FYE-GI with The Accountability Coach | Exit Rich

 

Michelle Seiler Tucker is the Founder and CEO of Seiler Tucker Incorporated. As a 20-year veteran in mergers & acquisitions, Michelle and her firm has sold over a thousand companies in almost every vertical. Michelle is the best-selling author of the book “Sell Your Business for more than it’s Worth, and her latest book, “Exit Rich,” which is available now.

In addition to being featured in INC, Forbes, Entrepreneur Magazine, and USA Magazine, Michelle makes regular radio and TV appearances on Fox Business News and CNBC. She has spoken alongside many prominent speakers, such as Eric Trump, Arnold Schwarzenegger, Kathy Ireland, Donna Karen, Stedman Graham, Randi Zuckerberg, Steve Wozniak, and more.

Her passion is to save businesses that might otherwise close. By identifying and correcting the top mistakes business owners make, Michelle will fine tune a business into a well-oiled machine.

Michelle gave us some great insight that will help us be even more successful, so we can Exit Rich, if that is your goal.

Here are some questions I asked Michelle that you will benefit from by listening to her interview:

  1. How does an entrepreneur create, build, and grow a business where they could exit rich? Basically, how does someone Build a Sustainable, Scalable, and Sellable Business?
  2. What kinds of businesses have a higher probability to sell better than others?
  3. Where would a business owner go to get an accurate business valuation for their business and industry?
  4. Why is it important to plan your exit strategy from day one using the ST GPS Exit Model (a five-step process that business owners need to accomplish before they sell their business)?
  5. Tell us what the 6 P’s are and why they are so important?

Hint: The “ST 6 P’s” is the best evaluation method every business owner should live by and establish within their company. It is based off 6 principles.

  1. What inspired you to write your newest book, Exit Rich?

To buy a copy of Michell’s newest book, Exit Rich, go to www.exitrichbook.com. It is only $24.79 plus shipping and handling. When you buy it here, you will get a lot of great bonuses worth over $50k.

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Check Out My Interview With Michelle Seiler Tucker – Author, Exit Rich!

We have a super special guest with us. Michelle Seiler Tucker is the Founder and CEO of Seiler Tucker, Inc. As a twenty-year veteran in mergers and acquisitions, Michelle and her firm have sold over 1,000 companies in almost every vertical. Michelle is the bestselling author of the book Sell Your Business for More Than It’s Worth. Her latest book, Exit Rich, is now available.

In addition to being featured in Inc, Forbes, Entrepreneur Magazine, and USA Today Magazine, Michelle makes regular radio and TV appearances on Fox Business News and CNBC. She has spoken alongside many prominent speakers such as Eric Trump, Arnold Schwarzenegger, Kathy Ireland, Donna Karan, Stedman Graham, Randi Zuckerberg, Steve Wozniak, and so many more.

Her passion is to save businesses that might otherwise close. By identifying and correcting the top mistakes business owners make, Michelle will fine-tune a business into a well-oiled machine. I’m sure Michelle will have some great insight for us that will help us be even more successful so we can exit rich. Welcome, Michelle. I appreciate you being with us.

Thank you so much for having me.

Let’s get right into it. How does an entrepreneur create, build, and grow a business where they could exit rich? How does someone build a sustainable, scalable, and sellable business? That’s a big question.

The reason it’s such an important question is that, according to Steve Forbes, 80% of businesses on the market will never sell. That’s a pretty startling statistic facing business owners, especially Baby Boomers. You have less than a 20% chance of selling your business. All business owners need to pay attention. That’s the main reason I wrote my book, Exit Rich, which was endorsed by Steve Forbes.

FYE-GI with The Accountability Coach | Exit Rich

Exit Rich: The 6 P Method to Sell Your Business for Huge Profit

First and foremost, one of the biggest mistakes that business owners make is that they don’t think about their exit. They don’t plan their exit. They don’t plan for the sale of their business until a catastrophic event occurs, whether that’s internal or external. Internal could be health issues, partner disputes, divorce, or death. External is this pandemic we have been living in.

The worst time to sell your business is during a catastrophic event because the business is typically doing poorly and trending downward. You’re not going to be able to maximize value. You probably end up selling for pennies on the dollar. We need to go back to the basics and say that if you want to have a successful exit, first and foremost, you have to change your mindset.

You have to stop thinking about your business as your baby. Your business is not your baby. Your babies are at home. Go home. Love them, hug them, and kiss them. Your business is your most valuable asset. Your business is your nest egg or your retirement fund. You must start with the end in mind, as Stephen Covey says, and plan your exit from the beginning.

