creates some automatic revenue that gives you that base of sustainable revenue, the foundation to pay your ongoing expenses onto which you can then start to expand.

Jeff Bullas: That makes a lot of sense. And that your book, The Automatic Customer, which I haven't read, but I have downloaded, I'm going to dive into that more. But yeah, creating something that... And the challenge, so you just go to unsubscribe, let's try and unsubscribe from an Apple's subscription, for example. Good luck with that, trying to find the unsubscribe button in Apple is a challenge in its own right. So now that we are going to opt out of not opt into... So you built this recurring business model. What are the challenges? What's the next step after that?

John Warrillow: Yeah, I mean, one of the things about a recurring revenue model in particular subscription model that you need to think very carefully about is that all of a sudden, your cash flow can become compromised because instead of getting 100% of what you sell up front, which is the way we buy most products, when you're buying a subscription, you're buying it on a tiny little slice every month for a long, long time. So over the lifetime value of that customer, that subscriber, you're bound to get more money from them in most cases. But up front, you're usually getting less money. In the old days, you used to go to Staples, I'm not sure what it is in Australia, but a big box retail store and you bought a box of Microsoft Office off the shelf, right? You install the CDs into the computer and there you spend 400 bucks on the CDs and you have it for life, it's been perpetuity, right?

John Warrillow: Of course, nowadays, we all subscribe to Office 365, or whatever it is, and you pay a little bit of money, but you paid every year. And over the lifetime, Microsoft gets more money out of you. But in the short term, they get less money. And so that's a real head scratcher for a lot of entrepreneurs. And so what we need to do is think through the cash flow model. And in particular, what I would recommend in most cases is to find a way to build for at least a big portion of your subscription upfront. It's one of the other drivers of the value of your company, is what we call the cash flow seesaw or teeter totter in America, where the value of your company goes up, the more cash you can accumulate and spit off. And so again, when you create your subscription model, think about, is there a way that I can get customers to pay up front for a significant portion?

John Warrillow: Because that does two things. Number one, it makes them stickier, and it gives you cash flow up front. It makes them stickier, because they make more of an investment with you when they start with you, and that makes them more likely to bet in and learn and onboard and ultimately stay with you longer.

Jeff Bullas: That's a great idea. In other words, sell instead of just a monthly subscription, sell it up front for one year and give them a substantial discount for buying that, and that would give you a bigger chunk of money.

John Warrillow: Yeah, and as well, if you can get them to buy, I mean, in the software case, you get them to buy like an installation package or an upfront training program. Well, they're making a significant financial investment to use the product in the first place. And that helps you two ways. Number one, the cash flow. But number two, because they're making that big upfront investment, they tend to pay more attention to onboarding. And the thing that is most predictive of the retention rate of a subscriber is the first 30 days of their relationship with you. It's called the onboarding window. And if you as a vendor, as an entrepreneur can nail that first 30 days, it doesn't matter what you're selling, it could be window cleaning services, it could be a software program, it doesn't matter. If you make sure that the first 30 days of a customer relationship as a subscriber is amazing, their likelihood to stay with you is almost infinite.

John Warrillow: And the opposite is not true. If you drop the ball in the first 30 days, no matter how good you are after that, their likelihood to attract goes up, their likelihood to leave you is much, much higher if you bubble the ball in the first 30 days. So if there's any place in the subscription relationship to really focus on, it's that first 30 days. That's going to be predictive of how long they stay with you.

Jeff Bullas: Yeah, because one of the biggest issues with subscription is churn. And what you've talked about is something that will minimize churn by, we could use the old chestnut term under promise and over deliver, which is essentially what you're saying, isn't it? So give us some examples of that, let's say someone signs up to an education talk program, they spend $50 a month, so we got the likes of digital marketer does this. So what are some of the things you would do in the first 30 days to make sure that they're just going, "Wow, this is so cool." What are some tactics?

John Warrillow: Let me give you a real life example, because it's in the book that you referenced an automatic customer in it. I think it just is a really illustrative example of bad onboarding versus good onboarding. The company is Constant Contact. Do you know Constant Contact? I'm imagining you know those guys. Gail Goodman was the CEO at the time, and they used to be run by a bunch of engineers. And so when people signed up for Constant contact service, they took a who, what, when, approach to onboarding. Meaning, the first thing they prompted you to do once you'd sign up for a free Constant Contact contract or a 30-day trial or whatever, they say, "Great, we're going to help you send an email to your customers and prospects. Who do you want to send it to?" Because they were engineers thinking in a very linear fashion.

