Six systems separate a business that sells for ten times cash flow from one that sells for two. Here they are, and here’s what each one is costing you right now.
Two owners in the same industry, doing roughly the same revenue.
The first works 60 hours a week. Can’t take a vacation. Answers the phone at dinner. He makes about $150,000 a year. If he went to market tomorrow, he’d get maybe two times cash flow, and he’d be lucky to get that.
The second works 20 hours a week. Takes six weeks off a year. His phone doesn’t ring after five. He makes $400,000. He could sell tomorrow for ten times cash flow.
Same industry. Same size. One of them owns a business. The other one owns a job that pays badly and never ends.
The difference is six systems.
Systems are a valuation question, not a management question
Most owners hear “build systems” and file it under someday. Right after the busy season. Right after the next hire.
Here’s the uncomfortable truth about someday.
A buyer isn’t paying for your revenue. A buyer is paying for revenue that keeps showing up after you’re gone. Every function that lives in your head instead of in a document is a reason for him to pay less, hold back more, or walk.
I’ve sat across the table from the moment it lands. The owner has spent twenty years building something real. He walks into diligence expecting six times cash flow. The buyer asks three questions, gets his answer from the owner’s face, and the number moves.
He didn’t lose those turns of multiple in diligence. He lost them over twenty years of being the system and never writing it down.
You can’t fix that in the year you decide to sell. A buyer wants three years of clean books and documented process, and you can’t go back and create last year.
The six, in order
They build on each other. Attraction feeds engagement. Engagement feeds service. Service feeds retention. None of it holds without accountability, and none of it means anything if you can’t measure whether it worked.
Start at one and go in order unless you already know where you’re bleeding.
1. The Client Attraction System
How to stop chasing clients and make them chase you.
Your pipeline fills when you work it and empties when you don’t. That’s not a marketing problem. That’s a valuation problem, because a pipeline that runs on your relationships is a pipeline a buyer can’t count on.
What a buyer does about it: he pulls your lead source list, sees your name on most of it, and drops his multiple. Read the full system.
2. The Client Engagement System
How to stop having nice meetings and start closing deals.
You can fill your calendar with appointments and still go broke. What matters is how many of them say yes, and whether anybody but you can make that happen. If you close 80 percent and your salesperson closes 20, you haven’t built a sales system. You are the sales system.
What a buyer does about it: an earnout. Two or three years of you staying on to hit a number, with a piece of your price contingent on it. Read the full system.
3. The Client Service System
How to deliver the same result every time without doing it yourself.
A teenager three weeks into the job at McDonald’s makes the same Big Mac in Omaha that they make in San Antonio. Exact toaster time. One swipe of mayo. Exactly two pickle slices. Not three. Not one. Two.
That’s not about burgers. That’s about whether your business can deliver your quality without your hands on it.
What a buyer does about it: escrow. Twelve to twenty-four months of your purchase price sitting in somebody else’s account, released only if the business performs without you. Read the full system.
4. The Client Retention System
How to turn one-time buyers into lifetime revenue.
There are only three ways to make more money. Get new customers, get existing customers to buy more often, or get them to spend more when they do. Two of those three involve people who already trust you.
Most businesses make the sale and disappear. Maybe a Christmas card. Maybe.
What a buyer does about it: he calculates your recurring revenue and your customer concentration in the first hour, and both of them move the multiple before he’s read a single contract. Read the full system.
5. The Team Accountability System
How to stop babysitting your business.
Your phone rings. Good news, your marketing works. Now the million-dollar question: who answers it, and what do they say?
Systems and benchmarks don’t invent themselves. If you’re waiting for your staff to build them while they’re doing their day jobs, don’t hold your breath. It will not happen. You take charge or nobody does.
What a buyer does about it: he counts how many boxes on your org chart have your name in them, then asks what happens if you get hit by a bus the day after closing. The answer costs you a seller note, an employment agreement, or both. Read the full system.
6. The Math of Management
How to stop flying blind and know if you’re actually making money.
