Your Book Is a Business Plan and a Marketing Proposal

Your Book should be written as a cross between a business plan and a marketing proposal and should describe where and why your business will grow and be a great opportunity for a buyer. Whether you are talking to buyers or trying to raise funds from an investor, they need to understand your vision for the future of the business and understand how you see that plan being executed. Your Book is the medium for conveying that information to the buyer. It should provide potential buyers with the essential information they need to move ahead with an offer, while controlling how much you divulge to competitors who pose as strategic buyers.

Expect your book to be parsed and studied in detail by the buyer. Frequently, particularly for larger deals, a potential buyer will have different people review the various sections of a Book. Anticipate questions regarding the claims you make in your Book. There are occasions when you will have to answer a question by stating “that information is available but will not be provided until we have a definitive agreement or until you perform your due diligence.” Some buyers will respect this, and some will resist. In those cases, you will need to decide how much risk you are willing to take by divulging information early.

Your Book may be a marketing tool, but it also needs to be a business plan that you have enough confidence in to be willing and able to execute (particularly if you intend to remain with the business or are being partially compensated based on the future performance of the business). Even if you don’t expect to execute the plan, your goal is to convey your vision of the future potential of the business. You may end up with a stake in its success. When you put growth projections into the plan, be ready to defend them. This is an area where “puffing” (overstating the features or potential of your business) can get you in trouble. Be honest, be direct, and take credit where it is deserved by focusing on the positives when writing about your business.

Of course, if you are talking to investors and expect to remain with the business, the execution of your plan will be as important to you as it is to them. At some point they are likely to hold you to your plan—so be careful what you promise! When you’re talking to a buyer—particularly a strategic buyer—they may have a plan of their own in mind, but they will still want to understand your thoughts for the future. Don’t be surprised and don’t become defensive if they have more confidence in their own plan than in yours. Your job now is to give them accurate information they can use to take the business where they want to go.

“Our Book has a summary of the financials for the past three years, and the detailed backups of our financial reports are available once we enter due diligence.”

“The organization chart in our Book shows the reporting structure of our management team.”

Using a Third Party to Write Your Book

One of the questions you may have by now is:

“Why do I have to write a book at all? The investment broker I hired includes that as one of their services.”

Using a third party (typically the business broker or investment banker you hire) to write your Book is a good idea, but they will still need your draft as an input. There is an additional benefit to having an independent pair of eyes work on your book. They can add the marketing polish you need and have more experience writing this type of document which is designed to attract buyers. The problem is that an independent third party doesn’t know your business and may only have a passing understanding of your market. They will need to get the information to write a Book about your business from you. By writing your Book, even if it is only used as a first draft, you will have a vehicle to transfer the information they require to produce a polished Book, and it will give you the opportunity to document your thoughts. One of the ways you drive the sale is by driving the Book. It’s the place you will tell them “Here is the valuation of my business.”

Generating Content for Your Book

The content included in your Book should be available as a direct result of the work products you generated as you went through the positioning tasks we described earlier. This is one of the reasons you took the time to perform as many of the positioning tasks as possible. The business model you created and the organization chart you made earlier will now be incorporated into your Book. Of course, if you skipped those tasks, you will want to go back and complete them (or complete the alternative you decided to use). The description of your business model, your organization chart, and the financial information you collected will all become part of your Book. Your Book should clearly convey the transferrable value the business offers a potential buyer.

Your Book Provides the Pith of your Business

After reading your Book a buyer should have a strong understanding and appreciation of your business, of its employees, how it operates, and mostly, how it makes money. You need to accomplish this without providing the finite details. Your goal is to present the pith of your business. The buyer should be able to feel the opportunity owning this business would bring. You want them to “need” to know how this story comes out in the future and to have a strong desire to be a part of it. The buyer should be drawn toward your business instead of going the opposite direction to another business they may be looking at; you want them to envision themselves in your position. Your Book is a marketing tool used to convert a potential buyer into a buyer.

There is a tendency on the part of sellers to try to put everything into their Book. When you write your Book, your goal is to give the buyer a compelling picture of the business but not necessarily every little detail. A successful marketing document should sell the benefits of the business rather than directly selling the business itself, and your Book is no exception. This is difficult to do in a business plan. If your business is a pizza shop, you want them to smell the pizza without giving them the recipe for your special sauce. The buyer should understand the essence of the business (its pith) and be eager to ask more questions. To get these questions answered they will have to become a buyer.

“How can you afford to develop that software?”

“Do you go offshore for developers?”

“Who are your key clients?”

These are all valid questions that should be answered—after you have agreed on an offer and selected them from among all the potential buyers. You may have peaked their interest, but you don’t want to give too much away to a potential strategic buyer who hasn’t yet become a buyer. Your Book should say,

“We have very low development rates.”

“Our client list includes several Fortune 500 users.”

“We have already negotiated advantageous long-term rates with our key suppliers that are transferrable to a new owner.”

Your organization chart, for instance, should convey titles and not names. Don’t be confused by the example in Figure 9.1. Separate the positioning task of creating the full chart by only using the appropriate level of detail in your Book. Creating the entire chart does not mean it must all go in your Book. After all, you don’t want a potential buyer to start calling key employees with job offers. The exception to this is the inclusion of short biographies for your management team—if those biographies are seen as a strength of the business. You want your Book to provide pith without seeming pithy.