John Warrillow: The challenge with that, that Goodman found was that the uploading of a CSV file and trying to match the fields was quite complicated for most entrepreneurs. Most entrepreneurs are not tech savvy, and certainly most retail business owners are kind of dumbfounded by this idea of uploading a CSV file and trying to match the columns and the rows, and... And they bail on it. Right in the first hour or two of using the software, they'd say, "To hell with this. This is way too complicated." And they bail, and they had an astronomical churn rate in their trial period. And so Goodman retooled and worked with the engineers and said, "You know what, guys, we got to think about this differently. We got to think more creatively about the onboarding process. What if we take a what, who, when, approach to onboarding? In other words, instead of asking them to upload their CSV file, why don't we have them design their first email? If you're a flower shop, we've got all these templates of visuals of pictures you can use at flower shops and all of a sudden the business owner is importing a picture, and it looks beautiful, and they're putting their name and they're writing their email, and it's all becoming on screen for them. And it's kind of coming to life for them. And they're becoming more and more emotionally attached to both the software and the idea of sending that email."

John Warrillow: And once they'd created a draft of the email, only then did Goodman say, "Okay, guys, now step two, we got to figure out who to send this to, right? And this is kind of a clue gee messy process, you've got to upload this thing, we can help you. Here's our 800 number." But by that time, they had the intestinal fortitude, the equity, the investment in the relationship to get over the speed bump associated with uploading the CSV file. And so again, this may sound really trivial as an example, but it's the kind of choreographing that smart companies think about when it comes to onboarding. It's that level of detail so that you can really nail the customer experience upfront. Long story short, Goodman nailed that form of onboarding, dropping their churn rates. It ultimately became a very successful company as a result.

Jeff Bullas: Yeah, that's a really great example. This may be something that's associated with that, the IKEA effect, which is essentially getting someone to put something together, which is what you've really described with an email, using a template. And IKEA effect is that they'll get, the customers are so embedded with the product that they need to put it together.

John Warrillow: Yes. I mean, the pride of creation, I guess, on some level, although, God help me if I have to put another IKEA information together.

Jeff Bullas: Well, it worked to a point, and I've tried to avoid it ever since. Especially-

John Warrillow: That moment I turned 30.

Jeff Bullas: Yeah, that's right. I put a double bunk together, and I had panels down the wrong way. And it's like, disassemble, then assemble again. It's like, shoot me. That's really what I thought at the end of that time. All right, so we've got the onboarding, and we're having a positive experience with over promised, over delivered, and promised. They're happy, you've got the first 30 days nailed. So what are some of the steps after that, that you see is we need to have a closer look at?

John Warrillow: Yeah, you mean in terms of building a valuable company, building a Built to Sell company?

Jeff Bullas: Yeah.

John Warrillow: I mean, one of the other things is what we call the Switzerland structure. Once you build this company up, what you've got to make sure is you do what investors call “de-risking”. It sounds like such a pretentious financial geek kind of term. But effectively, when an acquirer wants to buy your business, one of the things that they are evaluating is the level of risk, right? The more risk, the lower the value they're going to place on your business. So you want to de risk it for them, and then jack up the value of your company in their eyes. And one of the ways you de-risk it is you focus on the Switzerland structure, which is inspired by the country of Switzerland, which is sort of this, a lot of jokes, because they never take sides, right? The world wars can be breaking out around them and they choose not to pick a side, because they're trying to be Switzerland.

John Warrillow: And so the same is true of the most valuable companies, they remain Switzerland, meaning not dependent, or not too cozy to anyone; customer, employee, or supplier. That's the three constituencies, the legs of the stool, the Switzerland structure, where you find that a lot of companies become really dependent on a single customer, a single supplier or key employee. And what you've got to do at this process, especially when you're starting to think about, hey, maybe I can sell this business or juice value up to where I could sell it, you want to make sure that you're independent of any of those three groups. So customer diversity, you really want to make sure no one customer or client makes up more than say 10 or 15% of your revenue. Equally, suppliers. If you're getting all of your supply from one company, it can be a problem because that company could go out of business, changes model, et cetera. And the same token, you want to make sure that you're not overly dependent on one employee, because obviously, an acquirer is going to look at that as a potential liability.

