Michelle Seiler Tucker has two decades of experience selling businesses, mergers, and acquisitions. She’s also co-written an authoritative book on selling a business. In this appearance, she shares her considerable knowledge of exit strategy, preparing your business for sale, getting the best sale price, and more.
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How To Exit Your Business Rich With Michelle Seiler Tucker
In this episode, we’re talking about selling your business, and for that, I’ve brought along a topic expert, Michelle Seiler Tucker. Welcome to our conversation.
Thank you, James. Thanks for having me.
You have co-authored a book with Sharon Lechter. You have many years in this industry selling businesses and mergers and acquisitions. You’re an authority on this and you’ve put together what I would consider a must-have reference for anyone thinking of selling a book. I’ll say the overarching concept that came to me from reading the book is that you would be insane to try and sell a business by yourself. That was one of the big takeaways.
You said you might be great at your business but not so great at selling the business. The thing that struck home for me is my previous industry. I used to run a Mercedes-Benz dealership. A lot of the big business operators we had came in buying expensive vehicles for hundreds of thousands of dollars. Cars are very expensive in Australia.
They might be titans in their industry, but they might only buy a dozen cars in their lifetime and they weren’t that good at it compared to someone who does it every single day for a living. That’s for me what I got as a takeaway. Let’s talk about why that’s the case. I think you mentioned a statistic that around 8 out of 10 businesses won’t sell at all. The thing that blew me away was, in your book, you referenced the fact that pretty much every single sale deal is going to go off the rails. Let’s talk about that.
They’re going to go off the rails. Steve Forbes is the one who came out with the statistic that 80% of businesses or 8 out of 10 companies don’t sell. Steve Forbes endorsed my book Exit Rich as well. He said it’s a gold mine for entrepreneurs because so many entrepreneurs leave so much money on the table when they go to exit their business and that’s 8 out of 10. If you talk to M&A Source, they’ll tell you that 90% of businesses don’t sell.
It’s a huge number of businesses that will go on the market that will never sell and that’s for a multitude of reasons. The biggest reason for that is that most business owners don’t think about selling their business because they never planned for their exit until a catastrophic event has occurred, internal or external. Internal being health issues, partner disputes, death, or divorce. External is this pandemic we’re in right now. Trying to sell your business during a catastrophic event is the worst time to sell your business. You want to sell your business when it’s in its prime and doing well.
Plenty of people reading this are buying businesses right now and I’ve got a few clients. I had a lady who bought three businesses. She’s on a buying frenzy and the same information that would be good to sell her business is also useful for someone interested in buying businesses because they can spot the gaps. It sounds like from what I read in the book, you’ll sometimes spot an opportunity.
You gave an example of someone who thought they have a business but they didn’t have a business. They had a job and then you paired them up with another potential seller to create a better entity and sell for three times more than the original target price. Do you go into business with some of your prospects?
I do. I specialize in not only selling businesses. Like you, I own many different businesses and many different verticals. At any given time, I own 5 to 10 companies that I’m building to sell. If businesses are not sellable and I like the business, the owners, and it’s a niche, I’m not going to do a restaurant, I’ll invest my money, time, energy, effort, expertise, and resources and partner with that business owner. I do partner with business owners. I also buy businesses and flip them. I sell and merge businesses too. I specialize in buying, selling, fixing, and growing, but it’s got to be the right deal for me to partner with them because you can only grow the business as much as you can grow the owner.
That is so true. At least a quarter of the work I do is on the person itself. I feel like I am part therapist, part human psychology expert because of the people side of it. I’m not going to relay the whole book in this episode. I’m going to tell everyone to go and get the book. It’s at ExitRichBook.com because that’s not the point of this show.
I want to add something beyond the book here but one of the Ps in your formula is the people. It’s not only the business owner but the people in the business who is often a choke point for the business, especially the one who doesn’t have any people and thinks they have a business. That’s a common one in my market because anyone can start an online business and we’re predominantly online businesses.
