I’ve been questioning myself a lot this over the years “How to create a more scalable and sellable practice” or “How to create a business that can thrive without you”

– this is a multi-million-dollar question and especially for a service-based business, it is definitely a challenge as there are so many moving factors in the puzzle in scaling it.

Welcome to OMD TV and Podcast show the place to be to grow and scale your practice.

We are now in the second lockdown ever since the Pandemic started and we’d like to take this opportunity to record this special episode for you. Now we are going to talk about the key factors to make your practice more scalable and sellable.

This is what I have been finding… many business owners find themselves trapped in an unsellable business. Customers ask to deal with the owner, the owner becomes personally involve in serving the customer, reinforcing the customer’s reliance on the owner, and the cycle continues. A business reliant on its owner is unsellable, so the owner becomes trapped in the business.

I think the goal of building a practice is to make it sellable even though you don’t want to sell or even think about the exit plan in the future but if you want to build a great business you need to think about making your practice more scalable.

First of all, when building a company that runs successfully without you involves thinking of your business as an asset, rather than a job.

The core idea is to set your business up to be self-managing and attractive to an acquirer—even if you have no plans to sell. Making yourself attractive to an acquirer involves the very same things you need to create a self-managing company, because in essence, they are the same thing.

Acquirers look for businesses that can run without their founder, which also happens to be the key ingredient in a self-managing business.

I read this incredible book called “Built to Sell” few years ago and it helps transform our business quite significantly. I love this book so much that I’ve recently listened to its audio version again and I want to share with you the key findings from this book. If you want a copy of this book, message me, I’ll send you a free copy.

Now it’s time for us to reveal the key 5 steps of building a valuable, sellable business;

Step 1: ISOLATE A PRODUCT OR SERVICE WITH THE POTENTIAL TO SCALE.

The first step in building a business that can thrive without you is to find a service or product that has the potential to scale. Scalable things meet three criteria: (1) They are “teachable” to employees (like our Agency’s signature Seven-Step Web Design Process) or can be delivered through technology; (2) they are “valuable” to your customers or patients, which allows you to avoid commoditization; (3) they are ”repeatable, ”meaning customers need to return again and again to buy (e.g., think razor blades, not razors).

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 our company was ensuring our revenue was repeatable, meaning customers had to repurchase somewhat regularly.

Brainstorm all of the products and services that you provide today and plot them on a simple diagram with “Teachable” on one axis and “Valuable” on the other:

Once you have plotted everything you offer on the chart, eliminate services or products that a customer needs to buy only once.

Often you’ll find that the most teachable services or products are the ones that customers value the least. Alternatively, you’ll find that the products and services your customers value most are the least teachable. That’s normal. Try combining one or more services or products to create the idea offering.

STEP 2: CREATE A POSITIVE CASH FLOW CYCLE

You may notice that as part of the practice running journey, sometimes you found it hard to make the big strategic changes that you’d like to make happen, in part because we were simultaneously fretting about having enough money in the bank to pay our employees.

By creating a positive cash flow cycle, you’ll have the financial cushion and confidence to make some of the difficult changes required in steps 3 and 4. 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) all year to hire writers, editors, and photographers to produce the magazine.

Charging up front for your product or service will be possible if you have documented and differentiated your unique offering properly (step 1). Depending on your service or product, you may not be able to charge the entire amount in advance, but try to get at least some portion of your money before delivery.

A positive cash flow cycle will also increase the value of your practice. When an acquirer buys your practice, he or she needs to write two checks. One, obviously, is to you, the owner(s); the second check is to your company to fund its working capital – the money required for your business to pay its day-to-day bills.

If your business needs lots of cash, the acquirer will have to set aside money for working capital, lessening his or her appetite to write you a fat check. The inverse is also true: If your company generates excess cash, an acquirer will usually pay more for your business because he or she doesn’t have to commit funds to working capital.

STEP 3: HIRE A SALES TEAM

Once you have created and packaged your offering and started to charge up front, you need to remove yourself from selling it. If you have others delivering the product or service but you’re still the rainmaker, you will not be able to sell your business without a long and risky earn-out.

As you build your sales or physician liaison team, look for people who, first, enjoy selling and, second, like the product. Avoid hiring salespeople who come from professional services companies; they will likely want to reinvent your product or service for every customer.

