Thursday, December 22, 2016

Business Sellers Could Learn from this Seventeen Year Old Shark Tank Winner

Shark Tank Deal Wunderkind
The critical moment of many Shark Tank deals is when one of the Sharks asks, "How did you get to that valuation?'  I can't believe how often the contestants eliminate themselves with a poor answer to that question that stops their deal process almost before it begins.  Answers such as : We have invested $2 million in the product, so our valuation should be at least $2 million, or Our investors have put in $3 million so far. It should be valued at $5 million, or, I heard that xyz Company got $30 million for their company. So based on that our company should be worth $10 million."  Well, ask any Shark. This is not how they look at the value. The Sharks and the market in general don't care how much it cost you to develop the product or how much your investors have in or how much you need to retire or how much you think it is worth.

The Sharks look at what the ROI is for their investment in a company. So when the Sharks asked the seventeen year old how he arrived at his valuation he promptly responded with, our sales during this period were X$ and if your project that for a full year, they would total Y$. Our profit margins are at Z%, so if you project that forward, our annual cash flows would be XYZ$. At a cash flow multiple of 5 X, that gets you to our valuation. After a moment of stunned silence, one of the Sharks said, you have to be one of the smartest seventeen year-olds out there. I agree. This kid knew his stuff and he was prepared and he blew away the Sharks who have seen hundreds of contestants absolutely fumble this most basic of investor questions. Nice job, young man.

It is hard to criticize this very bright young man, but I am going to Bill Belichick him. The Patriots just won 27 - 3 and Belichick lists his three things the team could have done better. I only have one, and it is a minor nit, but could be important to him in the future. Most of the Sharks agreed that his was a fair valuation based on his multiple of cash flow analysis. One of the deficiencies of this approach, especially for very rapidly growing firms and earlier stage firms, is that the company growth rate is not accounted for in the cash flow multiple valuation approach. Why do some companies like Facebook and Google sell for much higher Price Earnings multiples than the average S&P stock? The answer is that these companies have a far higher earnings growth rate and that has been translated into a higher PE multiple. In fact, many investor professionals are now basing investing decisions on the PE growth multiple which does, in fact, incorporate the company's growth rate into the valuation equation.

So even though the Sharks agreed that his was a fair valuation, remember the car buyer never pays list price, so they will be trying to bid that price down by selling the value of having the Shark involved (which is quite valuable, by the way). Our seventeen year old wunderkind could have planted a preemptive thought when presenting his valuation with something like, "So our valuation is 5 X annual earnings, but that value does not even account for the fact that our sales have been growing by 8% month over month."

My assistant coach just passed me a note. What about the phenomenon for start-ups and emerging companies that their expenses are temporarily much higher due to the front loading of development and marketing expenses? If you look at the multiple of cash flow model, the entrepreneur is actually punished from a valuation perspective because of their growth expenditures if they are selling their company or seeking investors during this hyper growth phase.

So remember, buyers will try to come up with reasons why they should not pay you asking price for your company and you need to be able to counter with equally compelling reasons why they should. Maybe the Sharks should pay the seventeen year old entrepreneur a premium based on how much they might learn from this budding superstar entrepreneur.

Dave Kauppi is a Merger and Acquisition Advisor and President of MidMarket Capital, providing business broker and investment banking services to owners in the sale of information technology, software, and other technology based companies. Dave is also the editor of the Exit Strategist Newsletter and author of the Book Selling your Software Company - An Insider's Guide to Achieving Strategic Value

Wednesday, December 21, 2016

Shark Tank Star - Magnet Lady's Superior Negotiation Techniques

Beating the Sharks at Their Own Game

On the 12-16-16 Episode of Shark Tank presentation by the mother from Seattle, Washington, who has designed removable and reusable magnet stickers for hanging art, I witnessed a bit of deal making art from the contestant. First, she was passionate, confident, and likeable; always a great platform to establish in negotiations. Secondly, she was well-prepared and could easily articulate her prior financial performance. Third, she came in with a very impressive record of prior success on QVC. Too many contestants come in with a "save me" attitude that is not effective.  Magnet Lady focused on growth and what she and a Shark could accomplish.  She was precise in her ask (what she would use the funds for) and her valuation expectations. 

All of this was impressive, but where she earned a grade of A was on her deal creativity and execution under fire. First, Lori was trying to pressure her into a single bid, which is a technique many of the Sharks have tried to use. They try to elicit a single bid auction with the implied threat of the Shark walking away if their initial offer is not accepted immediately. In our Mergers and Acquisitions practice, we find this to be the single biggest mistake that entrepreneurs and business sellers make. They often jump at an unsolicited offer or non-contested offer that ends up being far lower than what a competitive market process would produce. Magnet Lady deftly and respectfully kept the doors open with a comment to the effect that once we were partners, you would not want me to make any rash decisions. This allowed her to receive additional offers from the other Sharks. This resulted in a substantial improvement in her valuation.

