Michelle Seiler Tucker is the Founder and CEO of Seiler Tucker Incorporated. She holds an M&AMI (Mergers & Acquisitions Master Intermediary) title and as a 20-year veteran in the M&A industry, she has a wealth of experience in buying, selling, fixing, and growing businesses. She and her firm have sold over a thousand businesses in almost every vertical and have a remarkable track record of success.
In addition to being featured in INC, Forbes, and USA Magazine, Michelle is a Keynote Speaker and makes regular radio and TV appearances on Fox Business News and CNBC. She has spoken alongside many prominent speakers: Eric Trump, Kathy Ireland, Mayor Rudy Giuliani, Donna Karen, Stedman Graham, Randi Zuckerberg, Steve Wozniak, and more. She is the Best-Selling Author of the book “Sell Your Business for more than It’s Worth” and has a new book coming out called “Exit Rich®.”
Listen to this illuminating Sharkpreneur episode with Michelle Seiler Tucker about successfully selling businesses.
Here are some of the beneficial topics covered on this week’s show:
- How 90% of buyers are first-time buyers and slow to pull the trigger on decisions.
- Why 8 out of 10 businesses won’t sell because they don’t have a plan.
- How business owners don’t think about selling their businesses until forced to.
- Why business owners must design their exit when creating the business.
- How many established businesses are currently going out of business.
Connect with Michelle:
Guest Contact Info
Links Mentioned: seilertucker.com
Listen to the podcast here
Exit Rich With Michelle Seiler Tucker
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With me is the inventor of the infomercial and the original Shark on the hit show, Shark Tank, Kevin Harrington. Kevin, thanks so much for joining us.
It’s great to be here. I’m looking forward to our special guest.
We have the honor of our second threepeat guest. Only two people have been on the show three times. Michelle Seiler Tucker is the bestselling author of Think and Grow Rich Today, Sell Your Business for More Than It’s Worth, and her latest book that we’re going to talk about is Exit Rich. She is featured regularly on Inc., Forbes, USA, Fox Business News, CNBC. She’s sold over 500 businesses. She’s here to talk to us about her incredible experience and the new book, Exit Rich. Michelle, thanks so much for joining us.
Thank you, Seth. Thank you for having me. Our company sold over 1,000 businesses.
You personally sold 500. I was giving you all the credit.
Michelle, let me start it off it. When I was a young entrepreneur, I was a business broker, but I was selling pizza parlors, delicatessens, flower shops, that kind of stuff, and sold quite a few of small businesses. What kind of businesses were you selling?
Before I even got mergers and acquisitions, I got franchise sales, franchise development, and franchise consulting. I transitioned into selling businesses. Same thing, pizzerias, flower shops, laundry, and things like that. Within 2 to 3 years, I transitioned into selling businesses over $2 million. Now, we’re selling manufacturing, distribution, logistics, staffing, B2B, SaaS businesses, eCommerce businesses. My sweet spot is businesses over $10 million.
Over $10 million purchase price?
Over $10 million purchase price, and the EBITDA is usually over $1 million.
That’s a good niche because there, you have sophisticated buyers that can make commitments. One of the challenges in selling smaller businesses, you’d spend six months with somebody, and then you’d find out they didn’t have all the money they said they had, or they didn’t want to own a business, or they were never going to quit their job.
We talk about that in Exit Rich. We defined the five types of buyers. Ninety percent of buyers are first-time buyers that are slow to pull the trigger. They need a lot of reassurance to make them follow through with the sell. We typically work with private equity groups to strategic competitors and sophisticated buyers.
Business owners, we often all think that I’m going to sell my business one day and get rich or exit richer. That’s going to be my liquidity event. You talk about a number of things in the book that prevent that from happening and that we need to fix before we ever think about selling. Can you talk about some of those?
Steve Forbes says 8 out of 10 businesses won’t sell. That’s a true statement. The biggest reason for that is because there is no plan. Business owners don’t think about selling until they have to, typically due to catastrophic events like health issues, death, partner dispute, or COVID, and they think about selling. By that time, it’s too late because the business is typically not doing well. It’s trending downward. The best time to sell the business is when the business is doing well. I’ve been in this industry over twenty years. We’ve worked with thousands of sellers, and I have never come across a seller that plans their exit out.