Jeff Bullas: Yeah, I'd really like that. I do know, I was on the board of a company recently, and we were very dependent upon Facebook for 80% of our revenue, which worried me a lot.

John Warrillow: They changed the algorithm, they changed the pricing model, they changed a number of things.

Jeff Bullas: Exactly. So what we did is we spread the risk right around that, took too much more direct business model, and dealt with a whole range of different markets where we aren't dependent on just one customer.

John Warrillow: That's fantastic.

Jeff Bullas: Which is really, really good. So the Switzerland effect model, what's the next step after that, that you think is really, really important?

John Warrillow: Yeah, I mean, at this point, I think you've probably got a Built to Sell company. You're selling a few things, you can get other people to do the work, you're building it on a recurring model. So it's a customer coming in on a recurring cadence. You're nailing the onboarding period, so you're reducing churn and you've got an independent model, so it's not dependent on you. At that point, I think you've got the essence of the raw material for a Built to Sell company. And then I think you probably want to start having these conversations in your mind about, "What do I want to do next? Do I want to harvest the value of this company, in other words, ultimately sell it? Or, do I want to just continue to grow the business in perpetuity? Am I happy doing that?" And you may decide that you are.

John Warrillow: One of the things that I talk a lot about, and maybe Jeff, you've done some of the same thinking on your end. There's this thing called the freedom point where a lot of entrepreneurs will wake up, and they will say, in a cold sweat, oftentimes, they will say, "Hold on, hang on a minute. If I sell this company, it would actually give me enough money to live for the rest of my life, I don't actually have to work again." And when you have that realization, first of all, it can be incredibly rewarding to have that realization. The second thing that happens oftentimes, is the thought that, "Oh, my gosh, every day I keep my business. I'm like gambling, poker addicts at the table in Las Vegas, putting all the chips in the middle of the table, because I've essentially created what I was aspiring to create, which is freedom, right?" It's the ultimate freedom, it's the ultimate world for most entrepreneurs, that there's creating. And every day, I continue to own that company, I'm risking that freedom. Because as we've seen, in this pandemic, anything can happen.

John Warrillow: There's always a black swan event around the corner. And if you don't monetize what you've created, you're effectively all in all the time. And for a lot of entrepreneurs when they start their business, it's like zero percentage of their net worth, right? It's an idea for most of us, and it's not worth anything. But if you reach a point where it is a viable ongoing business, it can become quite quickly a huge proportion of your net worth. We think about diversity in our personal lives, right? You don't buy all one stock in your stock market. But when it comes to your business, effectively, your net worth could be 50, 60, 70, 80% of your net worth. It could be in this one asset. That's when we start to think about, well, maybe it makes sense to harvest some of what you've created by selling either all or part of what you built.

Jeff Bullas: Yeah. So that's a great segue then to go to, all right, you've built to sell, you've had this aha moment. And going, gee, I've got all almost all my personal wealth tied up in this one business or one object-

John Warrillow: Asset, or whatever.

Jeff Bullas: Asset, yeah. Black's one of them, we've had one of these this year. And such a big risk. Some people go down the route, so they sell it and they go, "What do I do next?" And they lose purpose. They're going, "I've arrived. I've got all this money in the bank." And they realize, "Well, I haven't arrived, I'm lost." I've seen that with a few people over the last few years. It's like, okay, you never arrive. It's just the journey, which you want to enjoy.

John Warrillow: Mm-hmm (affirmative). Yeah.

Jeff Bullas: So anyway, that's a little segue there. But let's just dive on to the next part, which I find fascinating, which is a topic of your new book, which, when's it coming out? Is it January?

John Warrillow: On January, 12th, 2021. So in about a few days after we record this.

Jeff Bullas: Let's look under the covers and see what maybe is going to emerge from that in January. So you've built a business, build it to sell. Now, it's the art of selling?

John Warrillow: Mm-hmm (affirmative).

Jeff Bullas: Tell us some of the key steps in the art of selling.