I know you came from a franchise background much like me. You rose to the top of where you could go as an employee and found so many rich, abundant resources around you that it made sense to go into business. You and I have almost the exact same story. Everyone around us is telling us where crazy going into our own business but we have a secret skill. A special skill of being able to work with people and see opportunities is not common. As a mergers and acquisitions expert, I imagine you are installing this intel into your prospects that they’re not aware of and that’s probably part of your secret to raising the sale price. Correct?
Correct. The secret to maximizing value and the sales price is identifying the synergies in that business. Rather, it’s the branding. One of my pieces is proprietary assets. We identify the synergies whether they’re well-branded or they got certain trademarks, patents, contracts, subscription models with reoccurring revenue, databases, celebrity endorsements, eCommerce, and online placements. They are in the top three positions.
We identify the synergies and then the buyers because we have over 30,000 buyers we work with and there are five types of buyers that you’ve read in my book. We identify the synergies and figure out what buyers are willing to pay top dollar for those synergies. What buyers can take advantage of economies of scale? What buyers have the infrastructure where they can come in and maybe cut distribution because they already have distribution everywhere?
Before they even take over the business, they can cut $5 million out and increase their EBITDA. That’s how we maximize value. It’s identifying those synergies and the buyers who are willing to pay for them. Even if we got customer concentration, we got buyers that will pay for that customer concentration because they want to get their products in that door.
One of the businesses I sold was to my biggest client because he could instantly gain a 50% advantage of everything he bought with me. My big risk was that he would leave. I was a bit too strong on another one of his patrons. He is buying all my stuff and it was a problem because if he left and went and started his own competition, it would tank the value of the business.
It strategically made sense for him to buy it and for me to sell it to him. You use a bridge-building technique. You call it GPS. Let’s quickly touch on that for someone who’s not aware. You have a look at the destination. As you said, most people don’t even think about selling. It’s pretty much one of the first questions in my onboarding when I’m coaching a business owner. It’s, “Are you thinking of selling?”
I want them to come up with their number. Most of the work I’m doing is talking about their current point and where they want to get to but the destination of selling is I reckon probably still more than half haven’t thought of selling or list selling as the thing. For me, that was a big goal when I was building businesses because you capture the value. You talk about the current point where they’re at but then the important thing is you start thinking about who’s going to buy the business. I would call this like sucking eggs. You are creating the thing that the business should be buying that they didn’t know to build and they haven’t worked on yet but then they just look at it.
It’s like Facebook looking at WhatsApp or Instagram and thinking, “We should have done that. That’s a great idea. Here’s a couple of billion dollars.” You talk about the timeframe and the reason why. This is interesting. Could you share with me a couple of the most surprising reasons you’ve ever heard someone wanting to sell a business?
I had a little lady called me and she wanted to sell a business because her husband dropped out of a heart attack. She left her with a mountain of debt and she knows nothing about the financials and the business. I started asking her questions. He had no people. He had subcontractors. He had no processes. He didn’t have any of the 6Ps. Maybe profits, but when he died, the business died. I get all kinds of different stories.
It’s usually a catastrophic event when they want to sell. It’s usually if somebody died, they’re going through a divorce, got a huge partner dispute, COVID, the business is doing terribly, and the industry is dying. I get other things like, “I have a mistress so I got to be able to afford my wife and my mistress so I need to cash out.” I get all kinds of crazy stuff. I think I pretty much have heard it all.
I had some pretty strange scenarios at Mercedes-Benz too. I had people buying cars and having them dropped off at different places. It’s the same guy and I’m like, “You are crazy.” He’s one crazy attack away from ending this game.
I had one man who want to sell because he had a whole separate family that his wife didn’t know about and he needed cash out to support his other family.
It’s like the emergency card in an airplane. If the plane is about to crash, it’s too late to pull it out and find out where the exit door is. I would recommend to go and get the book now. Start preparing for a scenario and don’t make it catastrophic. Get out of the thing on your terms. One of the shocking statistics that I read about in your book is the idea that a lot of people have personal guarantees on their businesses. When the business suffers, then they start getting called back from their personal guarantees and they can end up becoming bankrupt. How common is this?