How Long Should Your Book Be?

Have you ever run an employment ad and received a stack of resumes you had to wade through? Unless someone is exceptionally experienced with a long list of previous jobs, most people understand that a resume shouldn’t be five pages long. The readers are usually short on time (which is why they are hiring someone) and just don’t have the leisure to read an excessively long resume. They will put an unnecessarily long resume at the bottom of the stack to read later—effectively putting the candidate at the end of the line. If a candidate can’t crisply convey why you should hire them, you lose interest quickly. The same is true for your Book.

You need to quickly and crisply grab a potential buyer’s attention. I advise clients to keep their Book under twenty-five pages. Fifty pages may be acceptable for a large or complex business with many products. This is a marketing document and, if a potential buyer needs to read through unnecessarily long pages of “boilerplate” you’re not helping them understand your business. You’re drowning them in information they don’t need at that point and probably won’t retain their interest. Some investors receive stacks of business plans every day and just toss away any that don’t quickly grab their attention. If you have trouble keeping your Book short, try giving it to your marketing department—or whoever writes your advertisements. They should be able to help.

Think about the marketing brochures written by automobile manufacturers. They are short, but they are classic in their ability to convey pith. When we see pictures of that off-road four-wheel-drive SUV driving through the surf or that luxury sedan stopped in front of a fancy restaurant while the driver helps a woman we can only see by her shapely legs and the high hem of her little black dress exit the car, we understand what this vehicle is being used for. They are selling us a lifestyle, not a car. Auto manufacturers are champs at giving us the car’s pith. If the sales brochures were long and provided only pure specifications, no one would read them. The essence of the vehicle is how much fun it is to drive or its sex appeal. After they get our attention we can ask about the 5.0-liter engine and soft leather seats.

If your business is a bakery, don’t show pictures of the ovens; show pictures of the bride and groom cutting the wedding cake or a family fighting for the last roll over the dinner table. If your business is a secure data center, don’t show pictures of the backup generator; show pictures of the lights on during a hurricane. Your Book should be long enough to sell a potential buyer on the essence of the business, but be short enough not to lose their attention (or to divulge too much information to a strategic buyer). Be ready to answer the detailed questions, though, once they have become a qualified buyer. At that point they shouldn’t feel that your Book or your answers have misled them. Now you should only need to fill in the blanks. If you have misled them, the deal will die, and you will see a qualified buyer walk away from the deal.

Book Outline

This is the outline I prefer to use when writing a Book. Again, it is a business plan, so there is no harm if you decide to add other sections that make sense in that context. You might find it helpful to refer to the earlier chapters to see what content can be applied when writing your Book. I have included references to help you with that. Appendix B includes an example of a Book written for Jim’s Bakery. I have attempted to track the Jim’s Bakery examples from the earlier chapters back into the example in Appendix B.

Protecting Your Work

All copies of your Book should be serialized and only provided to serious potential buyers who have agreed to an NDA with a receipt for delivery. A recipient should sign for each Book. This little bit of formality tells potential buyers you are serious and makes them think twice if they are strategic lookers that aren’t really interested in buying.

Your Book is your story. You don’t want a strategic competitor to show up in the future, using the information you created to tell a similar story for their business. It not only explains how you go to market but why and how what you do is unique.

“Gee, that business model they created was so slick, I thought I would use it as well.”

You need to ensure you are retaining control of the material in your Book when you are supplying it to third parties such as sales brokers and investment bankers. Your Book may seem like creative writing, but it is your creative writing!

One sure way you protect your Book is to formally copyright it. Copyrighting a document these days is very simple and inexpensive. In the United States, you do this through the US Copyright Office.11 This process is intended to help anyone who creates original material to apply for a copyright. If you need assistance, get advice from your attorney. You will need to identify any material in your Book, such as pictures and market material you purchase from another source (including those copied from an internet source), so they are excluded from your copyright. The process takes some time before a certificate is awarded. Even though you expect to give the draft copy of your book to a broker to update at some time, it makes sense to first copyright your draft. In addition, you can also add a copyright line to your Book before you formally copyright it—for example, “Copyright © [year] by Jim’s Bakery.” This line can go on page 2 of your Book or the last page of your Book.

Create a Short Handout

There is no need to hand a copy of your Book to just anyone who expresses interest. After you complete your draft Book, it’s time to create a one-page handout that summarizes the major points in the Book. A sample handout, based on the Jim’s Bakery example, is included as Appendix A. The handout has an abbreviated overview and bullet points that list the significant features of the business. While your Book will be handed out only when requested by a potential buyer (and only under an NDA), the handout can be freely distributed to those you think might have interest. The content in the handout will not require an NDA. The “call to action” in the handout will be to invite interested parties to call and discuss the opportunity with your intermediary. If you feel the need to start the ball rolling on the sale of your business, this will be the tool you can use (rather than handing out copies of your Book).

Jim’s Bakery Example

Appendix A (a sample handout) and Appendix B (a sample “Book”) are included and are based on the Jim’s Bakery model. Look at these samples closely. You should recognize that the content used to create the “Book” was developed as part of the positioning activities used as Jim’s Bakery examples in the earlier chapters. Chronologically, the handout is used first in the sales process; however, the best way to create the handout is to write your “Book” (Appendix B) first and then paraphrase the content of the “Book” to create the handout (Appendix A).