In my book, I call this the ST GPS Exit Model. If you want to drive somewhere, what’s the first thing you do? You pull out your phone and go to Google Maps. What do you plug in? You plug in the address or your destination. The problem of most business owners is most business owners don’t plan to fail. They fail to plan. They don’t have a destination, an endgame, and the desired sales price.

We work with our clients to say, “First things first, let’s plan your Exit Model. Let’s determine your destination. That’s your desired sales price.” Let’s say you want to sell your company for $5 million. We have a number. Everyone gets hung up on a number, but it’s just a number. You can adjust it along the way. The second most important thing is that the GPS model needs to know where you are starting from and your location. In other words, in business, what is your evaluation? What is your business worth?

Most business owners never get a business evaluation. They don’t think about getting a business valuation until they think about selling during a catastrophic event, and then they’re shocked to realize the fact that their business is not worth near what they thought it would be worth and what they need in which to retire on. You must get a valuation every single year because they’re events to increase valuations or decrease valuations. You need an annual valuation checkup.

Let’s say you want to sell for $5 million. Your business is worth $1 million. You get these evaluation checkups from a mergers and acquisitions advisor, not necessarily a CPA, because that’s not the core competency of most CPAs. They don’t specialize in evaluating businesses. Evaluations are more of an art rather than a science. You need to know how to evaluate synergies.

Let’s say you want to sell for $5 million. You’re worth $1 million. The next step in the process is knowing your timeframe. When do you want to sell your business? Let’s say you want to do this in ten years. You need to determine who your buyers are going to be. Notice I said buyers, not buyer. You never want to have one buyer looking at your business because, in all likelihood, that one buyer will fall apart. You need backup buyers. Plus, it’s hard to maximize value when we can’t create a bidding war because we have no competition.

There are five types of buyers. First-time buyers are 90%. They buy small businesses like coffee shops, restaurants, and pizzerias. We have the second type of buyer, which is turnaround specialists. They buy distressed assets. They don’t buy $5 million companies. We have private equity groups. They buy based on platforms and add-ons. Let’s say they want to get into healthcare but are not currently in it. They won’t even look at a healthcare business unless it has over $3 million in EBITDA. EBITDA is Earnings Before Interest, Taxes, Depreciation, and Amortization.

If they’re already in healthcare or already have a healthcare platform, they will consider add-ons underneath a known EBITDA. Private equity groups are great buyers also. Number four, buyers are strategics/competitors. They buy synergies. They typically will pay the highest multiple for your company. The last type of buyer is sophisticated entrepreneurs or industry agnostic. They chase EBITDA. If you’re trying to sell your business for $5 million, it’s going to be the last three buyers.

Now that you have this plan, you need to reverse engineer and figure out where the numbers need to be. If you want to sell for $5 million worth of gross revenues, COGS or, most importantly, your EBITDA, where does the EBITDA need to land? To sell for $5 million, your EBITDA is going to have to be around $1 million depending upon your synergies. You look at those buyers. You need to figure out what are the synergies you’re looking to buy and what is their buying criteria. You build your business to meet their specific criteria.

It’s like when a business owner starts a business, “Here’s my widget and my ideal target market.” They build everything to meet their ideal target markets’ specific buying criteria. Your business is your widget. Your buyers are your target market. You need to figure out what they’re willing to pay top dollar for and build your business to meet their specific criteria.

The last step in that equation is the why. Nothing in life gets done without a powerful why behind it. If business was easy, everyone would be doing it. If it was easy to sell a business for $5 million, everyone would be doing it. You have to have a powerful why to keep you motivated, keep you in the game, keep you hungry, and keep you weathering all the financial storms.

Nothing in life gets done without a powerful why behind it. You have to have a powerful why to keep you motivated and weather all the financial storms. Click To Tweet

Where we like to start with is the mindset. Think of a business as an asset. Plan this exit model because even if you never think about selling your business, at least you have a sellable asset. You will set your family up for success. I had a lady call me from Texas. Her husband dropped dead of a heart attack and left her with a mountain of debt. She wanted me to sell this company. There were no employees because he had built himself a glorified job rather than building himself a business.

He had all 1099s and all subcontractors. Plus, he had no processes. He wasn’t operating on all six cylinders. All the data was in his head. When he died, the business died. The next thing that we work with our clients after they build that GPS Exit Model is we work with them on building a solid infrastructure or a solid foundation in their company. We call this running on all six cylinders and all the Seiler Tucker 6 P’s.

Here’s a question going back to valuation. Where would someone go? What entity would they look for to get a business valuation and get an accurate one based on their business in their industry? I’m assuming people who value businesses and valuations have different specialties in different industries. Is that correct?