It’s extremely common in almost every single business owner in the United States. I don’t know about Australia, but in the United States, it pierces the corporate veil because they take a mortgage out against our home and sign personal guarantees. When they go to file bankruptcy, they’re not only going to lose their business assets. They’ll lose their personal assets too. That’s why I educate business owners not to do that.
Most of my clients know to have good corporate structures and trust accounts and things to shield their business. They even do things like license their intellectual property from one entity to the other. We also think about which entity is going to have a better tax situation when we sell because we can get things like capital gains to break on the right entity. You talk about how you need a sign-off authority if you have a certain type of entity in the United States if you want to sell it. It’s a resolution to make sure you are allowed to sell it.
The other thing here is if you go bankrupt, that’s pretty much the sin bin for seven years. You can’t have a nice car. It’s socially like having leprosy. It’s not as standard as you would expect in the United States, for example like it’s the end of the road. Luckily, most of the people in my world are not needing to borrow for their businesses because they’re pretty much online businesses and they can be started with a laptop. Let’s cover the s6Ps which are People, Product, Process, Proprietary, Patrons, and Profits. Which of the 6Ps do people usually fail at the most?
They typically fail at people and processes because entrepreneurs are control freaks. I always say you can’t grow unless you let go of control. You got to focus on your strengths and hire your weaknesses and you have to put the right people in the right seats. You also got to ask the who question, James. Who opens the door? Who handles customer service, marketing, legal, accounting, manufacturing, logistics, environmental, etc.? You should never be next to the who because you want to build a business without you.Entrepreneurs are control freaks, but you can't grow unless you let go of control. Click To Tweet
We talked about who not how.
The number one reason businesses are not sellable is because the business is 1,000% dependent upon that owner. If you pull the owner out, you have no business. I had a dentist that came to me and he’s been in business for 50 years. He has three dental hygienists with no other dentist. He says, “I want to sell.” I said, “Great, you’re going to have to stay for 2 to 3 years.” The three dental hygienists are his family so when he leaves, they’re leaving.
He said, “I’m not staying.” “We’re not selling because the minute you leave, the patients leave.” People are so important. You can’t do anything without people. You don’t build a business. You build people and people build a business. You got to have people first. The second thing that they mess up on is processes. Most business owners don’t think about processes because they’re so focused on sales, getting clients in the door, and making money.
It’s the exit strategy. They don’t think about processes until something bad has occurred in their business. You can’t do that. You need to design your processes around the customer experience so you can create happy raving fans and they need to be productive and efficient. Have your policy, procedure, manuals, and everything else. We’re selling the business for $70 million right now and we’re having to help them get the policy and procedures together, the manuals, and the SOP checklist. People in processes go hand in hand. You need people to help with the processes. You need processes to keep the people in line.You need to design your processes around the customer experience to create happy, raving fans. They must be productive and efficient and have your policy procedure manuals and everything else. Click To Tweet
It’s super common, especially the smaller the business, the less likely there is to be any kind of system. With an online business, that was one of the prime assets I sold. There’s some proprietary stuff, but I handed over an asset register and it listed every single SOP for the business. It listed every person in the business, every role they do, how much they get paid, and how long they’ve been there.
It was like, “That is what you’re selling apart from a domain name and a customer database.” It’s a little bit harder sometimes to get proprietary. Even in businesses at my level, we’re all doing trademarks and making sure we protect the thing we do because it’s so easy for someone to spend $9 on GoDaddy and set up shop cloning your service. As soon as someone hits pay dirt in the online world, there are 25 versions of it. They copy and clone. Protecting your space is very important for potential buyers because they don’t want to spend all this money and then find that they haven’t got a motor around their business. Do you want to speak to the big proprietary lessons there?
