The Freedom Manifesto Part 1: Picking your number Write down your number Get a divorce Twitter@JohnWarrillow John Warrillow is the author of Built to Sell
8 Many of us start out in business with a number, and then the chaos of running a company somehow takes over. We become reactionary and addicted to the thrill of creating one new product, finding one new customer, solving one more problem, hiring one new employee. Your number starts to fade into the background. Write down your number Most business owners I know have one. It s not something you talk about in polite company. Your spouse may not even know what it is. Your number is the price you would accept if someone walked into your company tomorrow wanting to buy it. Whatever your number is, my advice is to write it down now and stand by it. Many of us start out in business with a number, and then the chaos of running a company somehow takes over. We become reactionary and addicted to the thrill of creating one new product, finding one new customer, solving one more problem, hiring one new employee. Your number starts to fade into the background. If you re lucky, your business grows into a sellable company, but if you don t have a number written down, inflation starts to set it. What seemed like a dream number when you started becomes more realistic as your business expands, and the temptation is to move to an ever-bigger number. Then you re on the hamster wheel, and you forget why you got into
9 business for yourself in the first place. Most of us start companies because we want to achieve something remarkable or out of a deeply rooted need for independence. In the absence of an objective measurement for remarkable or independence, your number can act as a marker to let you know when you ve crossed whatever finish line you re striving for. I was lucky because I met with a group of 40 or so entrepreneurs once a quarter as part of a program called the Strategic Coach. Each meeting included a formal review of our goals. I would look at my number and ask myself a series of questions: 1. Where do you stand right now? Is my business more valuable than it was last quarter? Last year? Personally, I found things didn t change much from quarter to quarter, but it was motivating for me to see the progress over a series of years. To value my business, I estimated our earnings before interest, taxes, depreciation and amortization (EBITDA) and used the multiple businesses like mine were selling for. It is hard to find a
10 reliable multiple to use to value a company, so people tend to settle for a guesstimate. The multiple is somewhat less important than the process of thinking through what your business is worth and being clear about the progress you re making from one quarter or year to the next. 2. What do you have to do in the next 90 days, and over the next year, to make your business more valuable? This question helped me prioritize important but not necessarily urgent initiatives (thank you, Stephen Covey). If you start each quarter saying, What will make my business more valuable? you may find yourself prioritizing important tasks that would not have necessarily made the cut if your goal was simply to sell more or make more profit. Sales goals are good, but forcing yourself to think about what will make your business more valuable is a slight twist and requires a more nuanced answer. For example, you could ensure your customer contracts are set up to survive a change in ownership of your business. Another idea would be to upgrade your website, since it is likely to be among the first impressions potential acquirers get of your company.
11 3. What experiences do you want to enjoy after you sell? I found it motivating to write down experiences I would like to have rather than material things I would like to buy. My list of experiences included things like these:.. Live in another country. Save a life Spend a winter in a mountain town and snowboard every day of the season. Renew my wedding vows Start a foundation to lend money to entrepreneurs in the developing world Take my kids to every continent in the world Watch the Tour de France from the summit of Alpe d Huez Write a New York Times bestseller Qualify for the Hawaii Ironman
12 Each quarter, I would imagine these experiences in as much detail as I could muster. I would refine the wording and occasionally add to what is essentially my bucket list. Writing down the experiences I wanted to have after I sold my business forced me to disrupt the inertia I felt pushing me to grow my business at all costs without thinking about why. And it all starts with a number. Have you written yours down yet?
13 If I sold it (Playboy Enterprises), my life would be over. Get a divorce Last year, a New York Times reporter quoted 84-year-old Hugh Hefner as saying, If I sold it (Playboy Enterprises), my life would be over. If your workday entailed lounging around in a robe at the Playboy mansion, most guys could see why you might not want to give it up. But assuming your business is a little less ahem sexy, could you imagine life without it? Some psychologists have likened the sale of a business to the loss of a child in terms of its psychological impact and sense of loss for the founder. I think there are some steps you can take now to lessen the letdown. When I started Warrillow & Co., my name was literally on the door. In the beginning, I was so desperate for it to succeed that I poured all of my waking hours into the business. My hobbies and relationships started to wither from lack of attention. I rationalized my schedule, saying that once I got the business going, I could get back to my life.
14 After a while, the business did get off the ground, but I never changed my work schedule. The source of my drive evolved from necessity to the adrenaline rush I got from building a successful company. It all started to come undone in 2004, when the departure of an employee made me feel personally rejected. This employee was an important part of our team and managed one of our key relationships. She was going to a great job with a big multinational firm, but I felt betrayed. The loss of this popular employee triggered the departure of a number of other workers soon afterward. I was left with a skeleton staff, a troubled business and a bruised ego. The whole experience made me realize just how much a part of my personality my business had become and just how personally I was taking things associated with it. Eventually, I picked up the pieces and rebuilt the company. But, like a person who had been betrayed in a relationship, I became
15 I stopped putting life off and started to get one. more hardened and started to look at my business as an inanimate economic engine instead of a defining aspect of who I was. In short, I got divorced from my business. Rather than continuing to give all my time to my business, I vowed to get back in touch with the people and things that were important to me. I stopped putting life off and started to get one. I taught myself how to windsurf again. I bought a mountain bike and competed (that s a charitable way of describing my performance) in a threeday stage race. I started running. I bought skis and a snowboard and organized an annual trip with old friends. In short, I got back in touch with the things I like to do. Now that I was no longer working in my company day to day, I did miss the people. However, for the most part, I didn t miss the business itself because the void had been filled with other relationships, hobbies, interests and investments that I d started nurturing long before selling my company.
16 When I look back, I m glad I had a near-death experience in my business as it forced me to nurture outside interests and investments in my life before I actually attempted to sell. It s time to divorce yourself personally from your business.