Drive your first shot into the woods and most friendly golfers will give you a “Mulligan” which allows you a second chance to start out right. Lately I feel like I’ve been handed The Entrepreneur’s Mulligan.

Don’t get me wrong, my last business wasn’t a disaster, but there were things I would have changed:

• Over the years, I had painted myself into a corner by having employees on a hodgepodge of bonus plans which reflected my latest thinking on incentives at the time of hiring them. Hire enough people over a long enough period and you have a labyrinth of employee agreements to juggle.
• I had longstanding suppliers we stuck with out of inertia, not because they offered the best of what we needed.
• I had given one-time favours to some customers, only to have them taken for granted as long term elements of our relationship.

And because all of those things involved people and emotions and drama, they weren’t as easy to change as it was to write them just now. Over time, my business began to feel like how I imagine an artist feels mid-way through a painting when she realizes she selected the wrong-sized canvass: it’s too late to turn back, but it will forever be a flawed piece of work in the artist’s mind.

Starting fresh

And that’s one of the things you can look forward to after selling your business: you will get a blank sheet of paper and some time to design your next company. I think we entrepreneurs are creative souls and every artist is striving to create their masterpiece.  Can you name a song writer who wrote only one tune? How about a legendary architect who designed just one building or a photographer who took just one picture?

So why would an entrepreneur want one business as their legacy?

Scribbling on my blank sheet

I for one have started to jot down some ideas about my next business. My first few baby steps have been to:

• Develop a long terms vision and a set of values for my company which I personally find motivating and I think will resonate with people who come to work with me.
• Write an analogy for my new business which will quickly communicate the business idea to people who want to get involved.
• Quantify a 10-year goal and a basic strategy.

I’m sure I won’t get this business completely right either. And nor does the golfer who gets a second chance at their tee shot hit a hole-in-one. But that’s not the point. I’m just savouring that sense of excitement you get when someone gives you another chance to do it all over again.

So, have you taken your Mulligan?

One of the most interesting things about researching our new Done Deal series for this site has been discovering how common it is for the person selling the business to lend part of the money to the buyer.

It’s called “vendor financing” and for the sale of smaller businesses, it has become common. Basically you mutually agree to what the company is worth. The buyer then pays you a portion of the money on closing, with the other chunk paid to you over time with interest (the rate is negotiable).

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Usually when I write a story about selling a business for Inc, a dozen or so generous souls click the “Like” button and post it to their Facebook feed. Last week, Inc published my story “Are You A Closer Or A Schmoozer” and 186 people hit the Facebook “Like” button and another 203 “Tweeted” it. For me, that’s a lot of love and it made me think about why the story seemed to resonate with owners building to sell.

The core idea behind the article is that, to create a sellable business, you need to be able to generate sales without doing the rainmaking yourself. Knowing which of two selling styles you have can help you replace yourself as your company’s top sales person.

Today on my blog (above if you’re reading this on line) I’ve posted a video with a bit of the back story on The Schmoozer vs. The Closer piece. Please use the comments section to let me know your thoughts.

“Only insane people are entrepreneurs”

Penelope Trunk, the author of Brazen Careerist,  wins the award for most controversial interview I’ve done in the last year. As I write this, our Q&A titled “Only Insane People Are Entrepreneurs” has generated 24 comments ranging from high praise to blistering attacks.

During our interview, Penelope had me laughing out loud. At one point she told me the idea for my article was “stupid” and proceeded to come up with a better angle. In the interview, Penelope delineated between venture-backed companies that are “built to sell” and those lifestyle businesses that are not. Let me know what you think of the Penelope Trunk interview when you have a sec.

On a final note, you may notice my new branding (and the 4 emails you got from me in error last week — sorry) which is part of the launch of the new edition of Built to Sell: Creating A Business That Can Thrive Without You being released by Penguin on April 28, 2011. The new book includes the story of Alex Stapleton along with an all new implementation guide on how to transform a business into a sellable company. Thanks for your feedback on the cover ideas, they helped make the final cover design something I’m proud of.

Recurring revenue is the single most important element of building a company you could sell one day. In the video above and the articles below, I share my thoughts on why repeat customers are so important to the value of your business and how to convince your customers to sign up for a contract or subscription.

Please tell us about your own examples and experiences on creating a recurring revenue model in the comments section below.

How to Be Clairvoyant About Revenue

~ published January 7, 2011 Inc.com

Recently I wrote about how recurring revenue can make your business more predictable and less worrisome by helping you see your revenue stream well into the future. I’d now like to focus on how recurring revenue can make your business more valuable if you ever want to sell it.

An acquirer will need to be confident that your company will continue to generate revenue after you are gone. In short, you have to help them see the future by demonstrating how your revenue will be reoccurring. »more

Stop Living Project to Project

~ published January 5, 2011 Inc.com

The best thing you can do for your business —and peace of mind—in 2011 is to create a recurring revenue model. You know the kind, where you start a month knowing you already have some sales guaranteed. Having visibility into your future revenue allows you to plan your time and neutralizes the worry about when your next job will be.

Just about any business can be reshaped to provide a steady flow of projects and cash. For example, Jim Vagonis, the founder of Potomac-based Hassle Free Home Services, has redesigned the business model of the typical contractor. Your average drywaller, stone mason, electrician or plumber lives a lumpy existence, lurching between 16-hour days and stretches of unemployment.»more

Have you ever examined why you decided to start a business instead of becoming a doctor, school teacher, NASCAR driver or bureaucrat?  Now that you’re considering selling your company, I think it is worth remembering what got you into business in the first place.

I’ve found that business owners can be categorized into one of three buckets based on their motivations for starting a business. In the video above, I describe the three profiles which I labeled “Mountain Climbers” “Freedom Fighters” and “Craftspeople” in my first book.

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As you contemplate your inner drivers, here are some new articles on selling a business:

Amazon and Google Are Buying. Is Your Startup a Good Target?

~published December 16, 2010, BNET

Big companies are on a buying spree. In the past few months, Amazon.com bought the parent company of Diapers.com and the deal-of-the-day website Woot.com; Google has been on a pace to acquire a new company every other week; and Gregg Blatt, CEO of IAC Interactive, the company behind Match.com and Ask.com, recently told CNBC he has his checkbook out looking to buy companies.

Here’s the math on why big companies are buying businesses like yours: » more

Tips for Negotiating an Earn-out

~ published December 22. 2010, Inc.com

The other day I met with two entrepreneurs running a graphic design business generating $1 million in revenue per year. They were in the final stages of negotiating a deal to sell their company to a large multinational marketing services firm.

The buyer was offering $900,000 up front, which amounts to four times my friends’ pre-tax profit. The buyer had also offered my buddies an “earn-out”: another $700,000 if they achieved a sales growth milestone over the next three years as a division of the acquiring company. » more

Startup Survival: How to Get Past the 3-Year Hump

~ published December 9, 2010, BNET

Crumbs Bake Shop — No. 422 on the 2010 Inc. 500 list of the fastest growing companies in the U.S. — charges $4.50 for a single Peanut Butter Cup Signature cupcake. What do you think the bakery pays for the flour, sugar and Skippy?

In an environment where most businesses never see their third birthday, Crumbs is thriving in part because of its fat gross margin.  Whether you’re starting a lemonade stand or the next Groupon, arguably the single most important predictor of your future success is what you pay for the stuff you need to make your final product.

Here’s why gross margin is the key to surviving your first three years in business: » more