Proprietary, you have the 6Ps. The number one value driver that will get you the highest multiple is proprietary. In America, businesses that have under $1 million in EBITDA, Earnings Before Interest Taxes Depreciation, and Amortization, typically trade from 1 to 4 times EBITDA. When you get to over $1 million in EBITDA, that’s where all the buyers are. They typically trade for five and up. Proprietary assets can get you a 6, 7, 8, 9, or 10.
Unless you have a SaaS business, they are typically traded for multiple gross revenues but that’s the only industry that trades for a multiple of growth. The rest are multiple EBITDA. There are six pillars to proprietary. First and foremost is branding. The more well-branded you are, the more we can sell your company for as long as your brand is relevant in the mind of the consumers. The biggest brand in the world is Apple.
It would be Coke, Apple, Mercedes, or Amazon.
Coke is in the top 10. Amazon’s in the top 10. Mercedes is not even in the top 10. Apple alone is worth $259 billion. That’s only the brand. That’s not cashflow, inventory, assets, or anything else. Build your brand.
They did a good job to pull that off on such a generic name.
That’s because Steve Jobs came in and created all these proprietary products like the iPhone, iPad, iPods, and iCloud and then you have trademarks. Trademarks are extremely valuable. The big mistake that business owners make in the United States is you can’t just get a trademark. You have to get a federal trademark in the United States.
If you go to California, start your business, get a trademark, and haven’t checked the Federal database, somebody can go in and snatch up that name. You could be in business for 5, 10, or 15 years, but all of a sudden, you receive a cease and desist letter and you guys stop using that company name. I’ve seen clients do this or hire an attorney. They throw lots of money at the problem and the problem doesn’t go away.
You have to stop using that company name and start your branding all over again. Get a federal trademark. I don’t know if Australia has the same thing but I trademarked Exit Rich, the ST 6Ps, and all of my stuff. That is important, even with product exchange. We have a company right now that we’re selling for about $50 million and they have twelve different products. Each product has exclusive rights to a grocery store chain like Walmart. One has Target and one has TJ Maxx. They have a federal trademark for each one of these products. Synergistic buyers will pay more money for these federal exclusive trademarks and exclusive rights. Patents are another big one that buyers will pay a lot of money for.
We sold a company for $18 million that wasn’t making any money. They were losing money but they had eighteen patents. If you ever watch Shark Tank, everybody on Shark Tank always ask every single vendor, “Do you have a patent on that? Do you have a utility patent?” Their offer is always contingent upon the patent. The other thing that’s big in proprietary assets is contracts. Manufacturing contracts, vendor contracts, distribution contracts, franchisor that has franchisees, and client contracts are the most valuable, especially with these online businesses.
If you have a subscription model with reoccurring revenue, buyers will pay a higher multiple for reoccurring revenue but here’s the caveat with contracts in the United States. I don’t know about Australia, but in the United States, you have to have the two-sentence transferability clause that says, “This contract is transferable upon a new entity,” because 99% of all deals are asset sales. If your buyer’s not going to agree to the stock sale and your clients won’t agree to consent to transfer, then your deal could stop dead on its track.
I saw an M&A firm, a franchise, they have 1,500 locations. A private equity group bought them. They had their due diligence team and their due diligence team never looked at the contracts. They had a big celebratory party and franchisees didn’t like the private equity group, so 1 out of 1,500 transferred over. Within 60 days, the company filed for bankruptcy. They sued their entire due diligence team. Be proactive and have that language in there.
I know it’s in my terms and conditions and that’s how I sold my SEO business.
You are the only person that I’ve ever talked to in over many years. I sold over 1,000 companies that have that language. We’re selling a $70 million company right now and they have 150 contracts but none of them have the transferability language.