That’s not correct. I’ve been in business for over twenty years. We have sold over 1,000 companies. We’re industry agnostic. We have pretty much sold businesses in every single vertical you can imagine but the best place to get a valuation is not necessarily your accountant or your CPA. The best place to get an evaluation is from a mergers and acquisitions advisor because M&A advisors typically know how to buy new businesses.

Not all are created equal. Not all M&A advisors look at the synergies like we do. When we do valuations, we don’t just look at the EBITDA. We’re also going to look at your business based upon these six cylinders or these 6 P’s. We’re going to evaluate the business based on the synergies. Valuation is more of an art rather than a science because valuation values what a buyer is willing to pay for it.

If a business operates on all 6 P’s and they have proprietary assets and proprietary synergies like contracts, patents, trademarks, celebrity endorsements, and things of that nature, the five types of buyers that we talked about, strategics, competitors, and pegs, will pay a lot more money for those proprietary assets. When we do evaluations, we don’t just look at the numbers. We look at the synergies, our buyers, and what our buyers are needing in which to catapult their current business to the next level. Buyers will pay top dollar for those synergies.

FYE-GI with The Accountability Coach | Exit Rich

Exit Rich: When you do evaluations, don’t just look at the numbers. Look at the synergies. Look at your buyers and what they need.

 

Are there certain kinds of businesses that have a higher probability to sell well versus others?

It’s the businesses that have EBITDA of over $1 million. It’s not so much about the industry. Everybody thinks it’s about the industry. There are industries that are in high demand. IT is in high demand. Staffing, manufacturing, distribution, and healthcare are high-demand industries, but any business that has over $1 million in EBITDA will have a tremendous amount of buyers and will sell much more quickly. The reason for that is there are more buyers for good businesses. There are good businesses to buy.

That makes total sense, unfortunately.

It sounds so common and simple, but it’s true. There are not that many businesses. There are 30.2 million businesses in the United States. A very small percentage of them have over $1 million in EBITDA, but there are so many buyers for those businesses with over $1 million in EBITDA. That’s why we can create bidding wars for those types of companies. The goal or objective is to increase EBITDA.

What are some of the strategies that would help someone sell their business for more than it’s worth? Do you have any specifics about that?

One is what I talked about, planning your exit from the beginning. If you wake up one day and say, “I want to sell my business,” in all likelihood, you’re not going to get maximum value because you haven’t built an asset that someone wants to buy. That’s number one. Number two is creating a business with a solid infrastructure on the 6 P’s. Number one is people.

Many business owners and entrepreneurs have created a glorified job that they go to work at every day versus a business that works for them. Business owners have to focus on their strengths and hire their weaknesses. Work on your business, not in your business. You don’t build a business. We build people and people build the business.

Work on your business, not in your business. You don't build a business. You build people, and people build the business. Click To Tweet

The number one P is people. We’ve got to have the right people in the right seats. We’ve got to ask the who question. Who opens the doors? Who handles customer service, marketing, legal, accounting, manufacturing, distribution, logistics, and quality control? The clue is you should never be next to the who. Businesses are not going to maximize value if they don’t have people and if they’re 1,000% dependent upon the owner.

Number two is products. We’re talking about how you maximize value. How do you get the highest value for the sale of your business? A product is the other one. You have to ask yourself. Is your industry thriving or dying? When I wrote my very first book, Sell Your Business for More Than It’s Worth, in 2013, I did the research and learned that 90% of all startups would go out of business.

We all know that. That’s common sense. Startups are at great risk, but when I wrote Exit Rich in 2019 and did the same research, I was flabbergasted to learn that the business landscape has flip-flopped. It has switched. Startups are not at risk anymore. Only 30% of startups are going out of business now, as those businesses have been in business for ten years or longer.

Out of 27.6 million companies, 70% of businesses that have been in business for ten years or longer are going out of business. You hear about it in the media all the time, but you only hear about public companies like Toys R Us, Kmart, and Stein Mart, but they don’t talk about private businesses. These private businesses are poor, not rich, selling pennies on the dollar, closing their businesses, or even worse, filing for bankruptcy.

The number one reason for this is the lack of AIM. AIM is Always Innovate in Market. Products are huge. Look at your industry and ask yourself, “Is it dying? Is it thriving?” Do you have an Amazon and you’re in your prime? If so, that’s when you should be selling your business. Do you have a Blockbuster and you’re about to go bust? Products are huge. You also need multiple revenue streams.

The reason why so many businesses went out of business during the pandemic, especially restaurants, is they have one way they get paid. They have one profit center. They get paid by patrons coming in and eating or taking food to go. They don’t have eCommerce and products that they sell. They’re not getting paid any other way other than customers eating and/or taking food out. You have to have multiple revenue streams.