So now she has Lori who has been leveraged up by other offers and she knows that buyers hate this. Magnet Lady believes that Lori is her best partner going forward, but her initial offer is one half of what Magnet Lady originally asked for. She also knows that Lori will probably not just raise her bid directly in a bidding war type of auction. So Magnet Lady counters with a very creative structure that commits Lori to her original bid for a valuation at the closing of the deal, with a contingent performance Kicker. If that performance measure is reached then Magnet Lady will receive her originally proposed valuation.

This would have been an excellent strategy with several days and an experienced advisor to help her craft her counter proposal. But the fact that she did it in real time under intense pressure from skilled deal makers is quite remarkable. She knows with Lori's help, hitting her targets will be a slam dunk. So she soothes Lori's ego by not forcing her original ask, but artfully gets there with a slightly different structure. Plus, she has again reinforced her confidence in her venture by putting her skin in the game and not asking for the entire value up front.  Buyers love this. Done deal.  When your magnet days are over, maybe you will be "attracted" to a career as a deal maker. See what I did there?

Dave Kauppi is a Merger and Acquisition Advisor and President of MidMarket Capital, providing business broker and investment banking services to owners in the sale of information technology, software, and other technology based companies. Dave is also the editor of the Exit Strategist Newsletter and author of the Book Selling your Software Company - An Insider's Guide to Achieving Strategic Value

Tuesday, December 20, 2016

Shark Tank Presentation Critique - The Culinary Ninja

Our Shark Tank Contestant
As a mergers and acquisitions advisor, I find the Shark Tank show fascinating like a football coach would, watching next week's opponent's game film. The show distills what is often a 6 to 8 month process down to a very intense eight minute vignette of the deal. Prior to the Shark's grilling, the contestants prepare their investment business case (the equivalent of the offering memorandum) and market their opportunity to the show's producers to earn the right to pitch the Sharks.
The culinary ninja with his Paleo Ice Age Meals had an attractive product in a hot area with lots of potential. He used a little showmanship and delivered his pitch as a poem after presenting his ask at a company valuation of $10 million, with limited current sales.  Every one of the Sharks was turned off and several delivered a poem response that conveyed the message that his valuation was off the charts high and how can he possibly justify that. He had essentially lost them and tried to recover with his very recent development of a potential partnership with Cross Fit. That information was interesting to the Sharks, but he had already lost them.
With the caveat that I was not standing up there in the glare of the bright lights with 5 seasoned deal- makers in attack mode, I am going to deliver some arm chair quarterbacking. In our business, we are often approached by companies with great potential or the best technology, who just need the buyer with the brand, the customer base, and the resources to take the product to the next level.  Where the reality gap comes in is that they want to be paid for all of this future performance with a lofty valuation not supported by current financial metrics and they want it all in cash at closing. That is what the Ice Age Meals guy did and he got justifiably bloodied by the Sharks.
How could he have changed his outcome, gotten his investor partner, while creating the possibility that his valuation would be realized? Well, he could have withdrawn his deal and waited until he closed the partnership with Cross Fit, and then come back later with the same valuation expectations. That is not a good idea because getting this audience with the Sharks is too important to pass up and may never return. The approach of this arm chair quarterback would have been to preface his value expectations by first presenting the Cross Fit potential partnership . Next he should have acknowledged that it was not a sure thing so he was willing to do a deal with a significantly lower valuation at deal closing with a contingent future valuation based on post closing performance.
So his valuation proposal would be comprised of both value and structure. For example, he may ask for a closing valuation of $250,000 for a 10% ownership stake. The second component would be a potential $750,000 additional valuation which could be based on 6%, 5%, and 4% respectively of sales during the next three years of operations. So if sales were $3 million, $4 million and $5 million during the next 3 years, he would capture $180 K, $200 K, and $200 K of additional contingent transaction value. In the mergers and acquisition world, this contingent transaction value is referred to as an earnout.
Buyers are more than willing to pay for potential once that potential is realized and they love it when the Seller shares in the risk and puts their money where their mouth is. By using this approach the Paleo ninja would not have immediately turned off the Sharks and been dismissed as an unrealistic seller. He would have been viewed as a more resourceful partner and someone willing to work with the buyers.  Here is the sad part of blowing this opportunity. The deal with Cross Fit has a lot of hurdles to clear before any money changes hands. The odds are against a fledgling start-up trying to do business with a much larger established company. The biggest reason is that a great deal of buyer resources are expended in order to roll out a partnership and they do not want to risk that their new partner goes out of business and wastes the investment and potentially damages their brand.
An investment from a Shark is a self-fulfilling prophesy. The little company will survive and thrive. Taking this information of the Shark's investment back to Cross Fit immediately removes the largest impediment to getting the partnership deal closed. The odds of the partnership deal improve dramatically which in turn improves the future sales potential for the Paleo meals resulting in realizing the full potential of the contingent portion of the transaction value.
It is a shame a deal did not get done with a potentially very good product with some serious upside potential. A small tweak in deal structure could have resulted in a much more accepting deal environment between the Paleo ninja and the Sharks. Investors and business buyers set up evaluation gates that the target must pass through. Don't allow them to eliminate you early by not passing the reasonable seller gate. 