In Australia, the privacy law is very strict and I needed to be able to make sure that a buyer had permission to take over this relationship. You talk a lot about lawyers. You need good lawyers and I use a good lawyer when I sold my business. I also use them every time I start a revenue share deal or a partnership. I always get a written agreement with the correct legal language. I go to that extra expense and effort in the beginning because I’ve seen what happens if you don’t have it. Also, this is a subtle thing but I don’t think many people think about this. You talk about the difference between different types of agents. You don’t want a real estate agent selling your business. Let’s talk about that.
It’s like if you need heart surgery and you go to a dentist.
There are different types of brokers and agents. The point is you got to be very specific and you have to make sure that you’re not getting sucked into a machine that’s not exactly ideal for your scenario like getting good advice. My grandfather would’ve given me that advice. He did. He said you always questioned the person you’re getting advice from. You list twenty questions to ask a broker. That checklist is money in the bank for someone buying a book. You also have a roadmap for the top ten mistakes. You might touch on a couple and then I’ll let you go.
On the broker side, knowing who to hire and who not to hire. The big thing is you should never hire a real estate agent, commercial or residential, to sell your business. It’s like, I would never go sell a house. You don’t want me selling a house. There are so many different moving parts and things. A house is a house. With a business, you got employees, inventory, assets, and working capital. You got so many different things like lawsuits, tax liens, etc.
You got to make sure that you go with somebody that’s got years and years of experience and somebody who has sold hundreds of businesses in different verticals because your business is your most prized asset. You might not be like James. You may only sell one business in your lifetime. You want to make sure that you maximize the price and the value.
As far as the mistakes that business owners make, the biggest one is not planning their exit from the beginning. We talked about in the beginning, James, that you got to have a destination. If you don’t have a destination, you’re going to drive around in circles and drive up and down the financial hills and you end up nowhere. You got to pick a number.You want to ensure that you maximize the price and value. As far as the mistakes that business owners make the biggest one is not planning their exit from the beginning. Click To Tweet
You maybe have a cash machine but you’re not collecting a big payday.
Your big cash machine can go under. It happens every day.
You do caution that. People are ticking along and then something happens. I had a whole series of interviews on this show of case studies of people who adjusted during a pandemic and came out strong. Some of them were quite heavily invested offline. I had plenty of clients who had leased office space and those things. They had to get out of the leases or close yoga studios and completely transform their business. Essentially, their old business was put in the bin and they were a startup again.
The thing I like about selling the business is that little thing called the multiple. It’s the idea that you can get paid years’ worth of results upfront. If it combines with a reason why, if you’re finding you’re getting to that burnout, you’re not that interested, or you see the industry you’re in starting to go off a cliff, or if you’re a blockbuster store and you see Netflix coming around the corner, it might be time to get out of there before the catastrophe happens.
Blockbuster had the opportunity to buy Netflix and they didn’t.
It’s a strategic acquisition.
The other reason I wanted to mention is it’s important to get M&A advisor like us because we have over 30,000 buyers. There are five different types of buyers and you are never going to be able to create a bidding war if you go with a real estate agent or if you come with a business broker that sells pizzerias. You want to make sure that you’re going with an advisor that knows how to run a structured auction and an unstructured auction and can bring hundreds of buyers to the table to narrow it down and bring you 5, 10, or 15 ROIs. The only way you ever maximize value is by creating competition.
It’s great advice and it seems every time I buy a property, I end up at the real estate agent while someone else is on the other phone driving up the price. These unstructured auctions are very good for business and you’re right. A lot of people, if they’re going to try and sell their business themselves, they make a few mistakes. One that you mentioned is dealing with one buyer. I learned that lesson when I was about ten. I was selling a boat and someone wanted to come and look at it. I put it out on the front lawn and I rigged it all up and I had other people calling and I said, “No, it’s okay because someone is coming now to buy it.” I didn’t even get their phone number. I remember when the person no-showed on me, I felt shattered. I’d wasted that.