John Warrillow: Yeah, I mean, first of all, I think acknowledging that it is an art not a science. It's tempting, there's a whole raft of valuation consultants and accountants that will claim to be able to put a value on your company. I always sort of smile because it's an estimate of value, right? Because really value, the ultimate arbiter of value is going to be the acquirer, right? They're going to view your business and they're going to come up in their own mind about what they think it's worth. And so there's an art, as much as it's a science, there's a bigger portion of it, I think, which is an art, which is projecting what it would feel like for an acquirer to own your company. And so I think there's an overlying sort of art, which is that this is at least half an art form of promoting this business and making it a successful transaction for you.

John Warrillow: In the book, I did... For the podcast, I do an interview with a different entrepreneur every week, I've been doing it for five years, so up to something like 300 interviews now. I tried to curate the best ideas for selling a company, the best strategies, the best hacks, the best negotiations, sort of tips I could come up with, and put them into the book. That's really, it's a distillation of those interviews that have been so helpful for me personally, and have kind of formed what is in the book.

Jeff Bullas: Right. So you're trying to look as I suppose as positive as possible, but from a much more psychological point of view than just necessarily nuts and bolts, like it's going to be worth 10 X, annual revenue or 20 X unit profit, whatever. So what are some of the psychology that you discovered works well? Is it painting the dream of what they're going to get from buying this business, it's going to take them to the next level? Tell us a little bit more about the art side?

John Warrillow: Yeah, yeah. Have you ever read, and this is an old book, I think it's brilliant. But do you ever read recent Trout, The Art of Positioning, the recent Trout did... No, it's not The Art of Positioning, The Battle FOr Your Mind. Do you remember that book? 1970s. It's long-

Jeff Bullas: So the author isn't Trout. Is that what you're saying?

John Warrillow: Yeah, that's right. Al Ries, Jack Trout.

Jeff Bullas: Yep.

John Warrillow: I can't remember the name of it, but it's the best. I mean, you could just google recent Trout Marketing Positioning, and you'd come up with it in a second. But it's the best book I've ever read on the art of positioning a product. And they talked about the launch of Miller Lite beer and the way they positioned it, which was everything you've always wanted a beer, and less, because what they were doing was taking all the mental synapses in the brain around a beer. It's something that everybody knows what it is, everybody knows what it tastes like, everybody knows what it feels like to have a cold frosty mug of beer in your hand. And then just put that very subtle twist and said, and less because it was Miller Lite and had less calories, et cetera. And what they were talking about was the art of positioning a product in a zone or a category that consumers already know, and just placing a slight point of differentiation.

John Warrillow: The same is true when you go to sell your business, because acquirers, in particular strategic acquires and private equity groups. They are inundated with people trying to get their attention. And so they use shortcuts as a way to filter out the best opportunities. And so, one of the ways they do that is they have a kind of company in their mind that they want to go by. And if you don't look like one of those, they're going to filter you out pretty quickly. I'll give you an example. There's one of the books, a guy named Feldberg, who I interviewed, had a company called EmberNet, and they helped universities and colleges put their content online, their courses online. And in the early days, they got an offer, which was a pretty classic offer for their company of around three times profit. That was an acquisition offer, and for the acquirer making that offer, they saw EmberNet as this little web design shop. And they figured that a web design shop with a couple of partners, maybe a million or two in sales was worth around three times EBITDA.

John Warrillow: What Feldberg did is he said, "That's not enough." We are in this incredible burgeoning field of e-learning. And this is around the time that Lynda was acquired by LinkedIn, and everybody was all excited about e-learning. And so they made a change to the way they position their company. They went from positioning their business as a website design studio to a leader in the e-learning space. Well, long story short, a couple years later, they got another acquisition offer. This time, it was from a company that wanted to be in the e-learning space. They offered 13 times profit. So more than four times what they had originally been offered in terms of valuation model. Now, it was a bigger company, it was a different business model. But in part, it was the way they were positioning their company. So that's just one of many sorts of tips and tricks for how to maximize the value of your company when you go to harvest it, is you've got to look like something someone wants to buy.

John Warrillow: Acquirers have a list of the types of companies they want to buy. And you've got to fit into one of those categories, one of those buckets. And in the case of EmberNet, they fit into the e-earning bucket, which is how they got such a high multiple.

Jeff Bullas: It's very cool. I do like that approach. So you're differentiating and trying to tap into something that's, I suppose, trending.

John Warrillow: That's right.

