3 Ways to Untangle Yourself from Your Business
“Debbie King, owner of Association Analytics, was devastated to learn from an M&A advisor that her business was not sellable. She then proceeded to recreate her business model and was able to sell her business. Debbie sold the benefits of a product model instead of a service model,” shares Sam Thompson a Minneapolis business broker and the president of M&A firm Transitions In Business.
Debbie King was running on a treadmill so familiar to service company owners. Her company, Association Analytics, helped associations make sense of their member data, and she was wasting time on proposals that often did not get accepted. Then, when King did win a project, she was creating a custom solution for every job that required her to hire senior-level staff and personally get involved in client work. The model put a cap on her business, and when she reached 20 employees, she decided it was time to get out.
She met with an M&A professional who told her that based on her business model, Association Analytics was close to worthless.
King felt trapped. She couldn’t sell, nor could she stomach staying. That pain led her to search for a new business model. She decided to productize her custom consulting service into a product. King describes the transition, “If you think of it like the movie business, I was creating an original screenplay for each client. Now, I write one screenplay and sell tickets to the movie”.
There are a ton of lessons embedded within King’s story, including:
Niche Down: Before productizing her service, King tightened her definition of an ideal customer and got specific about who she was willing to serve. This process allowed her to build a product that would appeal to her perfect client.
Productize Your Service: Next, King transformed her custom analytics service. She took the process she used to do for clients on a one-off basis and created a dashboard that helped clients visualize their data. She hosted the application on Amazon Web Services (AWS) and charged clients a monthly fee.
Sell the Benefits of a Product Instead of a Service: Finally, King set out to sell her clients on her new product by describing the downside of a custom solution. King explained that a custom solution requires a senior consultant to be involved every time a client wants to touch it and is relatively unstable. In contrast, a product is a reliable solution offered 24/7, backed by testing and staff who know how to get the most out of it.
King expected an offer of 7 times EBITDA, so she was pleasantly surprised when she got multiple attractive offers, including one from her CFO, which she ultimately accepted. Listen, and you’ll also learn:
- How to fall back in love with your business.
- The downside of having your name on the door of the company.
- How to convince employees of the benefits of productization.
- A step-by-step process for productizing your service.