That’s why the first couple of chapters in Exit Rich is dedicated to what we call the ST GPS Exit Model, and that’s from day one starting your business or buying a business. You need to plan your exit. You need to figure out what is your desired end game. What’s your destination? What do you want to sell your business for? The biggest problem is nobody has a plan. Business owners are driving around in circles, driving up and down the financial hills, ending up nowhere. Unfortunately, many of them are going out of business. That’s what we’re trying to prevent.The biggest problem is nobody has a plan. Click To Tweet
What is the ideal business that you look for? I know you get phone calls, but do you call companies also? Do you go after businesses that aren’t for sale? If you have a sophisticated buyer that’s got cash, they want to buy something, and it may not be on the market, do you pursue opportunities that aren’t listed already?
We have done that in the past, but we work more with sellers, representing sellers. We already have over 28,000 buyers. We don’t have a shortage of buyers whatsoever. There are more buyers for good businesses than are good businesses to buy. We use every single different marketing funnel from paid search to social media, to the books to online speaking events. We get a lot of referrals as well, the type of businesses that we look for. Here’s the bottom line, we specialize in buying, selling, fixing, and growing. If a business is not sellable, depending upon the business and the owners, I partner with business owners. I invest money, my expertise, and resources and put them on a bill-to-sell program within 3 to 5 years.
I’ve done that many times over. As far as selling businesses, it depends. We have many buyers for those businesses that are over $1 million in EBITDA because PEGs, Private Equity Groups, many private equity groups are wanting to build start platforms. They buy two ways, platforms and add-ons. There’s no shortage of buyers because once we get businesses over $3 million in EBITDA, we have all the private equity groups that we can go to. There are over 2,500 private equity groups that we work with.
One of the things that I experienced in the small deals like selling a laundromat or something, there was generally owner financing because the buyers a lot of times couldn’t come up with all the cash. Banks weren’t owning them money. On bigger deals, do you see owner financing also?
There is a portion of owner financing, and I’ve been doing owner financing for over twenty years. There’s a smaller portion because everybody wants skin in the game. If we’re going to go SBA, SBA wants the buyer to put up so much money, they want the owner to hold so much paper. A lot of times, if a buyer is going to buy a business $10 million and up, the typical formula is 70% down, and then the owner holds a note on the rest, but they’re typically in the second position after the bank. There’s not always a buyer’s guarantee or a personal guarantee on that. There’s typically always a seller financing component of some sort.
You push for at least 70% down type of thing.
On the larger businesses, absolutely. Our firm does handle small businesses. My agents handle those. We typically won’t take a deal for less than 30% down. We don’t want our seller to do that because it’s too risky. We want at least 30 to 40% down.
You talked about not having a plan. You talk a lot in the book about having proper books. What does that mean to a business owner looking to sell? For example, I was looking at another deal where they came to me and said, “I looked at the tax return and said, ‘This says you’re only making X.’ I couldn’t even replace somebody. I couldn’t hire a manager for that.” I don’t make that. I make more than that. I’m like, “You’re not paying taxes on it, so it doesn’t count.”
Kevin can probably speak to this, too. One of the biggest issues in selling businesses has always been the financials. When I wrote my first book, Sell Your Business for More Than It’s Worth, everybody’s like, “Michelle, isn’t that misleading that you’re trying to sell a business for more than it’s worth?” I’m like, “No, because based on our tax returns, our business isn’t worth anything.” We have to dig deep and do an evaluation. We do extensive evaluations here. We have a whole team of analysts. We do evaluations and we get the P&Ls, the tax returns, the cashflow statements, everything. We go through the personal expenses that are not necessary to run the business and a non-reoccurring.
Most small business owners live out of their business. Unfortunately, most small business owners don’t keep good records. They look at us. I’m sure, Kevin, you went through this too. They expect you to figure it out. I’m not going to figure it out. They need to prove it to me. If they don’t prove it to me, I’m not going to have it back. We always go through the financials. It’s called re-casting the financials. We add back to personal expenses in a non-reoccurring. Once we’re done with that, they are making money, but they have to prove it. They can’t just say, “I do this. I do that.” I got to see it on paper. Whether it’s American Express, their bank statement, or something. We will normalize the financials. What we won’t do is add back cash. If they’re not reporting their cash, that’s on them.