Jeff Bullas: And I have heard some, watched TED Talk a while back and they use five different key things to maximize or success from an entrepreneur or business. And number one was finding the right trend that far surpassed even the funding, it surpassed the idea, but finding a niche that is trending. And I would totally agree with that.

John Warrillow: Very important in the sale of companies.

Jeff Bullas: Yeah. There's a couple of things I wanted to touch on, and then we'll have a look maybe at the Value Builder System that intrigues me and how that works in terms of wrapping up Built to Sell with the art of selling a business. So a lot of people want to sell the companies buying them, you want to de risk it. One of them is a Switzerland model. The other one is that they want to see a robust process. Let's look at the robust process a little bit in terms of how valuable you think they are.

John Warrillow: No, I think they are incredibly valuable. Again, in part, because a standard operating procedure or process, process for our American listeners, is a way that your business can operate without you. And so what we talked about a Built to Sell company is not dependent on its owner, one of the strategies is to sell less things to more people. Another strategy is to take the processes that you do in your company and document them, and make them repeatable, and share them with the people that you want to do the work. And again, this gives not only your business the ability to thrive without you, and that's incredibly important, but it also gives an acquirer a sense that there is a thing behind this business, there's process, there's infrastructure.

John Warrillow: If you put yourself in the shoes of an acquirer, they're petrified that they're going to buy your company and you're going to walk out the door, and they're not going to know how to run the thing. Imagine you get handed the keys to a car that you don't even know how to turn on, let alone drive or service et cetera. And the same thing is true as an acquirer. So when they see that you've documented your processes, that you built out a whole library and operating manual Handbook, it gives them an enormous sense of confidence that, hey, there's a recipe card here that we can follow. So I think that's a really important part of a Built to Sell company for sure.

Jeff Bullas: Yeah. In other words, you are essentially building something that doesn't need you, because a challenge with a lot of businesses is that you want to buy the business, you don't want to buy the person who started the business. And that becomes a challenge, doesn't it? For me, jeffbullas.com is me. Yes, I built processes behind it. But there is a real challenge to making it. So you're buying a system that is repeatable. And basically people walk in, they can just turn up the volume, do more marketing, change the marketing, because the system is robust and works well. So we've got basically the art of selling your business.

John Warrillow: Mm-hmm (affirmative).

Jeff Bullas: And you sort of touched on the art. What's some of the science of selling your business before we get into the Value Builder System?

John Warrillow: Sure. We can talk a little bit about valuable things or so. It's a software system that is designed to help you improve the value of your company. It's dependent on eight unique drivers or variables. We measure everybody who comes in and completes their Value Builder score, which is sort of like an intake questionnaire. It's about 40 questions that ask you about your business, do you have recurring revenue, how dependent is the company on you, et cetera, et cetera, et cetera. And what we do is give you a score. The average performing business when they start with us gets a score of 59 out of 100. And those companies are trading at getting offers of roughly 3.5 times pre tax profit. Those companies that achieve a score of 90 or greater, so these are the kind of best in class the All Stars so to speak, they're getting offers of 7.1 times pre tax profit or more than double.

John Warrillow: So it's a system that's designed to first of all, benchmark where you are, and then help you improve the value by thinking about moving these eight levers effectively. So one of those eight levers is recurring revenue, we've talked about that already, you've got to have more recurring revenue. Another is the Switzerland structure, making sure you're not dependent on any one customer, employee, or supplier. So there's these eight levers you can kind of manipulate up and down, and it drives up the value of your company. If you can get your score to 90 out of a possible 100, you've more than doubled your business value.

John Warrillow: One of the other things that I think, Jeff, is really aspirational and really attractive, I think about Value Builder, is that not only does a score of 90 improve the value of your company, it triples the likelihood that you're going to get an offer for your company. When we look at the average of our 55,000 users, about 13% of them have received an offer to buy their business. Yet, if we look at the folks who score 90 or greater, almost 40% of them have received an offer to buy their business, almost three times more likely. And again, you may not want to sell your company, but I bet you'd want to be courted, or get unsolicited offers because that puts you in a negotiation leverage position, right? You've got total control at that point. You don't have to sell, but you can entertain an offer. And that's I think one of the true benefits of focusing on these eight factors.

Jeff Bullas: So how does a value builder system work? In other words, if someone wanted to, let's say, use the system, how does it work? What sort of the pricing model? Tell us a little bit more about that, that would be interesting to the readers or listeners.

