It was my wife’s birthday yesterday. She’d kill me if I told you how old she turned but suffice it to say, it was a biggie (there is a zero on the end).

In an effort to preempt melancholy, I made my wife her favourite breakfast of all time: an egg McMuffin complete with a happy face made of HP sauce:

Kicking off a milestone birthday right

Finding English Muffins in this part of France is no easy task but I was determined to get this milestone birthday off to a good start. Which got me thinking, about milestones. Why is it that we celebrate birthdays or the start of a new year? On paper, it’s just another day, right? But milestones give us an excuse to hit the pause button and remind us of what we have accomplished, all the things we have to be grateful for and gives us permission to dream a little about the future.

So what are the milestones that you’re celebrating on your journey to building a valuable, sellable company?

If I may, here are a couple I think you should consider commemorating.

1. The day you go “all in”

Most of us start businesses while doing something else. You plan your business, maybe make a couple of sales but, as long as you have a job or a few credits left to get, you’re still on the fence. Then one day you decide to quit everything else and commit 100% to getting your business off the ground. Now that’s a day worth celebrating –  not for what you have accomplished, but for the courage it takes to jump off the fence and the adventure that lies ahead.

2. First time someone (or something) makes a sale

Making a sale as a business owner is a bitter sweet feeling. The sense of triumph is tainted by the realization that your business is dependent on you showing up. But the day that your salesperson walks into your office with a signed contract or someone hits the “buy” button on your website without you having to nudge them is a glorious moment in time.

3. A New home for your company

There is something special about moving into new space. A lot of business owners are creative souls at their core and a new environment to work in usually means you’re growing and investing in the future. Definitely a time to throw a party.

4. The million dollar mark

Hitting a million dollars in revenue is a significant achievement. Of the 27 million businesses in the United States, roughly 3%  do more than a million dollars in sales. You’re in an elite group – celebrate.

5. The first shot over the bow from an acquirer

The first time someone approaches you about buying your business is a special milestone. It’s usually an informal advance, maybe over lunch or at a trade show. I remember the first time I was approached by a big company who wanted to buy my marketing agency. The partner in charge of business development asked me to lunch and, once the plates had been cleared,  asked me if I would ever consider selling my company. I asked him what he was offering and he made a vague reference to “ten times”. I thought ten times was a very generous offer for a service business until he revealed he was referring to ten times net income after tax and that most of it would be made available on a five year earn out. While I passed on the offer, a little part of me was flattered to have been approached.

6. One million dollars of EBITDA

While you don’t need to have a million dollars of pre tax profit to sell your business, it is an important milestone to shoot for because it opens the door to a wider range of buyers. Some strategic acquirers won’t consider a business will less than a million dollars of Earnings Before Interest Taxes, Depreciation and Amortization (EBITDA). Also, financial buyers (e.g. private equity companies) have started to come “down market” and some will now consider businesses with a million dollars in EBITDA. You may not want to sell to a financial buyer, but having another offer at the table creates competition for your business.

7. First management team meeting

Cobbling together a senior team is a slow process but eventually you realize that your business is no longer all in your head and that other people have (and want) a say in things. Sitting down with your management team for the first time is a moment to savour – you’ve built a business capable of attracting senior talent and you have taken a giant step towards being sellable.

8. LOI / term sheet / Expression of Interest

Another big milestone is the first time you get a written offer to buy your business. More than empty chatter over lunch, this is a formal document where someone validates – in writing – that your life’s work has value to someone other than you. There’s still a long road ahead before closing day, but you deserve to celebrate.

9. Closing day

You need to down an entire bottle of your favourite bubbly for surviving the due diligence period which is a little bit like how I imagine a stoning to feel.

10. Your last day

In my last company, I remember the final day like it was yesterday. I had ridden my bike to work so when it was time to go, I put on my biking clothes, said my goodbyes, and road off down the street. The spring air has never felt so fresh, my bike had never felt so light. Freedom is a feeling to behold.

Out of interest, what milestones are you celebrating?

When I started to contemplate selling my last business, I was looking for data on what similar private companies were selling for. The media reported big company deals, but I knew they didn’t bare much relevance to my situation.

When I did hear about a private company sale, the details were never released publicly. Sometimes, the selling price was announced but rarely would they include the details of the multiple paid or the terms the sellers agreed to. >> More

I have found there are two basic approaches to building the team you’ll need to replace yourself: you can hire managers in the functional areas like finance, operations, sales and marketing or, you can find a second-in-command (2iC).

In most cases, I have found that acquirers like to see a strong management team, rather than just one good 2iC. However, a group of three or four senior people can be very expensive and may drag down your earnings which could lead you to opt for the more pragmatic 2iC strategy instead.

I’m reminded of Leo McGarry playing the role of Chief of Staff in Jed Bartlet’s Presidency in the TV series The West Wing. The 2iC’s job is to protect the Commander In Chief’s time for the strategic issues.

The danger of a 2iC, in my experience, is that it concentrates a lot of power in one person’s hands. That can work if you finish each other’s sentences, but if you ever fall out of love with your 2iC, it can leave you feeling neutered.

If you are going to use a number two to pull yourself out of the day-to-day details, my suggestion is to align your 2iC’s compensation with your goal to build a sellable business. That way, you avoid a conflict whereby your 2iC is looking to meet their short term objectives (either profit and/or revenue) and you’re looking to make investments that will make your business more valuable in the long run.

If you’re curious about how to find your 2iC, take a look at the first of the three articles below on selling a business where I interview Bob Sutton. Bob is a Stanford Professor and the bestselling author of Good Boss, Bad Boss and The No Asshole Rule and he provides his five tips for hiring a 2iC.

I’d like to hear from you. Are you in favor of a full blown management team over a 2iC? Any experience on how an acquirer views a 2iC-only replacement strategy? Please share your thoughts in the comments section of this post.

How to pick a second-in-command

~ published January 25, 2011 The Globe and Mail

Last week, as Steve Jobs set off on his most recent medical leave of absence, he handed the reins back to his second-in-command, Tim Cook.

Mark Zuckerberg has Sheryl Sandberg on staff to provide some adult supervision at Facebook.

A second-in-command (2iC) can balance the demands of running your business, and someone who has been clearly anointed can also go a long way toward making a leader redundant, which should be the objective of anyone wanting to build a sellable company.  »more

Are You Creating a Job or Building a Business?

~ published January 20, 2011 BNET

At some point, I think you have to decide if you are going to be self-employed or run a business.

Of course, most people start out in business being self-employed but soon reach a crossroads where they have to decide if they want to run a company. To turn self-employment into a business, you have to take one step backward financially to get two steps ahead. This is what I call the valley of self-employment — a time when your profitability actually goes down when you make the transition to a business. » more

How to Become a Talent Magnet

~ published January 19, 2011 Inc.com

After just five hours of meetings, a venture capitalist writes a check to fund an entrepreneur. When asked why he was confident despite so little diligence, the VC responds, “We just clicked.”

A case could be made that the more people you have in support of your venture, the better its odds of success are. So how do you go about attracting people—venture capitalists, an angel investor, a mentor, coach, partner or manager to help you with key decisions—to your company?  » more

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

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