What do you like best about what you do?
I’m an entrepreneur. At any given time, I own 5 to 15 different companies. I build companies to sell. I’ve owned companies in many different verticals. I’ve sold businesses in pretty much every vertical. I’m an entrepreneur. I’m like a kid in the candy store. I can’t wait to find out, “This guy has an eighth-grade education,” and he grew a multimillion-dollar company that we’re going to sell for $75 million. We got a company right now. This guy’s got an eighth-grade education. He grew this enormous company. They’re EBITDA is $17 million. We’re already getting offers in between the $60 million to $80 million range. I’m excited and passionate about entrepreneurship and about business owners. Like Kevin is with his infomercials and everything that he’s done with all of his inventors, I’m like a kid in a candy store.
I love saving small business, too. I don’t know if you guys realized this, but when I wrote my first book in 2013 and did the research, 95% of startups will go out of business. We all know that. It’s common sense. However, here’s what you probably don’t know. When I wrote Exit Rich with Sharon Lecter in 2019, 2020, I did the same research. Do you know that the business landscape has flip flopped? It’s now only 30% of startups go out of business.
Out of 27.6 million companies, those businesses have been in business for ten years or longer, 70% of those companies will go out of business. You hear about the public companies like Toys“R”Us in business for 75 years, gone. Kmart is gone. Godiva, our favorite chocolate, closed down 1,500 locations. This is happening like crazy. It’s my passion and my mission to try to help save small businesses because small businesses are the backbone of our economy, employing over half the US workforce.Small businesses are the backbone of our economy employing over half the US workforce. Click To Tweet
The title of the book is Exit Rich. It has some tips for someone that owns a business. I saw this all the time. They buy a business, but they never thought about, “I’ve got to plan for an exit.” They would think, “I’m going to keep that business forever.” One of your comments here and your recommendations is to show them how to exit and Exit Rich. What are some of the things people need to do after they buy a business so that they can plan for an exit?
Two big things. We do want people to exit rich. Many people are exiting poor, and that’s the issue. Number one is to plan your GPS Exit Model. Rather, you start a business or buy a business, or you’re just in business, start with the end in mind. When you want to drive somewhere, what do you do? You pull out your phone, you pull up Google Maps, you put in your destination. That’s what you should do with your business. You should put in your destination, your endgame.
What do you want to sell your business for? Let’s say you want to sell your business for $20 million. Great, now we got a number. A number is a start of a plan. You want to reverse engineer it. Now what do you need to know in a GPS exit? You need to know where you’re starting from. You need to know what is your current valuation. What is your business worth today?
Kevin, you probably know this as much as I do. It’s shocking to me. As humans, we go and get a physical checkup because we want to make sure our health is in good order. We drive our car into the shop because we want to get a checkup and make sure our car is in good shape, but we never get an annual valuation checkup. Many business owners have never had an evaluation of their business. I work with a guy who’s been in business for 45 years, no evaluation ever. Business owners should get an evaluation every year because there are events that can cause your business to increase in value or decrease in value, like the pandemic they’re in right now.
You need to know, “What’s my end game? I’m going to sell it for $20 million. What’s my current valuation?” Let’s say you are $5 million. This is a start of a plan. Now we say, “What’s my timeframe? Ten years.” “Who are the buyers going to be?” Not buyer. Many business owners come to me and say, “I have a buyer.” I’m like, “No, you don’t. You have a buyer. That deals probably not going to come to fruition.” You always want buyers. We always have backup buyers. You need to know, “Who are my buyers going to be?” If they buy a $20 million company, it’s not going to be a turnaround specialist and it’s not going to be a first-time buyer.
Now you need to know, “What’s the financial criteria need to be? What does the gross revenues need to be? If I want to sell for $20 million, where does my adjusted EBITDA have to be? It has to be between $3 million to $5 million. What are the characteristics that I need to build this business on? What are the synergies?” Buyers buy synergies. Buyers will sometimes pay more money in a higher multiple for a company that’s not making much money if they have the right synergies. You need to know, “What is my why? Why do I want to sell a $20 million company?” If it was easy, everybody would be doing it. What you need to do is build your company on what I call the six P’s that we talk about in Exit Rich.
