Last week I did a talk where the emcee introduced me by saying every service business needs to productize to scale up whereas every product company needs to ad service to avoid commoditization. Having run service businesses, I have given a lot of thought to “productizing” a service business but not as much to “servicizing” a product company.

But it makes sense. One of the reasons we’re willing to pay more for an Apple lap top (compared with something comparable from Dell) is the warm and fuzzy experience of shopping at an Apple store.

In terms of “productizing” a service, Jason Fried, the founder of 37signals and the author of “Rework”, had an amazing journey which he describes in the third — and my favorite —  of the four new articles on selling a business below.

How to sell a firm that depends on you

~published October 18, 2010 Globe and Mail

I thought you might be interested in the exchange I had with a reader recently.

Question: “I started a research company 13 years ago after working as an account planner and research director at advertising agencies for more than 15 years. (It was a) one-woman show . . . (and) later my husband joined me. We have worked together for the past decade or so, but kept it a small mom ’n’ pop outfit with the use of fieldwork agencies for support.

“Now my husband has been offered a job overseas, which he is planning to accept. I don’t have the energy to continue… »more

The secret formula used by buyers

~ published October 20, 2010 Globe and Mail

A funny thing happened when I was first approached by someone who wanted to buy my marketing agency: I forgot everything I know about sales.

Instead of listening to the customer and understanding his or her needs, I went into negotiations with potential buyers focused on my needs. I decided I wanted to get a certain multiple for my business but failed to put myself in the shoes of a buyer to figure out what he or she would be willing to pay.

It was a rookie mistake. Any first-year salesperson knows the first step when selling is to… »more

Jason Fried: the service-to-product switch

~ published October 20, 2010 Globe and Mail

37signals started out in Chicago as a three-person web design shop. Co-founder Jason Fried made a decent living but hated the feeling of being beholden to clients: “I found project-based consulting frustrating because we would work on a site for months and hand it over to the client, who would inevitably make changes and drag us through their politics. It was rare that what we actually built saw the light of day.”

Fried and co-founder, David Heinemeier Hansson, continued to serve their clients, but as their projects grew larger and more complex, they found themselves looking for a piece of software that could help them better… »more

Your Business, Your Rules

~ published October 21, 2010 BNET

I had dinner the other night with a business owner who was having trouble getting paid for his work. His company provides a service to other businesses and issues hundreds of small invoices of less than $200 each a month. The problem: At the end of each month, he looks down his list of receivables and typically sees 20 or more deadbeat customers that are more than 90 days late in paying. He then has to dispatch his bookkeeper to chase down his money.

I suggested he start processing customers’ payments on a credit card instead, reasoning that the 2 percent merchant fee would be worth it given the time and energy… »more

4 Ugly Truths About Selling Your Business They Don’t Teach You at Harvard

I owned a business called “Warrillow & Co.” and our product was “The Warrillow Subscriber Network” and our biggest marketing program was “The Warrillow Summit”.  When the Warrillow in Warrillow & Co. decided to sell his business, things got tricky, which is what I wrote about in this article.

This week one of my fellow columnists at BNET, Donna Fenn, wrote a counterpoint to my article suggesting that a family name could be a good company name.  She used the example of Joel Bomgaars who started a software company called Bomgar, which is an anglicized derivative of his Dutch surname. Donna points to Bomgar’s success – they have been on the Inc. 500 list for two years running– as proof a family name can work as a company name.

Donna’s article forced me to refine my thinking on whether or not a surname is a good company name if your ultimate goal is to sell your business. I think Bomgar’s name works primarily because it is not immediately obvious that it is a family name. Bomgar sounds like a funky piece of technology and it is a little fun to say. Kind of like “Toyota” rolls off the tongue with a sense of playfulness which is why I think it worked for Kiichiro Toyoda.

Thanks to Donna, I would also now draw the distinction between naming a service and product business. Bloomberg as a company name works because the Bloomberg terminal is a thing that separates the business from Michael Bloomberg the person.

If you’re stuck with your surname in your company name, my suggestion is to focus on building product brands that eventually surpass the prominence of your company name.  The brothers Johnson & Johnson started the business but we have become even more familiar with their products like Tylenol and Band-Aid.

If you have a service business and a traditional surname like “Robertson” or “Smith” in your company name, I think it can be more difficult to separate yourself personally when it is time to sell your business. What do you think?

Have you ever noticed how some of your best business ideas hit you when you’re on vacation?

I’m not sure if being relaxed allows the mind to operate on a more creative plane, or if it is just being observant to the way people do things differently, but when I travel, my entrepreneurial mind kicks into over drive.

I’m writing to you today from Aix-en-Provence where my family and I have spent the month of July. France isn’t exactly a bastion of entrepreneurialism (something like half the population works for the state in some capacity) but even here, my mind was spinning on new business ideas.