Dave Kauppi is a Merger and Acquisition Advisor and President of MidMarket Capital, providing business broker and investment banking services to owners in the sale of information technology, software, and other technology based companies. Dave is also the editor of the Exit Strategist Newsletter and author of the Book Selling your Software Company - An Insider's Guide to Achieving Strategic Value

Tuesday, December 13, 2016

Business Sale Negotiations - Base the Letter of Intent on Your Industry's Valuation Metrics

Unless you are one of the rare companies that is viewed as a valuable strategic acquisition by a company with highly valued stock as their currency,  your selling price is going to closely approximate your industry's valuation metrics. For an eCommerce Website it could be a multiple of annual net profit, for a IT managed services provider it is a multiple of MRR (monthly recurring revenue), and for a distributor of medical supplies it is a multiple of EBITDA.

So for this example we will use the IT Managed Services Provider. We got a great deal of buyer interest and had multiple buyers involved. We started taking bids and negotiating letters of intent. Because we know that the due diligence process can stretch out (sometimes as a buyer's way to make late inning price adjustments - an unfortunate practice known as Re-Trading) we wanted to provide a price adjustment mechanism that was fair to both buyer and seller. Normally because the process favors the buyer, the price can only go down between LOI execution and closing, but almost never up (if you don't believe me, read on and you will see how true that is). We wanted to accomplish two things with our approach; 1 encourage the buyers to complete the process in a reasonable period of time and 2 provide for both price increases and decreases with a performance measurement that would be based on the prior 12 months to the month of closing.

As we started getting our offers, our counter offers converted the purchase price into a multiple of EBITDA and then incorporated language that would base the final purchase price on the actual EBITDA for the prior 12 months to closing. The language looked like this:

BUYER will pay SELLER purchase price of $4,350,000 (four million three hundred fifty thousand US dollars) for 100% of debt-free assets of the company, goodwill, non-compete and non-solicit agreements. For illustration purposes, the valuation is based on 4.35 times EBITDA of the trailing 12 months (TTM) to the month prior to the execution of this letter, as provided by the business broker. At the present time and using available information, the TTM EBITDA from October 2014 to end of September 2015 is calculated to be approximately $1,000,000. The purchase price at closing will be based on an EBITDA multiple of 4.35 X the actual EBITDA for the 12 month period preceding the month of closing.

Again, the main purpose of this language is to level the playing field between buyer and seller.  Normally the buyers deluge the seller with voluminous data requests and in smaller privately held companies it is usually the owner that is in charge of responding. Often the performance of the business suffers and the buyers then make their adjustment to purchase price based on that downturn. If you do not formalize and document the corresponding upside for the seller, should the business performance improve, the buyers never raise their price. They have had you off the market for 6 months and it is par for them to play brinksmanship and threaten to walk on the deal rather than raise their price. You box them into a corner with this language by proactively documenting what you know they will do already. Once documented, it is pretty hard to argue that you shouldn't be provided the same protections. It is the same principal as a mutual non disclosure agreement.

So in a competitive bidding situation, we get the best terms and conditions from our buyers including the variable purchase price calculation at closing and fixing the amount and the formula for calculating the net working capital level.  We hammer out a couple of additional details including the calculation of the earnout, with the ultimate winner and we dual sign the letter of intent. As promised, the due diligence is exhaustive with the private equity group buyer. They assign a junior analyst to be the coordinator and another analyst to focus on populating the data room.  They already own a platform in this industry and involve that company's CEO in our weekly status call. As the months pass, yes months, the seller's performance continues to improve and we are sending monthly financial updates. It is becoming evident to all involved that the purchase price is going up. Remember what I said earlier - for the buyer the price almost never goes up.

Four months into the process the buyer produces a "term sheet" which basically fixes the purchase price to the original place holder level and overrides several key points that we had earlier negotiated in a competitive bid process. Our client was very upset and we pointed out to the buyer that we were not going to accept new terms after we were off the market for four months and that they had agreed to these terms in a competitive situation. I even sent them our email threads of our hard fought negotiations as a reminder. I also sent them our deal comparison work sheet to show all of the other bids that we received (I blanked out the identities of the other buyers, of course). Because of our extreme negative reaction they did not press on getting any agreement on the term sheet.

So we returned to the due diligence process and the PEG hires a human resources consulting firm, adding to the due diligence burden and often duplicating requests already completed. They also hired an "independent third party" CPA firm to go over our clients information and produce a quality of earnings report but not before yet another exhaustive round of data gathering, again much of it duplicated. We received a detailed report with several attacks on EBITDA and value but a couple of the highlights were, "To recruit and maintain quality employees, the Company may have to step up its contribution to the cost of health insurance and also add to the benefits package. The costs of such upgrades could easily run $50K-$100K per year."  This was completely speculative and not backed by any facts including our requested quote from their insurance carrier to move 8 employees to the new plan. We also pointed out that retroactively applying anticipated future adjustments to historical EBITDA was a real stretch on industry practices.

Another gem in the report was "The company will need to add resources in the administrative function at a cost that might be estimated on the low side at perhaps $100 K annually." This is after we have already discussed eliminating the seller's CFO with the platform company at a savings of $50,000.  