Some owners feel comfortable when there’s money in the bank. Here’s the dirty secret. Sometimes that money is there because you haven’t paid your bills yet.
Being great at what you do doesn’t qualify you to own a business. Different skill sets entirely. I read about a granite company with beautiful work and raving customers that was going broke while the owner admitted he never understood the financial side.
What a buyer does about it: a quality of earnings review. An accountant sits down with your books and tries to prove your profit is real. If he can’t, the price comes down, the holdback goes up, or he decides you’re not the kind of seller he wants to deal with. Read the full system.
Where you actually are, in sixty seconds
Before you pick a system, find out where you’re bleeding. Seven questions, sixty seconds, and it costs nothing.
Answer them honestly. Not how you wish things were. Not how you tell your spouse things are. How they actually are.
- How many hours did you work last week?
- When was your last real vacation, where you didn’t check email or take calls?
- What happens to your business if you can’t work for 30 days?
- How much of your income comes from you personally doing the work?
- If you tried to sell today, what would it be worth in multiples of cash flow?
- Do you have documented systems for your core processes?
- How do you feel about your business right now?
Reading about the six isn’t the same as building them
There are three kinds of owners who get this far.
The dreamers love reading about business. They love talking about it. They love thinking about how great a 20-hour week would be. They never do anything. Five years from now they’re still working 60 hours, wondering why nothing changed.
The tinkerers get excited. They start System One. Most of it, anyway. Then they get busy, or distracted, or discouraged. Five years from now they’re still working 60 hours, but now they feel guilty about it.
The doers read it, get it, and take action. They commit. They get help when they need it. Twelve months later they’re working 25-hour weeks, making more money, and enjoying their business again.
You didn’t read this far because you’re a dreamer. Dreamers quit after the first paragraph.
Frequently Asked Questions
What are the six systems?
Client Attraction, Client Engagement, Client Service, Client Retention, Team Accountability, and the Math of Management. Together they move a business from something that depends on the owner to something that runs without him, which is the difference between selling for two times cash flow and ten.
Why does a business that runs without the owner sell for more?
Because a buyer is purchasing future cash flow, and cash flow that depends on you walking through the door every morning is cash flow he can’t count on after you stop. A business evaluated on a cash flow stream that doesn’t require the owner is worth many times more than one where the cash flow depends on the owner selling his time.
How long does it take to implement all six?
Ninety days of real work gets you a documented version of each one. Two hours a week, three sessions of forty minutes. Making them run without you takes longer, and it’s the part most owners quit before finishing.
Which system should I start with?
One, unless the assessment tells you otherwise. They build on each other on purpose. Fresh leads with no way to close them is a waste, and a great close rate on a delivery process you have to run personally just buys you more work.
My business is different. Do these still apply?
I’ve worked with professional services, retail, manufacturing, restaurants, contractors, and consultants. Every one of them attracts clients, converts them, delivers something, keeps them or loses them, runs on people, and either makes money or doesn’t. The six apply to all of them.
I don’t have time to build systems.
That’s exactly why you need them. You’re out of time because you don’t have systems. It’s like saying you’re too busy chopping down trees to sharpen your ax.
Do I need to sell my business for this to be worth doing?
No. Everything that makes a business sellable also makes it livable. Fewer hours, more money, a phone that stops ringing at night. The valuation is the scoreboard, not the reason.
When should I start if I want to sell in five years?
Now. A buyer wants three years of clean books and documented process, and you can’t manufacture history. Starting the year you go to market is exactly one year too late.
One Hour. One Price.
Sixty minutes on the phone. Just you and me, talking about your business.
I’ll tell you which of the six systems is costing you the most right now, and what I’d fix first.
It costs $1,000.
Most business owners get one shot at their exit. One. The cheapest hour you’ll spend on it.
The material on this page is general information about how businesses are built and valued. It isn’t legal advice, and reading it doesn’t make me your lawyer. Every business is different, and the details are where the money is.