John Warrillow: Well, it's always free to get started. So you can get your value builder score, just go to valuebuilder.com, and you can complete the questionnaire. When you do that, we'll invite you to connect with a certified value builder, which is one of the people around the world that have been licensed to use the system to offer this system. So in Australia, we've got sort of high value builders in Melbourne, and Sydney, and Brisbane, and all over the West, Australian, Perth, and so forth. And then there's people all over the world who offer the value builder system, and they will help you interpret your score. They'll give you your report out of a possible 100. And then if you want, you can engage them to help you go through the 12 steps in the value builder system, and they will take you through it. But again, it's free to get started, and then you can make the decision whether you want to go through the whole process with your certification.

Jeff Bullas: Okay. So you've built a really interesting model of views that you've learned from, I suppose, hard work and challenge. What are some of the big challenges you've discovered as an entrepreneur that you've really struggled with personally?

John Warrillow: Personally, I think... Remember that radio show I told you about, like 25 years ago, I used to do? There was a guy named Greg Clark, he's probably dead now. I mean, this was years ago. I hope he's not dead. We had a great interview, but this is going back 30 years. And I remember I said, "What's the one thing that you wished someone had told you or done differently, or whatever?" And he said, "You know what, John, I wished I had not gotten so high on the highs and knockouts and so low on the lows." I've always remembered that quote because it resonated with me at the time, it still resonates with me today.

John Warrillow: I find that if I do one... One of my biggest mistakes is taking the business much, much too personally. And so as a result, when things go well, I am way too happy. And then when things don't go as well, I am really bear to be around. And so I've always struggled to moderate my moods around how things are going in the business. That's something I'm constantly working on even to this day, I'm constantly trying to find more of a middle ground in terms of not getting too high on the highs and low on lows. Again, I remember the quote, like it's yesterday. And again, it must be almost 30 years ago that Greg shared that with me. That's one of the things I personally struggle with. I've heard this over time, as well with other entrepreneurs is that, and the book that was mentioned was The Hard Things About Hard Things.

Jeff Bullas: Yeah, great book.

John Warrillow: I think it's done by Horowitz,

Jeff Bullas: Ben Horowitz, I think.

John Warrillow: Yeah. I would agree with you, I've had some of my lowest moments in life, I think when businesses failed. Sometimes I've had just an absolute boom for two years as sales skyrocketed, and it's like a drug. It's a real struggle to manage that.

Jeff Bullas: So just to wrap things up, we've talked about the Built to Sell, which I think is a great book, and then you've got The Art of Selling, then you've got the system that I suppose wraps those both, and that would start the business, building it, and then exiting. So what are two or three things you could share with our listeners that you'd like them to go away with that you think it's really, really important as an entrepreneur?

John Warrillow: Yeah, look, I think one of the key themes that transcends everything that I do is this idea that if you can build a company that can thrive without you, you have the ultimate control. You can create the life that you want to lead, you can continue to run your business knowing that it's not dependent on you, that it is a sellable asset if you ever choose to monetize it. And that takes a different mindset. For money entrepreneurs, we grow up in entrepreneurship thinking that our profit and loss statement is our report card at the end of the year, right? Like how do we do on our top line, how does the bottom line look. And in many cases, that's a false narrative. It's a mirage, because if you can't build it to a point where it doesn't depend on you, it's not very valuable, and it really can be really much less of a job than a real kind of transferable asset.

John Warrillow: And I think that the mindsets that I think is important, I'm sure in the very beginning of our conversation, is this idea of instead of thinking about how do I make more money this year, or how do I make more revenue this year, think about how do I take this child, this adolescent that's going to move it in all kinds of different directions, lots of adrenaline and testosterone? And how do I kind of get it to a point where he or she can sort of thrive on their own? It's just a different way to think about your role as an entrepreneur. It's the thought of being a parent to a business as opposed to kind of being the CEO of business. Does that make sense?

Jeff Bullas: Yeah, totally. I think it's a great analogy you're using, is you're essentially trying to nourish a child to grow up and leave. And your job as a parent is not to have them dependent on you, your job as a parent done correctly, is that hopefully they can grow up and be independent enough to go out into the world and succeed.