Another Quality of Earnings Report Finding "The relatively low margin on product sales combined with the fact that they are generally not recurring except over multi-year replacement and upgrade cycles means that the product component of the business should be valued using a separate, lower multiple of revenue and/or earnings than the service revenue, which is recurring." Well, first, the division of product revenue was clearly stated in all materials the PEG  had when negotiating their offer.  The offer against 11 other qualified bidders was a single EBITDA multiple. Again, the bid was set in a competitive process and did not include any dual multiple component.

All in all they presented $332,000 in EBITDA Adjustments as their starting point to reopen the price negotiations almost 5 months into the process. We refuted every one of their attempted non supported and arbitrary adjustments.

As nerves were frayed and the deal is on the edge of blowing up, I get an email from one of the partners at the PEG. 'Thanks for the note Dave, clearly we are just going to keep talking past each other if we focus on EBITDA. I think we can agree to disagree. (for clarity this won’t change the approach to employees, they will still be offered our company's benefit package at closing).

MRR is clearly the value driver of this and all MSP businesses." He claimed that the information they were provided and were using for their LOI showed a different revenue breakdown between product sales and monthly recurring revenue than what the seller was currently doing. "That issue notwithstanding the average TTM MRR at that time was 239k and the purchase price in our signed term sheet was $4.35M or 18.2x MRR. The average TTM MMR has indeed grown since April (by 7.2%), applying an 18.2x multiple to that MRR $256k brings you to $4.66M, we are willing to round up to $4.7M. That represents a $250k increase in enterprise value since the term sheet was signed."

Well the actual measurement that the LOI called for was based on 4.35 X the latest TTM EBITDA of $1.2 M that puts the value at $5.22 M.

At this point the PEG counted on our guys giving in and taking  their deal but there had been so much erosion of good will that our sellers walked away. This was a very expensive outcome for all involved. My take away from this is first, I am really angry at this unfortunate practice of "re-trading" that some PEG's use as their acquisition model. Wikipedia, the free encyclopedia, defines A Re-trade[1] as the practice of renegotiating the purchase price of real property by the buyer after initially agreeing to purchase at a higher price. Typically this occurs after the buyer gets the property under contract and during the period that it is performing due diligence. The buyer may raise a due diligence issue and demand a purchase price adjustment to a lower re-trade price. The seller can be left in a bad situation where it must either accept the lower price or lose the sale and re-market the property.

It occurs to me that had the buyer set their purchase price to the metric that was most important to them in setting value, they would have made sure to completely understand what the MRR in this case was prior to negotiating a LOI. If the due diligence process showed an unexpected surprise or variance in MRR they would have been protected. Also the seller would have accepted any legitimate price adjustment because the rules were clearly spelled out. They instead bid on a multiple of EBITDA and despite their best efforts to carve it up in due diligence could not find one defensible legitimate adjustment.  When the price went against them and they attempted to change the metric to give them the answer they wanted, they destroyed the seller's trust and killed the deal.

Dave Kauppi is a Merger and Acquisition Advisor and President of MidMarket Capital, providing business broker and investment banking services to owners in the sale of information technology, software, and other technology based companies. Dave is also the editor of the Exit Strategist Newsletter and author of the Book Selling your Software Company - An Insider's Guide to Achieving Strategic Value

Friday, November 18, 2016

Essential Reading For Tech Company Entrepreneurs 20 Books that Will Change How You Look at Your Business

Creating a great technology company involves much more than building a great product or service. Much of your success will depend on your business model, influencing customers, overcoming obstacles, employing social media, scaling, leveraging a worldwide workforce, and much more. This curated reading list consists of books we have recommended to clients and ones clients have recommended to us. They will inform, energize and inspire you while improving the odds of you building a successful company. 

Crossing the Chasm, 3rd Edition: Marketing and Selling Disruptive Products to Mainstream Customers
The bible for bringing cutting-edge products to larger markets--now revised and updated with new insights into the realities of high-tech marketing. In Crossing the Chasm, Geoffrey A. Moore shows that in the Technology Adoption Life Cycle--which begins with innovators and moves to early adopters, early majority, late majority, and laggards--there is a vast chasm between the early adopters and the early majority. While early adopters are willing to sacrifice for the advantage of being first, the early majority waits until they know that the technology actually offers improvements in productivity. The challenge for innovators and marketers is to narrow this chasm and ultimately accelerate adoption across every segment. 

Blue Ocean Strategy, Expanded Edition: How to Create Uncontested Market Space and Make the Competition Irrelevant 
The global phenomenon that has sold 3.5 million copies, is published in a record-breaking 43 languages and is a bestseller across five continents—now updated and expanded with new content. This global bestseller, embraced by organizations and industries worldwide, challenges everything you thought you knew about the requirements for strategic success. Now updated with fresh content from the authors, Blue Ocean Strategy argues that cutthroat competition results in nothing but a bloody red ocean of rivals fighting over a shrinking profit pool. Based on a study of 150 strategic moves (spanning more than 100 years across 30 industries), the authors argue that lasting success comes not from battling competitors but from creating “blue oceans”—untapped new market spaces ripe for growth.

Blue Ocean Strategy presents a systematic approach to making the competition irrelevant and outlines principles and tools any organization can use to create and capture their own blue oceans.