I always think about that. In the last week, I sold quite a few surfboards on our classified site, for which I only need one person to call me, but I keep selling until it’s gone. You say very clearly in the book, “Don’t celebrate your sale too early especially if you’re providing finance for the buyer.” I don’t think people realize this, but it’s pretty uncommon that someone is going to stump up 100% of a business purchase on the spot. You talk about holding money in escrow and the fact that a lot of people selling their businesses are going to have to endure payment terms. I’d say that would be a significant area of attention to work with and that’s where your experience would be quite helpful.
Everybody wants to leverage other people’s money. We work with our clients on creative financing, but the biggest thing we do is make sure our sellers are protected.
In terms of protection, a huge mistake people make is they reveal too much. Let’s talk about confidentiality.
That’s another reason why you want an advisor. I’ve had business owners hand over their client list in the first meeting. You don’t want to do that. I tell my clients what to show, what not to show, and when to show the rest. I don’t allow my clients to give away proprietary information unless we are close to an LOI with escrow. It’s important to know what you should give and what you shouldn’t give but you got trade secrets. You got a client list and things that are proprietary to your business.
A lot of times, if somebody is in the industry and I feel like they’re only trying to get information, we’ll even make sure the attorney draws up and non-compete so that buyer is not going to compete with my seller in this geographical area. We go the extra mile to make sure that the sellers are protected and they don’t give away too much proprietary information. We control the process all the way.
Software companies are notorious for that. Going to see the competitor, seeing what they have, going back to the lab and making it themselves. There was even a name for it but I won’t say it in case they get all legal with it.
We’re very careful too. If there are some competitors looking at a certain business, we don’t show the business to that competitor without our owner giving us permission in writing to do so. A lot of times, we’ll do it non-descript meaning that we won’t reveal any personal proprietary information at all even the company name or address or anything like that. We’ll run the whole process as far up to almost the LOI without disclosing who that company is if it’s a competitor because a lot of competitors are just seeking information. They’re trying to get information from that particular company.
That’s amazing how much intel you can gather from acting like a purchaser. Every time there’s a property for sale in this area, I know all the neighbors are piling in there. They want to see how they’re laying out the furniture and what view they’ve got. They are gathering intel and they have no intention to purchase. The agents don’t mind. They love having the appearance of competition when they invite you.
In businesses, you can’t do that. We don’t have open houses for businesses. Confidentiality is typically the most important thing to a seller because they don’t want their employees knowing that they’re selling or their customers, vendors, manufacturer, or anybody else because everybody gets spooked. Nobody likes change. We keep the sale proprietary hush-hush until closing day.
That’s one of the biggest tips and you also advise against selling to your employees, which a lot of people have wishful thinking around that. We see some fantastic stories in the news occasionally, like a bus coach company sells their company to the employees and gives them all a bonus for working for them for 35 years but that’s probably quite rare. The worst-case scenario is that they all find out you’re selling and then they bail on you and you’ve got nothing left.
Selling to your employees is called an ESOP. You can do an ESOP. It’s less than 5% of all transactions in the United States. At an ESOP, there are lots of hoops and stuff you have to jump through. As far as selling to 1 or 2 employees, the problem with that is that the business owners start giving them all this information. Information that the employee doesn’t have like the financials, the secret sauce, trademarks, and trade secrets. They’ve never qualified the employee to even make sure that the employee can afford them.
That employee has to be the most dangerous person with that information. They can set up across the road.
A lot of times, they don’t disclose them. We make sure that all of our buyers sign non-disclosure agreements that they have to keep everything proprietary and in some cases, even a non-compete. A lot of times they don’t qualify to make sure they can afford the business and they don’t disclose them. When they find out that the employee can’t buy the business and the employee becomes disgruntled, he starts talking to other employees. Misery loves company and before you know it, you got mutiny.
The only way you should sell to your employees is an ESOP or hire an advisor like us, Seiler Tucker, because what we do is we’ll go in there and we’ll handle everything for you and we’ll be the bad guy. You can still be a good cop. We’re the bad cop. We’re the ones asking for the financials and signing these nondisclosure agreements. We’re the ones who know what to give and what not to give them. It keeps that relationship between the employee and the owner still intact versus you being a bad cop.
