I had a Clover-brewed coffee this morning for the first time at the Starbucks attached to the Hyatt on Pine in downtown Seattle.  The Clover machine simulates the freshness of a French press coffee but shortens the brew time to 90 seconds instead of the 6 minutes typical of a French pressed cup of Joe. After a successful pilot in Seattle, these machines are being installed in all 5,000 small-format Starbucks locations in the US.

According to my barista this morning, Clover was conceived of by a Stanford grad who liked French pressed coffee but not the time and headache involved in making one.

They designed the $11,000 Clover machine and started selling them one unit at a time to small independent coffee shops keen for something new to differentiate themselves from Starbucks. Then along came Starbucks itself who said they’d like to install 5,000 units.

A $55 million order would have been many times the size of Clover’s annual sales so instead of placing the order, Schultz & Co. just bought the 11-person company outright.

Have you ever heard of a company getting a term sheet instead of a purchase order?

I hope you enjoy the articles below on selling a business with your brew of choice.

Buy business with emotion, justify with logic

~ published June 22, 2010 the Globe and Mail

On May 11, 2010, the NBA approved Mikhail Prokhorov’s bid to buy the New Jersey Nets. Mr. Prokhorov made his money mining nickel and gold in the wild-wild east of mid-’90s Russia.

By all accounts, Mr. Prokhorov is a hardscrabble entrepreneur who made the bulk of his fortune in the frozen Siberian tundra. But he reportedly has a soft spot for basketball. At six-foot-six, he is a competitive player himself. »more

Business can learn unity lessons from World Cup

~ published June 23, 2010 the Globe and Mail

It was fun to watch South Africa play soccer in the opening round of the World Cup.

The South Africans have never been a strong soccer nation, but their team was determined and unified around the common goal of winning. The stadium was packed to the gills, with tens of thousands of people all desperate to see their team win. And as the CBC cameras panned around the countryside and in the bars and on the streets, it seemed that all of South Africa shared a common goal.

It reminded me of the feeling you get when you’re in a company and everybody knows what the target is and everyone is motivated to achieve it. It also reminded me of the time I was misaligned with my general manager and how disruptive that was. »more

Would you sell out staff for an extra $1 million?

~ published June 24, 2010 the Globe and Mail

At the Vancouver airport not long ago, I bumped into an old friend I’ll call Melanie. She runs a successful marketing firm in Toronto, and we were both flying home.

I had come to know Melanie a decade earlier after I’d invited her to sit on the advisory board for one of my companies. At each meeting, Melanie would sit quietly and periodically ask questions — good questions. She didn’t grandstand or pound the table, she just listened and offered the occasional opinion based on her experience. »more

I used to meet once a week with my senior team and the first item on our agenda was always the same: renewal rate.

Each week, we’d discuss how many subscribers had decided to re-up. We would try to understand why each former subscriber left and come up with ideas to “save” anyone teetering.

Although I didn’t say it at the time, I knew the single most important statistic in a negotiation to sell my company was going to be our renewal rate because it was the one gauge that would allow acquirers to project our revenue into the future.

I have ranked 6 different recurring revenue business models — from least to most valuable  in the eyes of an acquirer– in the articles below. Please use the comments field to share your own examples of creating an annuity stream.

Three valuable forms of recurring revenue

~ published June 15, 2010 Globe and Mail

The single biggest thing you can do to increase the value of your business — no matter the size — is to create a recurring stream of revenue that an acquirer can count on into the future.

Although all recurring revenue will have a positive impact on your company’s value, some forms are more desirable than others. Starting today and continuing tomorrow, I’ll present six forms of recurring revenue from least to most valuable: »more

The top three forms of recurring revenue

~ published June 16, 2010 Globe and Mail

Renewable revenue is the holy grail for business owners looking to create a valuable — and sellable — company.

Whether your business is large or small, acquirers need to know it will keep going after you’re gone, so the best way to get an attractive cash offer is to give the acquirer visibility into the future revenue of your company. »more

This week I had an uncomfortable exchange with an audience member, twenty years my senior, who challenged my decision to keep the sale of my business secret from my employees:  ”Why didn’t you just tell your employees?” he asked in what I perceived as a condescending tone.

In retrospect, it was a fair question but he had hit a sore spot and  I lashed back: “I’ve never quite understood why some business owners think of themselves as the patriarch of their business and that they somehow have to provide for their employees like some overbearing 1950′s father figure.”

The room went quiet as we stared each other down. For the rest of the talk I felt like I was walking on egg shells.

I got on the plane that night and things went from bad to worse as I read about how Tony Hsieh built Zappos into a billion dollar business by focusing on creating a happy culture for his employees.

I have never managed to get culture right and I read stories about warm and fuzzy working environments with equal measures of jealousy and skepticism.

In the early years of running my marketing agency, I tried to be a new age manager by sharing financial results with my employees, paying for after work socials, inviting people to bring their dogs to work and involving employees in decision making. It was all text book happy culture stuff. None of it worked. My employees listened politely and participated hesitantly in after work junkets but I never got the sense my attempts to offer a friendly work environment made a difference.

Eventually I stopped trying. I separated my social life from my company. I built a corporate culture that would, at best, be described as average. It’s a failure that still smarts. So as you read the articles I wrote this week about selling a business below, please keep in mind that I’m the last guy on the planet who should  give advice on how to build a positive business culture. And if you’ve figured out the culture thing while simultaneously building a sellable business, please let me know what I did wrong.

Leave the Business to the Kids? Maybe Not

~ published The Wall Street Journal June 9, 2010

When Brian France took over as the CEO of Nascar, he completed a feat that may be even more difficult than winning the Daytona 500: he successfully stewarded his granddaddy’s business into the third generation of family ownership.

According to McKinsey & Co., less than one in three family businesses survive to their third generation of family ownership. »more

3 questions a buyer will ask before acquiring your company

~ published Entrepreneur.com June 2, 2010

Recently Google acquired DocVerse for $25 million. DocVerse allows a group of users to share and edit Microsoft Office (Word, PowerPoint and Excel) documents in real time without having to e-mail them back and forth. Google plans to integrate the DocVerse technology into its Google Docs application, accelerating its adoption.

But why did Google buy DocVerse instead of just creating its own technology to imitate what DocVerse had built? »more

Will unfaithful employees drown in your moat?

~ published The Globe and Mail June 1, 2010

I have a friend who recently made partner at a big law firm. He fits the mould of a successful lawyer: smart, hard-working and willing to wine-and-dine clients into the wee hours to win business.

He joined his firm after law school and worked 100-hour weeks for the first seven years. His schedule was hard on his first marriage, which ended in divorce. While his personal relationships suffered, his career thrived as his partners continually recognized his dedication to the firm and alluded to his candidacy for partnership. »more

Safe, non-addictive and mood altering

Whenever I get frustrated by life’s little inconveniences, I log on to kiva.org and make a couple of small loans to a fellow entrepreneur in the developing world.   I’ve set up a “lending team” of Built To Sell readers and I’d like to invite you to enjoy the all-natural buzz of helping a fellow entrepreneur in a tight spot.  Join my team.