The 7P Framework For Growing & Grooming Your Business For Sale

This is part-four of my FIVE-part process for generating a significant amount of wealth via acquiring a business without spending any of your own money, growing and improving it quickly before selling it on and generating a big profit. In part-one, I introduced you to the concept of this five-part process and in part-two, I listed the 10 items you need to look for in identifying the perfect business to acquire. In part-three I shared my 10-step, cash-free acquisition system with you. If you missed part-three, read it here before continuing with part-four.

Now you own your first business, what’s next? How can you make your new business systematised and just irresistible to hungry corporate buyers who will take you out of the market for a premium price, thus generating a massive profit for you. In three months, 12, 24 or even longer. You may love owning your new business and want to stay there longer and even bolt other businesses onto it. We will get into that later in this post.

Once you own a business, how do you grow it? How do you improve it? What essential pieces need to be in place to underpin success? Let me introduce you to my 7P framework for ultimate business success.

The 7 P Framework

I designed the 7P framework from my interactions with over 1,000 businesses. Here are the 7 P’s:

1) Planning – The treasure map

2) Personal – Be your absolute best

3) People – Building your internal tribe

4) Proposition – Who cares what your business does?

5) Pocket – Show me the money

6) Process – Playing the game to win

7) Partners – Building your external tribe

Let’s explore each in detail:

1) Planning – The treasure map

The problem is that very few small business owners truly do the necessary, deep planning. Planning is all about creating the treasure map and without this, how do you really know where you are going and how to get there safely?

Planning breaks down into four critical sections:

i) Strategy
All businesses need a strategy, whether this is Apple or your small business or start-up. Strategy is about making clear and specific choices about what your business will be. It’s all about focus. You can’t be everything to everybody. Strategy must start with the vision for your business (what will your business be and how will people measure it). It must also include your mission and values statement (what do you believe and how will you act to live your vision). It also must clearly state how you can generate competitive advantage in any market. Finally, it must also determine your core market by understanding both financially attractive markets and how they are related to you and your business. See the blog post “Creating A Winning Strategy”.

ii) Business plan
A business plan is what it says on the tin, however, what if I told you all businesses need multiple plans. The first is your internal business plan, and this is how you measure yourself and your business. The second is your funding business plan. Why are they different? Simple. Investors think in a very specific way. As a small business owner, you are selling two things: your product or service, so you make that irresistible to your prospective customer. Second, if you are seeking investment, you are selling your businesses’ equity. That is a completely different sell and as such, requires a different plan. I call this the equity marketing paradox. How do you think like an investor and what are the critical questions you will need to answer? See the upcoming blog post “The Ten funding questions”.

iii) Exit

I interviewed more than 2000 small business owners in 2014, and more than 85% of them went into their new business venture without having a clearly defined exit strategy. Without this, what are you really working towards? There are five types of exit. You can sell your business (trade sale or an individual) or merge it with another one like you. Second, you can float your business on the stock market. This is difficult and expensive, but it works well for high growth businesses, especially in the technology, telecommunications and pharmaceutical industries. Third, you can give it away. Sounds strange however I have seen this happen hundreds of times. Give it away if you are bored of it, tired of it or just cannot continue to work in it anymore. Four, you can shut it down and close the doors (96% of start-ups suffer this fate within just ten years). Five, you can franchise it, and to do that you need to set it up and optimise it, so it works like a finely tuned watch.

2) Personal – Be your absolute best

Starting a business is one of the most difficult and riskiest things you can do but rewarding and truly fulfilling if you get it right. To maximise your businesses success, you need to be personally firing on all cylinders. These are the three things that must be in place:

i) Personal effectiveness
You need to be the absolute best you can be. In this section, I will run through some personal effectiveness tools you can use to set yourself up for high achievement every single day. You can ensure that you don’t have any ‘off days’ and that you are fulfilling your maximum potential at all times. See the blog post “10-Steps To World Class Productivity”.

ii) Leadership and Management
Leadership and management are both overused word in business, but it’s a critical subject. There are some critical parts of leadership, and we will cover them next. Do you work in or on your business and what is the difference? How do you make your business independent of you and what kind of legacy do you want to leave? We will also discuss the concept of You Inc. What is your personal brand? When disaster strikes, what do you do? We will also cover crisis management and how to ensure your business is ready.

iii) Work-life balance

Good balance is a critical aspect of your business and your life. More than 40% of entrepreneurs I interviewed in 2014 had suffered either a relationship breakdown or serious health problems as a result of going into business. You need to set yourself up properly and still find time to enjoy your life: your relationship, your children, your hobbies. Manage your time properly and make sure your employees get the most out of you in the shortest time available. Again, read the blog post “10-Steps To World Class Productivity”.