Let’s finish out then on the pricing. It’s a double question. One is you referenced it. Most people sell for the wrong amount. It’s either too little or they miss out altogether. How much are we going to pay someone to help us with this? I don’t think I read that but could you give us a guideline on that? Is it worth paying that extra fee to get an extra price?
Absolutely, because the advisor not only brings buyers to the table and maximizes value if you get the right advisor, but they also help you not get in trouble and not get sued later. We make sure that the reps and warranties are there and you’re not overcommitting to things. We bend over backwards to take care of our sellers to make sure not only are they getting a maximum price, but they’re also being protected all along the way. Whether it’s seller financing, non-compete, people coming in and them staying on for so long and making sure they get paid.
There are so many steps along the way that we make sure the sellers get protected. I don’t know about Australia but in America, there are a lot of M&A advisors. I’m a Mergers & Acquisitions Master Intermediary, a senior business analyst, and a bunch of other stuff. I sold over 1,000 businesses. Because I’m on the panel for M&A Source, most of my peers charge a retainer fee. There is a company that is huge on charging retainer fees as well. They charge retainer fees but they can’t sell the business for you.
A lot of M&A advisors charge retainer fees and it’s anywhere from $5,000 a month to $60,000 upfront. It depends. If they charge retainer fees, they might drop a point or two on the commissions. If I don’t think I could sell your business, I’m not taking it because I don’t want to mess up my great statistics. I’m results-driven. I’ve been in this industry for many years. Before this, I sell franchises, franchise consulting, and franchise development. We sold over 1,000 deals and we don’t charge retainer fees.
We’re 1,000% results-driven. If we don’t sell the business, you don’t pay us. Now, we might be a couple of points higher because we’re sharing the risk. I’m investing my money, my time, expertise, and resources to sell your business in hopes that I can recoup my investment. We might be 1 or 2 points higher than the people who charge retainer fees. It depends upon the size of the business. If it’s a smaller business, the commission points are going to be higher.
If it’s a larger business, there might be some negotiation there, but it’s different than what it is for real estate. Real estate brokers charged 3%, 2%, 5%, or whatever it is. Advisors charge more than that. They’re going to charge 8%, 9%, 10%, 11%, 12%, or somewhere around that range and it’s all across the board.
That’s very helpful. I appreciate that.
On larger businesses, we are like, “What’s your base?” This is going to be a percentage. If we get you more than that, then we get this. We get a higher percentage and then a higher percentage but I would encourage everybody not to pay a retainer fee.
I think that’s a good idea. All the coaching students I’m taking on my high-level programs now are performance-based. I read that 98% of the deals that come to you in written form are closed. You have a high closing ratio on the ones that make it through the funnel. I did like your book too that you’ve got the timeline of where things should be disclosed or not and all of the steps. We won’t get into that. I’m going to ask you down to close out with your top piece of advice.
If someone read this entire episode and they’re thinking now, “I should be thinking about selling my business. I should think about who’s going to buy it, when they’re going to buy it, and why I want to sell it.” Where should they focus their first energy? What’s the action step you’d love them to have written down from this episode? I’m sure it’s probably to call Michelle. What else is it?
Number one is to buy the Exit Rich book and number two is to call Michelle.
It’s at ExitRichBook.com. Thank you so much.
Here’s the thing I wanted to get across too, James. Exit Rich is not just about selling your business. All your readers might be like, “I’m not going to sell my business.” I’m here to tell you that nothing lasts forever. Remember my story about the little old lady whose husband dropped dead from a heart attack? You should always plan your most valuable asset with the end in mind. Exit Rich is all about building a sustainable business that can operate without you, that you can scale, and when you’re ready you, have a sellable asset and you don’t end up in an 80% of businesses that never sell.