We will send everybody to Exit Rich to get them to learn about the six P’s. You give advice every day. What is the best advice you’ve ever gotten?
I don’t know if it’s necessarily the best advice, but one of the best things that always resonated for me was instead of looking at things that happen to you, ask yourself, “Why did this happen for me?” If we didn’t get a client we wanted, instead of saying, “Why did this happen?” Maybe it’s for a good reason that we didn’t get that client. That always resonated with me. If I had a bad day or something didn’t go my way, or I was trying to hire somebody and I didn’t get that person, I always ask, “Why did this happen for me?” and not to me.
Michelle, when you look at companies like when Facebook started, they were raising billions, and they had no sales. Obviously, it’s tough to sell a business that doesn’t have sales, but how do you deal with companies that are in that growth mode that they need capital and its future? It’s a little more complicated than a company that’s got EBITDA.
You look at Facebook, and Facebook pays $19 billion for WhatsApp. WhatsApp was emerging. WhatsApp had a synergy that Facebook wanted. WhatsApp had a billion users, and that’s why Facebook is willing to pay $19 billion. What we do in a situation like that is we go to our buyers. We find out as much as we can about the business, and we go to our buyers to see who’s a good synergistic fit and what buyer is willing to buy a percentage of the company or invest in that business. It’s like SaaS companies. SaaS companies want to sell for twenty times gross revenues. They have no EBIDA at all. In fact, they’re losing money. Again, we would go to those synergistic buyers that are only in the market for SaaS companies. I’m going to come to you and say, “Kevin, do you want to do this? Do you want to invest in this business?”
You said they had a billion users. A company that’s buying like Facebook would say, “What would it cost me to require a billion users?” Now they’re starting to put some numbers on the value of the acquisition. They were hemorrhaging because they had a billion users. It takes time to make the EBITDA happen from there.
We talk about that in the valuation section in Exit Rich. We talk about how to valuate synergies. One of our pieces is proprietary, our six pillars of proprietary. We go through how do you value a brand? Do you know who the biggest brand in the world is? Apple, $289 billion. That’s without EBITDA, assets, inventory, real estate, anything. We do talk about that, how to evaluate synergies because there are buyers out there like Facebook that will pay a lot of money for talent, contracts, and brand. We sold a company for 126% more than what the business appraised for because our client had a contract with BP, and it was a strategic buyer that’s been trying to get in BP for the last several years and could never get in.
We always look at the synergies that our business has and assess a value to that. Plus, when we go to a market, of course we’re not going to put a price on it because we know that we’re going to have hundreds of buyers for one business, hence creating a bidding war. Buyers will pay more for synergies. As where you go from a 5 multiple to a 10, to a 15, to a 20, buy those synergies.
We greatly appreciate your time. We know it’s incredibly valuable. For our folks who want to get their hands on the book, Exit Rich, where is the best place for us to send them?
We can go to ExitRichBook.com. You can buy it on Amazon as well. ExitRichBook.com is $24.79. It’s less expensive. We will email you to digital download immediately when the book launches. We’ll send you the hardcover. Plus, we’ll give you a lifetime membership into Exit Rich Book Club. That is where we have lots of video content. We also have documents.
Kevin, you would appreciate this. Business owners come to me all the time and say, “I’ve never seen a sample purchase agreement or LOI or due diligence checklist or closing docs, or even organizational charts.” Everything you need to run your business or sell your business is an Exit Rich Book Club for your review and download. Those documents alone are worth over $25,000. Plus, we’re also giving away 30-day membership into Club CEOs, which is a mastermind, but we do Q&A and hot seats and things of that nature for entrepreneurs.
Michelle, thanks again for joining us.
Thank you so much. It was a pleasure. Thank you both.
It’s great seeing you. Good luck.
- Think and Grow Rich Today
- Sell Your Business for More Than It’s Worth
- Exit Rich
- Amazon – Exit Rich
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