Processes are another big one. A lot of businesses are inefficient and unproductive and lose money because they have inefficient processes. Processes need to be designed with the customer experience in mind. They need to be efficient, productive, and well-documented. Proprietary assets are the number one value driver. This is the fourth P. Let me give you a crash course quickly in evaluations.

If you have a business with under $1 million in EBITDA, pretty much every industry except for SaaS will trade from the multiple of EBITDA, the seller’s discretionary earnings, or EBIT. It would typically trade anywhere from 1 to 3 and a half times EBITDA, STE, and EBIT unless you’re in the SaaS business, then you will get the multiple of revenue.

Businesses over $1 million in EBITDA will typically trade for five and up. Proprietary assets are what will help you sell a business for more than what it’s worth on paper. These proprietary assets are the highest value driver. Number one is branding. Let me back up. There are six pillars. I’ll go through them quickly. Number one is branding. The more well-branded you are, the more I can sell your company. Nobody is paying any money for Blockbusters because they went bust.

The most valuable brand in the world is Apple. Apple is worth over $359 billion for the brand, not including cash for inventory, assets, or anything else. Build your brand. Trademarks are valuable. The biggest mistake that business owners make around trademarks is they get a logo trademark in their state. They never check the Federal database to make sure it’s available. I’ve seen business owners in business 5, 10, or 15 years off, and all of a sudden, they receive a letter that they have to cease and desist because they never got a Federal trademark. Protect your IP.

Patents are huge. If you ever watch Shark Tank, every shark asks about patents. We sold a company for $80 million that wasn’t making any money, but they had eighteen patents. Contracts are valuable. Manufacturing contracts, distribution vendor agreements, and franchise orders of franchisees. Client contracts are the most valuable of all, but here’s the caveat to contracts. I’ve never met a business owner in the twenty years I’ve been doing this that has gotten this right.

FYE-GI with The Accountability Coach | Exit Rich

Exit Rich: Contracts are valuable. You want to be proactive and get the correct language in your contracts.

 

You need a two-sentence transferability clause that says, “This contract is transferable upon a new entity.” Ninety-eight percent of sales are asset sales. If your contracts are not transferable, the buyer refuses to do a stock sale, and your clients won’t agree to transfer, your whole deal can fall apart. If you want to be proactive, then get the right language in your contracts.

Databases are huge. Facebook paid $19 billion for WhatsApp. WhatsApp was hemorrhaging, but it had a billion users. They had a synergy that Facebook knew they could always monetize. What we’re talking about are these synergies and then celebrity endorsements and radio personalities. We have a client that has their things endorsed by Oprah. Strategics will pay a lot of money for that because they want their products also endorsed by the Queen of Everything.

It’s the same thing with radio personalities. They can only endorse one vertical at a time. If you’ve got a radio personality endorsing your skincare company, they can’t endorse any other skincare company. Nobody can bump you from those spots. It’s the same thing with eCommerce businesses. They need top positions on Wayfair, Amazon, and Etsy. We will pay more money for this. These are proprietary synergies that buyers are looking for.

The last P is patrons. If you have customer concentration, and most businesses follow the 80/20 rule where 80% of the revenue comes from 20% of clients, if you lose a couple of clients, you’re going to be out of business. There’s no doubt about it. Plus, it’s going to make it very difficult to sell your business because most buyers are fearful of customer concentration.

The last P is profits. If the business is not profitable, you can still sell it and make a huge profit if you have those proprietary assets we talked about. A lack of profits is never the problem. It’s a symptom of not running on the other five Ps. This is how you build up value and get more money for your business. We’re able to create bidding wars for companies that have and are operating on all six cylinders.

To recap, the six principles are people, product, processes, proprietary, patrons, and profits.

There’s the pandemic pivot if you want to add a seventh one. I’ll give you the eighth one. We still need to be passionate. Another thing that we see is a lot of businesses are using 1099s versus W-2s. You can get away with that in some industries, but you need to check the boxes and make sure that you’re following the rules.

For instance, we had a manufacturing plant that had 1099s in a warehouse and on their manufacturing floor. They had no workers comping those 1099s because they’re not employees or 1099s. There is no worker’s comp. If one of those employees gets hurt and sues that business owner, they will win. That business owner will go out of business and probably have to file for bankruptcy. Plus, the IRS will come after them for an audit and find them on every 1099 that was supposed to be an employee.

Keep your intellectual property in a separate corporation. If you get sued or something happens in your business, you don’t want your IP to be at risk. You want to make sure that you keep that in a separate entity. One of the biggest profit mistakes that I see is that 1 or 2 out of 5 business owners will be embezzled during the term of running their business. Embezzlement is huge.