The number one action would be to figure out what you want to sell for. What is your price tag? That’s the question I always ask everybody and they always look at me like a deer in headlights. Here’s the other side of that coin, James. I ask you, what do you want for your business? It’s a little scary because sellers will tell me, “Michelle, I want $20 million,” but then their EBITDA is $100,000. It’s also got to be realistic.
I ask then, “How did you come up with that number?” They say, “That’s what I need to retire on. That’s what I got paid for my other family or that’s what I need to buy an island.” At the end of the day, buyers don’t care about what you need. Buyers care about what the value is to them. Let me tell you something.
There are two different schools of thought here that I’ve talked about in Exit Rich. You’re going to have your price because you think that’s what you need. You think that’s the seller sanity that you have to have $20 million to retire on. When I sit down and work the numbers with you, you might only need $10 million. You got to start with what do you need. What do you worth now? Most business owners have no idea what their business is worth right now and then we got to bridge that gap.
I do that same exercise. I ask what their number is. They haven’t even thought of selling the business, but if we work on the number, it’s like, “What do we need to build for that number to be realistic?” I have this concept. It fits well with a couple of things I talk about on the race course. It’s about building assets you control and my book is called Work Less Make More.
I feel that a business that’s good to sell is a really good business to keep. If your reason why isn’t very strong to sell, then it’s a good business to have, in the meantime. If it does have good people running, you do have great systems, you do have fantastic patrons, or you’ve got a proprietary edge on the market, they’re wonderful businesses to run.
Thank you for sharing so generously. Thank you for sending me a copy of the book to read. I enjoyed it. I’ve read plenty of books on a similar topic because I wanted to educate myself when I was selling my businesses. I wish I had your book a few years ago, but it’s not too late for anyone reading this to go and get it. Thank you so much, Michelle.
James, can I tell your audience all the value that they’ll get if they buy it before the launch date?
Go for it.
Everybody that goes to ExitRichBook.com buys a book for $24.79, which is less than Amazon, we will send you to digital download immediately so you don’t have to wait until the book launches. We’ll send you to digital download so you can start reading Exit Rich now. For anybody that lives in the United States, we’ll send a hard cover to your doorstep upon the launch date. Outside of the United States will be extra shipping, of course.
We will then give you access to the lifetime membership of Exit Rich Book Club where you get video content and me doing deep dives into these different strategies and techniques. You also get documents to run and sell your business. To run your business, we have sample policy and procedure manuals and an SOP checklist. We have employee handbooks and non-competes. To sell your business, we have sample letters of intent, purchase agreements, due diligence checklist, and closing docs.
These documents are there for your review and your immediate download. If you went to your attorney to recreate it, it would cost you over $30,000 to recreate these documents. We give you a 30-day free membership into Club CEOs, which is a mastermind where we do hot seats and Q&As where we help business owners build a sustainable and scalable business so when they’re ready, they can exit rich. All of that James is at ExitRichBook.com for $24.79.
I’m curious as a marketer, stepping aside for a sec. When you do your 30 days, do you trigger that from the purchase of the book or do you have an optional continuity? I’m curious from a marketing perspective.
We do it from the purchase of the book. That’s a good question. I could ask my administrative team. I think we do it from the purchase of the book, but it might be from when they log in.
There are two main ways to do it and this is our world here. You can get into trouble with force continuity if you’re not very clear on it and if you don’t remind people, etc. I’ve always done optional force continuity, but I’ll probably do a whole episode on that. If you read this and you’re interested, I’ll do an episode on different ways you can go about it because I set up a book funnel for SuperFastResults.com/book for my own book.
It’s giving away my book and then I upsell the print copy and the audio version. There’s a coupon set for SuperFastBusiness where I give $70 off the first month. They basically access it for less than $1 a day instead of $99. That’s the way I’m testing it. Maybe we’ll review that and see if we can compare notes, Michelle.
Maybe you can consult with me on that and I’ll consult with you on the next business that you sell.
If I’m going to sell another business, I’m coming back to you to chat about that. Thank you so much.
Thank you, James. Thank you for having me. It is a pleasure.
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