John Warrillow: Yeah, and I think if you talk to parents, I mean, you're a dad. There's nothing that gives a parent more pride than seeing their kid independently succeeding in the world, whatever they choose to do; fireman, lawyer, whatever. It doesn't matter what they're doing. They're independent, they are thriving without you. And I think the same is true, that feeling that you get from running a company, that, "Oh, my gosh, it's working without me. They're making sales, they're making widgets, they're shipping customers, customers are happy, and I'm not doing anything." And that is an enormous sense of satisfaction for entrepreneurs, whether you sell it or not, it's kind of gravy. It just gives you that enormous sense of pride, of achievement, that you build something, you've created something that literally will perpetuate itself beyond you. And I think that's an amazing feeling.

Jeff Bullas: Yeah, and I agree. When I do the podcasts, yes, I have to do the doing in terms of the interview. But we have a system behind that, that I still do one other important part of it, which is to go through the transcripts at the end, because for me, what's very important part of the journey for me is to learn.

John Warrillow: Mm-hmm (affirmative). Got it.

Jeff Bullas: And every opportunity I have to sit down and have a chat like we're having now and dive into what you've learned, I learn so much. You're teaching the listeners, and that gives me so much joy, is that then we're raising the whole energy of the planet. And I think I used the term before is, teach yourself, teach others, and raise the energy of the planet

John Warrillow: I love that expression.

Jeff Bullas: It's become a little bit of a mantra in the last few weeks, but I've done that in different ways. But what I love about the podcast now is I know the team can just deliver on it, I only have to do a couple things. Number one, run the interview, upload the files at the end, and then do the transcripts. The reason I want to do that is because I then have to distill 14,000 words or 15,000 words that have emerged from this conversation. And I'm going, "Wow, that is so cool." And for me, just the learning part. Look, and a lot of entrepreneurs think it's all about the money, and we know they get to a certain point where the money is yes, long as it can pay for your life, long as it can give you freedom to go to a restaurant or take a holiday. After a certain point, it becomes pointless.

John Warrillow: That's right, yeah.

Jeff Bullas: And then the freedom then really is the freedom that you have emotionally, intellectually, to do the things you really, really love doing. And that's the other thing about being an entrepreneur, is that freedom comes with its responsibility, and that it can be painful, it can be hard. I certainly see that, as an entrepreneur, if you just get lost in the fact that it's all about the money. Well, it's pretty soulless. And it's got to be that balance between giving the freedom financially, maybe de risking and selling it so that you can maybe move on to the next adventure.

John Warrillow: Absolutely.

Jeff Bullas: Because certainly selling your business is great. But if you've got nothing to do except just go to the golf course every day and buy tequila, you got in six months, you are going to hate yourself.

John Warrillow: Absolutely. And you know, if I go back to the 300 or so people I've interviewed for Built to Sell radio, I think virtually all of them have started another company. It wasn't about retiring in a true sense of the word. It was because they wanted to move on. They wanted to monetize what they created and go do something else. And I couldn't agree more.

Jeff Bullas: So apart from exiting a business, just to finish things up. What's important to John?

John Warrillow: Oh, man. Obviously, I've referenced my kids throughout the conversation. So my family's hugely important. I try to take some of the things that we've talked about today into my personal life. I just love being a dad and watching my kids grow up and that takes up a lot of my time right now. That's a pretty big deal.

Jeff Bullas: So family brings you joy.

John Warrillow: Yeah, for sure.

Jeff Bullas: Okay.

John Warrillow: For sure.

Jeff Bullas: Well, if you can raise and discuss your family, then maybe that is success.

John Warrillow: Good. The rest is gravy. Yeah, for sure. I agree.

Jeff Bullas: All right, John. It's been an absolute pleasure.

John Warrillow: No, me too. I've enjoyed this conversation for sure.

Jeff Bullas: We'll keep in touch. I look forward to sharing this with my listeners. And I look forward to catching up in real life sometime when 2020 has passed and we can-

John Warrillow: When we've all got the jab and we can get on with our lives.

Jeff Bullas: We can get into a plane and go and explore the world and meet up with various people. I look forward to catching up with you at some stage.

John Warrillow: I really like that.

Jeff Bullas: You live in a beautiful country. I have had the pleasure of being in Canada, so I'd like to revisit it. Thanks very much, John. It's been an absolute pleasure.

John Warrillow: Thanks, Jeff.

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