David and Goliath: Underdogs, Misfits, and the Art of Battling Giants 
Malcolm Gladwell, the #1 bestselling author of The Tipping Point, Blink, Outliers, and What the Dog Saw, offers his most provocative---and dazzling---book yet.

Three thousand years ago on a battlefield in ancient Palestine, a shepherd boy felled a mighty warrior with nothing more than a stone and a sling, and ever since then the names of David and Goliath have stood for battles between underdogs and giants. David's victory was improbable and miraculous. He shouldn't have won. Or should he have?

In David and Goliath, Malcolm Gladwell challenges how we think about obstacles and disadvantages, offering a new interpretation of what it means to be discriminated against, or cope with a disability, or lose a parent, or attend a mediocre school, or suffer from any number of other apparent setbacks.

Gladwell begins with the real story of what happened between the giant and the shepherd boy those many years ago. From there, David and Goliath examines Northern Ireland's Troubles, the minds of cancer researchers and civil rights leaders, murder and the high costs of revenge, and the dynamics of successful and unsuccessful classrooms---all to demonstrate how much of what is beautiful and important in the world arises from what looks like suffering and adversity.

In the tradition of Gladwell's previous bestsellers---The Tipping Point, Blink, Outliers and What the Dog Saw---David and Goliath draws upon history, psychology, and powerful storytelling to reshape the way we think of the world around us.

Abundance: The Future Is Better Than You Think  Providing abundance is humanity’s grandest challenge—this is a book about how we rise to meet it. 
We will soon be able to meet and exceed the basic needs of every man, woman and child on the planet. Abundance for all is within our grasp. This bold, contrarian view, backed up by exhaustive research, introduces our near-term future, where exponentially growing technologies and three other powerful forces are conspiring to better the lives of billions. An antidote to pessimism by tech entrepreneur turned philanthropist, Peter H. Diamandis and award-winning science writer Steven Kotler.

Since the dawn of humanity, a privileged few have lived in stark contrast to the hardscrabble majority. Conventional wisdom says this gap cannot be closed. But it is closing—fast. The authors document how four forces—exponential technologies, the DIY innovator, the Technophilanthropist, and the Rising Billion—are conspiring to solve our biggest problems. Abundance establishes hard targets for change and lays out a strategic roadmap for governments, industry and entrepreneurs, giving us plenty of reason for optimism.

Examining human need by category—water, food, energy, healthcare, education, freedom—Diamandis and Kotler introduce dozens of innovators making great strides in each area: Larry Page, Steven Hawking, Dean Kamen, Daniel Kahneman, Elon Musk, Bill Joy.

Platform Revolution: How Networked Markets Are Transforming the Economy--and How to Make Them Work for You 
A practical guide to the new economy that is transforming the way we live, work, and play.
Uber. Airbnb. Amazon. Apple. PayPal. All of these companies disrupted their markets when they launched. Today they are industry leaders. What’s the secret to their success?
These cutting-edge businesses are built on platforms: two-sided markets that are revolutionizing the way we do business. Written by three of the most sought-after experts on platform businesses, Platform Revolution is the first authoritative, fact-based book on platform models. Whether platforms are connecting sellers and buyers, hosts and visitors, or drivers with people who need a ride, Geoffrey G. Parker, Marshall W. Van Alstyne, and Sangeet Paul Choudary reveal the what, how, and why of this revolution and provide the first “owner’s manual” for creating a successful platform business.

Platform Revolution teaches newcomers how to start and run a successful platform business, explaining ways to identify prime markets and monetize networks. Addressing current business leaders, the authors reveal strategies behind some of today’s up-and-coming platforms, such as Tinder and SkillShare, and explain how traditional companies can adapt in a changing marketplace. The authors also cover essential issues concerning security, regulation, and consumer trust, while examining markets that may be ripe for a platform revolution, including healthcare, education, and energy.
As digital networks increase in ubiquity, businesses that do a better job of harnessing the power of the platform will win. An indispensable guide, Platform Revolution charts out the brilliant future of platforms and reveals how they will irrevocably alter the lives and careers of millions.

Virtual Freedom: How to Work with Virtual Staff to Buy More Time, Become More Productive, and Build Your Dream Business
Entrepreneurs often suffer from ”superhero syndrome”—the misconception that to be successful, they must do everything themselves. Not only are they the boss, but also the salesperson, HR manager, copywriter, operations manager, online marketing guru, and so much more. It’s no wonder why so many people give up the dream of starting a business—it’s just too much for one person to handle.

But outsourcing expert and ”Virtual CEO,” Chris Ducker knows how you can get the help you need with resources you can afford. Small business owners, consultants, and online entrepreneurs don’t have to go it alone when they discover the power of building teams of virtual employees to help run, support, and grow their businesses.

Virtual Freedom: How to Work with Virtual Staff to Buy More Time, Become More Productive, and Build Your Dream Business is the step-by-step guide every entrepreneur needs to build his or her business with the asset of working with virtual employees. Focusing on business growth, Ducker explains every detail you need to grasp, from figuring out which jobs you should outsource to finding, hiring, training, motivating, and managing virtual assistants.

With additional tactics and online resources, Virtual Freedom is the ultimate resource of the knowledge and tools necessary for building your dream business with the help of virtual staff.