The big reason for that is a lot of times, business owners will hire a bookkeeper or have someone accounting and trust, but they don’t verify. They don’t have checks and balances in place to make sure that nobody is stealing from them. You need to put the right people in the right seats. You need to empower people to make decisions, but you should never take your eye off everything. Always trust but verify. Always inspect what you expect. Embezzlement is a huge profit mistake. Trillions of dollars every year are stolen from business owners.

You need to put the right people in the right seats and empower them to make decisions. But you should never take your eye off everything. Always trust, but verify. Always inspect what you expect. Click To Tweet

Unfortunately, I do know a couple of business owners who did have people embezzle from them. They thought they were their best friends even though they were an employee. They befriended them and hung out with them and their kids. You hear all these stories of embezzled millions, which is sad. I’m sad to hear that does happen so much with other businesses as well.

It happens a lot.

I’m curious. What inspired you to write Exit Rich?

What inspires me is everything that we have been talking about here. Eighty percent that businesses don’t sell. That is heartbreaking for these entrepreneurs, especially business owners that have invested time, energy, money, and efforts over the last several years or decades in some cases and have made huge sacrifices along the way. Many of these business owners don’t take vacations.

I spoke to a business owner. He said, “I haven’t had a vacation in nine years. I’ve missed all of my kid’s activities.” His business is not sellable for a multitude of reasons. I wrote Exit Rich to help educate business owners on how to build a business that’s sustainable and that they can scale. When you’re ready, you have a sellable asset. You don’t become part of the 70% of businesses going out of business. Plus, you don’t fall in that category of the 80% of businesses that will never sell.

I believe you have a special offer around making it available to people.

I do. Extra Rich launched. We are still offering bonuses for anyone that buys Exit Rich at ExitRichBook.com. You can buy Exit Rich at Amazon. You can go to all your major retailers, but at ExitRichBook.com, we will email you the digital download for $24.79 plus shipping costs and then ship the hardcover to your doorstep to anyone who lives inside the United States. We will give you a lifetime membership in the Exit Rich book club. That’s a club where we have all kinds of training and video content, plus documents to run your business and sell your business.

We have sample policy and procedure manuals, employee handbooks, non-competes, sample letters of intent, purchase agreements, due diligence checklists, and closing documents. All these documents are there for your review and your download. I can promise you that if you want to recreate all these documents, it will cost you over $50,000 to do. This is a huge value. Plus, we’re giving a 30-day free membership to Club CEOs, which is an entrepreneurship mastermind where we help business owners pivot and build out sustainable, scalable, and sellable businesses, all for $24.79 at ExitRichBook.com. Our main website is SeilerTucker.com.

You’re buying a book for $24.79 that could be worth millions.

One little tweak in there could change your business exponentially and not only make you more profitable but also make your business sell for a lot more money than you ever thought possible.

The bonuses alone are worth not just the $50,000 part of that. It could be worth millions in addition to all the insight that you provide in the Exit Rich book. That’s amazing. Everybody needs to jump over to ExitRichBook.com and get started.

Thank you so much, Anne.

Are there any other words of wisdom that you would like to share before we close?

I always like to end with my favorite quote. It’s my quote. That’s why it’s my favorite. A lot of times, entrepreneurs think it’s lonely. It doesn’t have to be lonely. Entrepreneurs love helping other entrepreneurs. There are so many different networking groups like Club CEOs that you can take advantage of and become a participant and a member of so that you can network with like-minded individuals. I always say, “Your network equals your net worth.” Entrepreneurship is all about finding the right mentor. Always say, “It is hard to read the label from the inside of the bottle.” You need an outsider’s perspective to read the warning signs and keep you out of the danger zone.

Entrepreneurship is all about finding the right mentor. It's hard to read the label from the inside of the bottle. You need an outsider's perspective to read the warning signs and keep you out of danger. Click To Tweet

Thanks again for sharing your very valuable time with us. I took a lot of notes. I’m sure the people reading took a lot of notes. They can get your book and get even more information. I appreciate your valuable time.

Thank you so much, Anne. It was a pleasure being with you.

My hope for our time together with Michelle is that you got value in an idea or two that will help you be even more successful. Feel free to share my show with others, as they can be found on most podcast platforms and in most English-speaking countries. If you would like to get a short daily fix for me, subscribe to The Accountability Minute, which also can be found on most podcast platforms and in most English-speaking countries. Always remember to aim for what you want each and every day. Until next time, make it a great day every day. I appreciate you reading.

 

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