3) People – Building your internal tribe

People are the lifeblood of any business. You can have the world’s best systems, processes, products, services and mountains of cash but without people, your business will not work.

How do you hire the ‘right’ people? Do you hire superstars, or smart creatives, as Google refers to them? Or do you hire people that are “just good enough” to do a set of tasks required of them and which they will be accountable for? E-Myth author and small business expert, Michael Gerber maintains that if your business processes and operations manuals are well-defined, you only need hire individuals to perform certain tasks that are “just good enough”. This would ensure management by delegation versus abdication, and your employees will not go “off piste” and only do exactly what is required of them. Conversely, Chet Holes, author of the Ultimate Sales Machine, maintains you should only hire superstars. Extraordinary people who can do much more than is required. My opinion, from my 23 years in business is to have an 80/20 mix. 80% of your employees need to be systematised, follow specific rules and do specific everyday tasks. Bookkeeping, shipping and receiving, manufacturing, HR, sales administration, marketing campaigns, etc. The remaining 20% can be “superstars” and these individuals work well in sales or other business development roles. In summary, “superstars” on deck, “just good enough” in the engine room.

4) Proposition – Who cares what your business does?

Your business proposition is critical if you are to not only thrive, but also survive. What are the key elements of a strong business proposition?

i) Why do customers buy?
To sell anything successfully, you need to either solve your customer’s problem or assist them in achieving a specific goal. A big mistake most business owners make is trying to sell using features. Colour. Performance. Quality. Price. None of that matters until the buying decision has been made. People buy based on emotion and how you strike at those emotional chords will determine your success. The emotional chords include fear, pain, vanity, lust, ego, envy and pride. Do you think anyone buys a Ferrari because of colour, styling, fuel economy or speed? No. Look at the last five emotions. If you are selling a high-performance sports car, you need to trigger all of those five emotions.

ii) Benefits
Benefits are equally important. Would you every go out and buy a drill? Yes, you would but you are not buying a drill, are you? (the feature). You are actually buying the ability to make a hole to say, hang a picture, that will make your house nicer (the benefit). Do people buy flights or train journeys? No, they are buying the destination. The journey is the feature. The destination is the benefit.

iii) Marketing

Marketing is one of the most over-used words in business but what does it mean? How do you determine your routes to market, how to communicate with your prospective customers and how to qualify them? Everyone that you either target or touches your business is a suspect. You “suspect” they want to buy your product. The first step is converting them into a “prospect”. You need to qualify them. Do they have the pain you can solve or the goal you can help achieve? Are they ready to buy now? Do they have the budget? Can you efficiently get your product into their hands profitably? If you cannot answer these questions, keep qualifying them.

The route to market is critical. Take Intel as an example. Intel makes microprocessors and memory for computers and mobile phones. Do you think Intel has a microprocessor and memory “shop”? Of course not. Intel’s customer is not you or I (although we are the ultimate recipient of the technology). Intel’s customer is the computer or phone manufacturer. Clearly defining who, exactly, is your customer and how do you reach them is critical.

iv) Your unique selling proposition (USP)
I dislike acronyms, but this is one I really like. Unique selling proposition, or differentiation is all about what makes your business stand out from the rest of the market and more importantly, how can you beat them to win business consistently. You need to determine what sets you apart, then do more of it. Much more of it. If you don’t know what makes you special, call your top-10 customers and ask why they repeatedly buy from you and not your competitor. That is your answer and must be your theme, your anthem, your reason for being.

5) Show me the money

All businesses need cash. Investment, funding, working capital, it doesn’t matter what you call it but how do you generate it in rapid fashion?