Built to Sell: Creating a Business That Can Thrive Without You 
 According to John Warrillow, the number one mistake entrepreneurs make is to  build a business that relies too heavily on them. Thus, when the time comes to sell, buyers aren't confident that the company-even if it's profitable-can stand on its own. To illustrate this, Warrillow introduces us to a fictional small business owner named Alex who is struggling to sell his advertising agency. Alex turns to Ted, an entrepreneur and old family friend, who encourages Alex to pursue three criteria to make his business sellable: * Teachable: focus on products and services that you can teach employees to deliver. * Valuable: avoid price wars by specializing in doing one thing better than anyone else. * Repeatable: generate recurring revenue by engineering products that customers have to repurchase often.

The E-Myth Revisited: Why Most Small Businesses Don't Work and What to Do About It
An instant classic, this revised and updated edition of the phenomenal bestseller dispels the myths about starting your own business. Small business consultant and author Michael E. Gerber, with sharp insight gained from years of experience, points out how common assumptions, expectations, and even technical expertise can get in the way of running a successful business.
Gerber walks you through the steps in the life of a business—from entrepreneurial infancy through adolescent growing pains to the mature entrepreneurial perspective: the guiding light of all businesses that succeed—and shows how to apply the lessons of franchising to any business, whether or not it is a franchise. Most importantly, Gerber draws the vital, often overlooked distinction between working on your business and working in your business.
The E-Myth Revisited will help you grow your business in a productive, assured way.

Zero to One: Notes on Startups, or How to Build the Future
If you want to build a better future, you must believe in secrets.

The great secret of our time is that there are still uncharted frontiers to explore and new inventions to create. In Zero to One, legendary entrepreneur and investor Peter Thiel shows how we can find singular ways to create those new things.

Thiel begins with the contrarian premise that we live in an age of technological stagnation, even if we’re too distracted by shiny mobile devices to notice. Information technology has improved rapidly, but there is no reason why progress should be limited to computers or Silicon Valley. Progress can be achieved in any industry or area of business. It comes from the most important skill that every leader must master: learning to think for yourself.

Doing what someone else already knows how to do takes the world from 1 to n, adding more of something familiar. But when you do something new, you go from 0 to 1. The next Bill Gates will not build an operating system. The next Larry Page or Sergey Brin won’t make a search engine. Tomorrow’s champions will not win by competing ruthlessly in today’s marketplace. They will escape competition altogether, because their businesses will be unique.

Zero to One presents at once an optimistic view of the future of progress in America and a new way of thinking about innovation: it starts by learning to ask the questions that lead you to find value in unexpected places.

Exponential Organizations: Why new organizations are ten times better, faster, and cheaper than yours (and what to do about it)
Frost & Sullivan’s 2014 Growth, Innovation, and Leadership Book of the Year

In business, performance is key. In performance, how you organize can be the key to growth.

In the past five years, the business world has seen the birth of a new breed of company—the Exponential Organization—that has revolutionized how a company can accelerate its growth by using technology. An ExO can eliminate the incremental, linear way traditional companies get bigger, leveraging assets like community, big data, algorithms, and new technology into achieving performance benchmarks ten times better than its peers.

Three luminaries of the business world—Salim Ismail, Yuri van Geest, and Mike Malone—have researched this phenomenon and documented ten characteristics of Exponential Organizations. Here, in EXPONENTIAL ORGANIZATIONS, they walk the reader through how any company, from a startup to a multi-national, can become an ExO, streamline its performance, and grow to the next level.

“EXPONENTIAL ORGANIZATIONS is the most pivotal book in its class. Salim examines the future of organizations and offers readers his insights on the concept of Exponential Organizations, because he himself embodies the strategy, structure, culture, processes, and systems of this new breed of company.”—John Hagel, The Center for the Edge

Chosen by Benjamin Netanyahu, Prime Minister of Israel, to be one of Bloomberg's Best Books of 2015

The 4-Hour Workweek, Expanded and Updated
Forget the old concept of retirement and the rest of the deferred-life plan–there is no need to wait and every reason not to, especially in unpredictable economic times. Whether your dream is escaping the rat race, experiencing high-end world travel, earning a monthly five-figure income with zero management, or just living more and working less, The 4-Hour Workweek is the blueprint.

This step-by-step guide to luxury lifestyle design teaches:
•How Tim went from $40,000 per year and 80 hours per week to $40,000 per month and 4 hours per week
•How to outsource your life to overseas virtual assistants for $5 per hour and do whatever you want
•How blue-chip escape artists travel the world without quitting their jobs
•How to eliminate 50% of your work in 48 hours using the principles of a forgotten Italian economist
•How to trade a long-haul career for short work bursts and frequent “mini-retirements”

Growth Hacker Marketing: A Primer on the Future of PR, Marketing, and Advertising 
A Primer on the Future of PR, Marketing and Advertising

A new generation of megabrands like Facebook, Dropbox, Airbnb, and Twitter haven’t spent a dime on traditional marketing. No press releases, no TV commercials, no billboards. Instead, they rely on a new strategy—growth hacking—to reach many more people despite modest marketing budgets. Growth hackers have thrown out the old playbook and replaced it with tools that are testable, trackable, and scalable. They believe that products and businesses should be modified repeatedly until they’re primed to generate explosive reactions.