If at all possible, hire at least two people to do sales, not just one. For one thing, sales careers typically attract competitive people, and a little healthy competition between these employees will work in your favour; for another, an acquirer will want to see that you have a product or service that can be sold by salespeople in general and not just one superstar salesperson.

STEP 4: STOP SELLING EVERYTHING ELSE

Once you’ve assembled a great sales team, stop taking in projects that fall outside of the standard offering you identified in Step 1. It’s tempting to accept these sales because they bolster your revenue and cash flow. If you’re charging up front for your service or product and your salespeople are selling it, then you shouldn’t have to worry about cash flow. That leaves added revenue as the reason to accept projects that fall outside of your process. The revenue may feel good at first, but it comes at an unacceptable cost:

Your team will lose focus; customers, realizing that you’re not serious about your standard process, will see a chink in your armor and start asking for customization of their projects; and to meet this demand, you will need to hire other people to deliver.

I’ve had the opportunity to study hundreds of business owners who have made this transition, and most have told that customers who used to ask for custom services respected the change they’d made to their business model. Many clients actually buy more once the service or product is standardized. Customers are smart; they often know you’re overreaching your capabilities in accepting assignments that fall outside of your sweet spot.

Stopping yourself from accepting projects outside of your scalable product or service is the toughest part of creating a business that can thrive without you. You will have employees testing your resolve and customers asking for exceptions, and you will second guess yourself on more than one occasion. This is normal; you have to be strong on this and resist the temptation.

There is a point where the wind will start blowing the other way and your customers, employees, and stakeholders will finally realize that you’re serious about focusing on one thing. It takes time. It will happen, and when it does and you feel as if the boat has actually shifted, you will have sailed a long way toward creating a sellable business.

LESSONS FROM OUR EXPERIENCE

Business owners often believe that to be “customer-centric,” they have to give customers whatever they want. But giving customers too much choice can be a detriment, especially if you’re trying to build a company you can scale and ultimately sell. I learned this the hard way.

STEP 5: LAUNCH A LONG-TERM INCENTIVE PLAN FOR MANAGERS

If you’d like to have a business you could sell, you need to prove to a buyer that you have a management team who can run the business after you’re gone. What’s more, you need to show that the management team is locked into staying with your company after acquisition.

Avoid using equity to retain key management through an acquisition, as it will unnecessarily complicate the sale process and dilute your holdings. Instead, create a long-term incentive plan for your key managers. Each year, take an amount equivalent to their annual bonus and put it aside in a long-term incentive account earmarked for each manager you want to retain. Allow the manager to withdraw one-third of the account’s balance each year after a three-year period. That way, a good manager must walk away from a significant amount of money should he or she decide to leave your company.

You may also choose to “top-up” the balance in a long-term incentive plan with a one-time special bonus in the event of the sale of your business. That way, your key managers will have an increased incentive to help you sell your business and stay with your practice after the sale to get their share of the proceeds.

The following five steps provide a road map for creating a business that can thrive without you.

I’ve also included my own personal observations and experiences learnt from applying the process in our business.

Before you start this process, please engage a good accountant experienced in helping business owners with succession planning. Do not wait until you have an offer to see an accountant. Timing is critical.

Now if you want to scale up and automate your lead generation process for your key procedure, I’d suggest that you create an automated webinar sales funnel and use it as the lead magnet for your one key procedure.

Since your patients can’t really attend in person seminars or events you are hosting, or even thinking about keeping in touch with your referring doctors, webinar is a way to go, it can be used as a valuable lead magnet on your website that allows your patients and prospects to learn more about you and your expertise and answer a lot of frequently asked questions that they have for your key procedure, this will help save your time from repeating again and again the same info.

This is also to separate yourself from your competitors by doing something different and help connect with your prospects via visual media.

If you want to learn how to set up an automated webinar that can be used to generate new patients and referral on autopilot, I’d recommend that you check out our online course called Automated Webinar Sales Funnel. This is to automate your marketing to leverage your time and scale your practice.

There you have it, the indispensable tool for you to connect and attract new patients to your practice and position you as the expert in your chosen field.

I’ll leave a link to it in the show note below so you can sign up.

Thanks for turning in and hope to see you in our webinar online course soon.

#29: How To Create a More Scalable & Sellable Practice

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