Fresh business ideas

Take for example the way the French peddle sports equipment. On the outskirts of Aix they have a sports multiplex called “Oxylane Village”. The anchor is a massive (think Walmart superstore) Decathlon sports store that is a mash up of an REI, Dick’s and Disneyland for sports enthusiasts. They have 50 isles of sports gear for every possible activity. They have an entire aisle dedicated to swimming goggles for example.

New ways to sell

Decathlon not only has everything you’d need for even the most peculiar of sporting pursuits, they also make buying the regular gear an experience. They have testing centers for just about any sport you can imagine: you can try a new racket on a mini tennis court set up with a ball machine to lob you floaters; there’s a putting green; scaled down soccer pitch; bike paths and it goes on. Outside is an entire village of kids sports activities including trampolines, zip lines, go carts etc.

I’ve never seen anything like Decathlon in North America, which is why my mind started racing about the North American retail concepts that are ready to be disrupted by offering customers an entirely new experience.

Not only do long vacations offer plenty of new business ideas, they are also a great way to test how ready your business is to be sold (the more it can run without you, the easier it will be to fetch a premium price for your company). To that end, and in case you needed any additional justification for a nice long break this summer, here are a couple of my recent articles on how a sabbatical is an essential ingredient in creating a sellable business:

Test your company’s value by going on vacation

~published July 21, 2010 the Globe and Mail

A holiday can be a good way to test how well your business can run without you — in other words, how sellable it is.

I had been running my research business for five years when I decided I needed a proper vacation. Not one of those quasi-vacations when you take your mobile to Florida for a week and check in three times a day. I needed a real vacation. »more

Sabbatical by the boss leads to attempted takeover

~ published July 20, 2010 the Globe and Mail

Recently I read about a guy who flew around France in a solar-powered plane for 26 hours without using a drop of fuel. The planning and plotting apparently took years, with a team of engineers thinking through every aspect of getting a plane aloft on the power of the sun and then storing enough battery power to keep it airborne throughout the night. After years of planning on land, someone actually had to get inside the plane and take a test flight. »more

Three ways to find out what your business is worth

~ published July 22, 2010 the Globe and Mail

It’s natural to want to know what your business is worth, but it can be hard to find out.

Years ago I owned a marketing and design agency and I used to rely on the multiples the big advertising-agency holding companies got on the stock exchange. I’d assumed that, because Omnicom was trading at 22 times earnings, my little agency with $150,000 in profit was worth around $3 million. »more

Selling Your Business? The 2 Most Important Numbers to Analyze

~ published July 22, 2010 BNET

I was on my way home when I got the call I had been expecting from the mergers and acquisitions firm I was using to sell my company. I pulled over — this conversation was going to require some focus.

“We have two offers we’d like to meet to discuss,” said my banker.  »more

photo courtesy of Flickr/Meagan

This morning I read a story in The New York Times that General Motors (GM) is preparing a public stock offering and analysts estimate the value of GM to be $50 billion to $90 billion.

What I find interesting is the huge range analysts estimate the company to be worth. There’s a $40 billion dollar gap between the high and the low; the low estimate is almost half that of the high.

It seems nowhere is pricing so subjective — so much in the eye of the beholder — than with a business. Can you imagine your real estate agent saying your house could fetch $500,000 or $900,000? You’d probably find a new real estate agent.

Despite all of the Wharton-educated analysts with their pivoting spreadsheets, valuing a company is still little more than a grownup game of pin the tail on the donkey.

When it comes to getting the highest price for your business, I have found it important to reserve your best selling skills for selling your business not your product, which is what I write about in my favorite (and the first) of the three articles below….

Make selling your business the top priority

~ published July 15, 2010 the Globe and Mail

Have you ever seen a speaker who said something that changed the way you think?

The most memorable speech I can remember hearing took place in 2002 at the executive education campus of the Massachusetts Institute of Technology. »more

Are you letting your customers wag the dog?

~ published July 13, 2010 the Globe and Mail

I have found giving customers too much choice can be a detriment to building a sellable company. I learned this the hard way when my first attempt at building a scalable service business flopped.

I had read a glowing article about Jupiter Research (now part of Forrester Research), an analyst firm that provided its studies to customers through a subscription offering. Jupiter would do one piece of research and present it to all of its customers. Finally, I thought, a model that brought some scale and leverage to the consulting business. »more

Are bossy customers undermining your business?

~ published July 14, 2010 the Globe and Mail

Yesterday I shared the perils of giving customers too much choice in what they buy. Today I’d like to share my experience around giving customers too much say in how you make what they buy.

First, some background: a decade ago I tried to scale up a subscription research offering similar to a Bloomberg or Forrester research program–you know, the model by which a customer subscribes to a pre-set number of reports provided to all. »more

photo courtesy of Flickr/Daniel Morris