Where does funding come from? Equity investors, debt providers, grant funding and internal sources. How do you secure funds from all four and the advantages and disadvantages of each? You will have raised sufficient cash to acquire the business in step-five of the 10-step process. If you are raising follow-on funding, in the future, from investors or lenders, read my blog post on “The Ten funding questions, etc.” Equity investors will want a share of your business. Lenders or debt providers will want some security, and you must obey a set of covenants (financial rules) consistently or face penalties and worse still, call in of the entire loan. Grant funders will typically want you to match what they provide (personal funds, debt or equity). Internal funds come from your cash flow and how effective your business is at generating cash through trading. If people that owe you money (debtors or receivables) pay you faster than the people that you owe money to (employees, lenders, creditors or payables), then you will positively generate cash flow. For many businesses, this is the opposite, thus when they try to grow, they run out of cash. The business may be profitable over a certain period, but if they run out of cash, the business will die. Someone once said to me “Sales revenue is vanity, profit is sanity, but cash in the bank is reality”.

6) Process – Playing the game to win

What are systems and processes?

Every business needs a system and processes within the system that need to be followed, measured and controlled. How does this function and operate? There are many systems in your business. Some are hard systems (for example, machinery), and some are soft (for example, your sales system, or your organisational system or “org chart”). The “org chart” is the most important system in your business. Remember what we said earlier from Michael Gerber about employing “just good enough” employees? You can do this if your org chart is clearly defined. How do you structurally organise your employees, in your business, to give you the most efficient and effective system? There are three parts to this. First, you need to structure your business today to look like it will once you have finished building it and growing it. List every position in your business for when it’s finished. You should have more positions than employees. That’s fine. Second, list all of the tasks that each role or function must perform and when. Hourly, daily, monthly, quarterly and ad-hoc. Next, determine how you measure performance of each task and the standard to be met. Finally, document each and every task in your operations manual, so anyone who performs the task, in the specific role, can do it perfectly, each and every time. That is how McDonalds was built, and it will work in your business as well.

7) Partners – Building your external tribe

Finally, we will discuss how you build your external tribe versus your internal tribe. Even micro businesses can build world-class partnerships in the external market. Your external tribe should consist of the following:

i) Advisors
Leverage your business contacts to both help you grow your businesses but strategically focus and manage it as well. Leverage the expertise and networks of your professional advisors: lawyers, accountants, funders, consultants and even your bank.

ii) Customers
Arguably the most important partner you have. Without customers, you don’t have a business. Customer service is critical to your business and how it’s a major part of your USP and pricing structure. Have your very best customers part of your advisory board. Have them help you be successful and you will convert them into raving fans who will tell everyone they know.

iii) Suppliers

All businesses have suppliers; some are more critical than others. Without an effective supply chain, your business will suffer. Keep your critical suppliers very close to you and put them on your advisory board. In my experience, this will allow you to have the best terms and prices with your critical suppliers, improving your competitive edge and your cash flow. I know many suppliers who have funded their customers to make them grow, as it helps them grow. Intel does this very well.

iv) Investors
If you want to grow your business quickly and either can’t or don’t want to use debt finance, an investor can be your knight in shining armour. There are different types of investor. Individuals, called angels, dragons or investing non-executive directors in the UK will have deep expertise in your particular market niche. There are also investment funds, either venture capital (small to medium) and private equity (medium to large). If you have a compelling business and plan you will get the money. The question you need to ask yourself is what else do you want in return, in addition to cold hard cash? Don’t just pick an investor on the best terms (lowest equity dilution for funds invested) but also look at their value-add. Can the investor help you by introducing new customers from their networks? Can they fill in a skills gap in your business and give compelling, critical advice? Does the investor have a strong track record investing in your sector? Your investor needs to be a sparring partner, not just a piggy bank.

v) Joint venture partners
How can you make money selling someone else’s products or services? Just because you don’t make a particular product or provide a particular service, doesn’t mean you cannot sell it. Identify attractively and related products and services that are complimentary to what you do and go partner with (or acquire) businesses that do those things well. If you sell technology hardware, go partner with a software or service company that can add value to the customer over and above the particular hardware you sell.

vi) Bolt-on acquisitions
In the 10-step process, you will have originated many opportunities, so you can follow up your first acquisition by bolting on others that are complimentary, again in cash-free deals. Two amazing things happen when you combine two businesses via an acquisition, or a merger. First, you can cross sell products and services between the two complimentary customers and second, combining operations will allow you to take costs out of the business. Combining sites, equipment, employees, marketing activities, etc. So sales increase via cross-selling and costs reduce as a percentage of the higher sales so profits increase faster than sales.

And that is it for part-four of my five-part series on buying and selling businesses. In part-five I will go over creating a killer exit strategy for your business and how to maximize the profits from the sell by building on what you have already learned and finding the right type of buyer.