Bestselling author Ryan Holiday, the acclaimed marketing guru for American Apparel and many bestselling authors and multiplatinum musicians, explains the new rules and provides valuable examples and case studies for aspiring growth hackers. Whether you work for a tiny start-up or a Fortune 500 giant, if you’re responsible for building awareness and buzz for a product or service, this is your road map.

The New Strategic Selling: The Unique Sales System Proven Successful by the World's Best Companies 
The Book that Sparked A Selling Revolution In 1985 one book changed sales and marketing forever. Rejecting manipulative tactics and emphasizing "process," Strategic Selling presented the idea of selling as a joint venture and introduced the decade's most influential concept, Win-Win. The response to Win-Win was immediate. And it helped turn the small company that created Strategic Selling, Miller Heiman, into a global leader in sales development with the most prestigious client list and sought-after workshops in the industry. Now Strategic Selling has been updated and revised for a new century of sales success. The New Strategic Selling This new edition of the business classic confronts the rapidly evolving world of business-to-business sales with new real-world examples, new strategies for confronting competition, and a special section featuring the most commonly asked questions from the Miller Heiman workshops. Learn: * How to identify the four real decision makers in every corporate labyrinth * How to prevent sabotage by an internal deal-killer * How to make a senior executive eager to see you * How to avoid closing business that you'll later regret * How to manage a territory to provide steady, not "boom and bust," revenue * How to avoid the single most common error when dealing with the competition.

How to Win Friends & Influence People
Millions of people around the world have - and continue to - improve their lives based on the teachings of Dale Carnegie. In "How to Win Friends and Influence People" Carnegie offers practical advice and techniques, in his exuberant and conversational style, for how to get out of a mental rut and make life more rewarding. His advice has stood the test of time and will teach you how to: make friends quickly and easily; increase your popularity; win people to your way of thinking; enable you to win new clients and customers; become a better speaker and a more entertaining conversationalist; and, arouse enthusiasm among your colleagues. This book will turn around your relationships and improve your dealings with all the people in your life.

The Obstacle Is the Way: The Timeless Art of Turning Trials into Triumph
The Obstacle is the Way has become a cult classic, beloved by men and women around the world who apply its wisdom to become more successful at whatever they do.

Its many fans include a former governor and movie star (Arnold Schwarzenegger), a hip hop icon (LL Cool J), an Irish tennis pro (James McGee), an NBC sportscaster (Michele Tafoya), and the coaches and players of winning teams like the New England Patriots, Seattle Seahawks, Chicago Cubs, and University of Texas men’s basketball team.

The book draws its inspiration from stoicism, the ancient Greek philosophy of enduring pain or adversity with perseverance and resilience. Stoics focus on the things they can control, let go of everything else, and turn every new obstacle into an opportunity to get better, stronger, tougher. As Marcus Aurelius put it nearly 2000 years ago: “The impediment to action advances action. What stands in the way becomes the way.”

Ryan Holiday shows us how some of the most successful people in history—from John D. Rockefeller to Amelia Earhart to Ulysses S. Grant to Steve Jobs—have applied stoicism to overcome difficult or even impossible situations. Their embrace of these principles ultimately mattered more than their natural intelligence, talents, or luck.

If you’re feeling frustrated, demoralized, or stuck in a rut, this book can help you turn your problems into your biggest advantages. And along the way it will inspire you with dozens of true stories of the greats from every age and era.

The Wisdom of Crowds
In this fascinating book, New Yorker business columnist James Surowiecki explores a deceptively simple idea: Large groups of people are smarter than an elite few, no matter how brilliant–better at solving problems, fostering innovation, coming to wise decisions, even predicting the future. With boundless erudition and in delightfully clear prose, Surowiecki ranges across fields as diverse as popular culture, psychology, ant biology, behavioral economics, artificial intelligence, military history, and politics to show how this simple idea offers important lessons for how we live our lives, select our leaders, run our companies, and think about our world.

Originals: How Non-Conformists Move the World
The #1 New York Times bestseller that examines how people can champion new ideas—and how leaders can fight groupthink, from the author of Give and Take

“Reading Originals made me feel like I was seated across from Adam Grant at a dinner party, as one of my favorite thinkers thrilled me with his insights and his wonderfully new take on the world.” —Malcolm Gladwell, author of Outliers and The Tipping Point

“Originals is one of the most important and captivating books I have ever read, full of surprising and powerful ideas. It will not only change the way you see the world; it might just change the way you live your life. And it could very well inspire you to change your world.” —Sheryl Sandberg, COO of Facebook and author of Lean In

With Give and Take, Adam Grant not only introduced a landmark new paradigm for success but also established himself as one of his generation’s most compelling and provocative thought leaders. In Originals he again addresses the challenge of improving the world, but now from the perspective of becoming original: choosing to champion novel ideas and values that go against the grain, battle conformity, and buck outdated traditions. How can we originate new ideas, policies, and practices without risking it all?

The Lean Startup: How Today's Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses
Most startups fail. But many of those failures are preventable.  The Lean Startup is a new approach being adopted across the globe, changing the way companies are built and new products are launched.

Eric Ries defines a startup as an organization dedicated to creating something new under conditions of extreme uncertainty. This is just as true for one person in a garage or a group of seasoned professionals in a Fortune 500 boardroom. What they have in common is a mission to penetrate that fog of uncertainty to discover a successful path to a sustainable business.

The Lean Startup approach fosters companies that are both more capital efficient and that leverage human creativity more effectively.  Inspired by lessons from lean manufacturing, it relies on “validated learning,” rapid scientific experimentation, as well as a number of counter-intuitive practices that shorten product development cycles, measure actual progress without resorting to vanity metrics, and learn what customers really want. It enables a company to shift directions with agility, altering plans inch by inch, minute by minute.

Rather than wasting time creating elaborate business plans, The Lean Startup offers entrepreneurs - in companies of all sizes - a way to test their vision continuously, to adapt and adjust before it’s too late. Ries provides a scientific approach to creating and managing successful startups in a age when companies need to innovate more than ever.

Adapt: Why Success Always Starts with Failure 
In this groundbreaking book, Tim Harford, the Undercover Economist, shows us a new and inspiring approach to solving the most pressing problems in our lives. When faced with complex situations, we have all become accustomed to looking to our leaders to set out a plan of action and blaze a path to success. Harford argues that today's challenges simply cannot be tackled with ready-made solutions and expert opinion; the world has become far too unpredictable and profoundly complex. Instead, we must adapt.
Deftly weaving together psychology, evolutionary biology, anthropology, physics, and economics, along with the compelling story of hard-won lessons learned in the field, Harford makes a passionate case for the importance of adaptive trial and error in tackling issues such as climate change, poverty, and financial crises—as well as in fostering innovation and creativity in our business and personal lives.
Taking us from corporate boardrooms to the deserts of Iraq, Adapt clearly explains the necessary ingredients for turning failure into success. It is a breakthrough handbook for surviving—and prospering— in our complex and ever-shifting world.

The Ten Faces of Innovation: IDEO's Strategies for Defeating the Devil's Advocate and Driving Creativity Throughout Your Organization
The author of the bestselling The Art of Innovation reveals the strategies IDEO, the world-famous design firm, uses to foster innovative thinking throughout an organization and overcome the naysayers who stifle creativity. 

The role of the devil's advocate is nearly universal in business today. It allows individuals to step outside themselves and raise questions and concerns that effectively kill new projects and ideas, while claiming no personal responsibility. Nothing is more potent in stifling innovation.

Drawing on nearly 20 years of experience managing IDEO, Kelley identifies ten roles people can play in an organization to foster innovation and new ideas while offering an effective counter to naysayers. Among these approaches are the Anthropologist—the person who goes into the field to see how customers use and respond to products, to come up with new innovations; the Cross-pollinator who mixes and matches ideas, people, and technology to create new ideas that can drive growth; and the Hurdler, who instantly looks for ways to overcome the limits and challenges to any situation.

Filled with engaging stories of how companies like Kraft, Procter and Gamble, Cargill and Samsung have incorporated IDEO's thinking to transform the customer experience, THE TEN FACES OF INNOVATION is an extraordinary guide to nurturing and sustaining a culture of continuous innovation and renewal.

Selling your Software Company - An Insider's Guide to Achieving Strategic Value How the Merger and Acquisition Process Really Works and What You Can Do To Win 
Selling your technology company for strategic value involves far more than creating a great technology, product, or service. Much of your success will depend on your business model and important value drivers such as contractually recurring revenue and network effects. The most important factor is the process you employ when you sell your company. The greater your company's reliance on the leverage of technology, the greater the room for the market to interpret its selling price.
We explore all aspects of the M&A process, from the planning and marketing to the Letter of Intent, due diligence, and closing, and everything in between. We discuss topics like the subtle language that buyers use in LOI's that can cost sellers huge swings in value at closing; optimal transaction structures, avoiding punishing net working capital adjustments, negotiating tactics, and much more. This book is a must read for the tech entrepreneur contemplating the sale of their business.
In order to maximize your company's value you must fully engage the competitive marketplace. We have see seen swings in the value of technology companies of millions of dollars between an unsolicited offer for a small software company by a Private Equity Group and the ultimate purchase transaction from a strategic industry player. That staggering result is the difference from  selling at a cash flow multiple and selling for strategic value in a competitive soft auction.
The greater the complexity of the process, the greater the advantage to the one with experience. Just ask a rookie quarterback in his first NFL start. Selling a business is a highly complex process and the business seller is usually in their first transaction while the typical buyer has made dozens of prior acquisitions. This book attempts to level the playing field by sharing the author's seventeen years of deal making experience representing technology focused sellers of businesses.

Dave Kauppi is a Merger and Acquisition Advisor and President of MidMarket Capital, providing business broker and investment banking services to owners in the sale of information technology, software, and other technology based companies. Dave is also the editor of the Exit Strategist Newsletter and author of the Book Selling your Software Company - An Insider's Guide to Achieving Strategic Value