FYE-GI with Trend Following Podcast | Exit Rich

 

My guest today is Michelle Seiler Tucker, the Founder, and CEO of Seiler Tucker Incorporated. She has sold hundreds of businesses to date and currently owns and operates several successful businesses.

The topic is her book, Exit Rich: The 6 P Method to Sell Your Business for Huge Profit.

 

In this episode of Trend Following Radio, we discuss:
“Clients buy what they want not what they need.” Real Estate Industry 6 P Methods Buyer and Seller E-commerce Businesses Selling a Business. Jump in!

I’m MICHAEL COVEL, the host of TREND FOLLOWING RADIO, and I’m proud to have delivered 10+ million podcast listens since 2012. Investments, economics, psychology, politics, decision-making, human behavior, entrepreneurship and trend following are all passionately explored and debated on my show.

To start? I’d like to give you a great piece of advice you can use in your life and trading journey… cut your losses! You will find much more about that philosophy here: https://www.trendfollowing.com/trend/

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Michelle Seiler-Tucker Interview With Michael Covel On Trend Following Radio

This is one of those episodes I’ve not gone down this rapid hole yet, selling your business. I’ve met people over the years and you could call them business brokers or mergers and acquisition experts. Not to the size of a Goldman Sachs deal but smaller businesses from hundreds of thousands of dollars to $10 million to $20 million. There’s a lot of business action out there and a lot of people often want to sell their businesses.

My guest caught my eye and her new book, Exit Rich. It’s all about how you exit or get out. She has some great war stories. Her name is Michelle Seiler Tucker and she’s been at this game for many decades. She gets into the nitty gritty and all aspects of selling a business. From the evaluation part to the negotiation part. It’s a fascinating backstory too of how she got started.

It’s one of those Anthony Robbins tales almost, finding her way into something she did not necessarily expect and decades later sitting in a cat board seat as the intermediary to help buy and sell businesses. What a great place to be. You always want to be the house. Without any further delay, let’s jump right into my conversation with Michelle Seiler Tucker and get a little bit of that insight as to what we got to do when it’s time to sell.

Michelle, I think back on myself and I don’t know if I’ve said this exactly on the show before or maybe but the first time I ever made money as an entrepreneur was when I was either 10 or 11. I looked it up. I grew up in the State of Virginia. My father had a decent size property. In 1979, a guy was running to be the senator for the State of Virginia. He happened to have been married a then Elizabeth Taylor.

Here I was a 10 or 11-year-old kid and there was going to be a big party with hundreds of people in the backyard at my parent’s house and one of these famous actresses is going to be there. I had an instant Polaroid camera and I was walking around taking pictures. I still remember this to some degree as a 10 and 11-year-old boy, she did not look like her famous Hollywood times.

She was older and didn’t look as good but I’m taking these Polaroid pictures. These creepy old men were coming up to me demanding these pictures and I started selling them. I was taking snapshots of Elizabeth Taylor and old men were giving me $20 for a Polaroid. That was when I knew and I was like, “I love this feeling of selling something.”

That’s a great story. I love Elizabeth Taylor.

I’m sure there’s a moment in time in your life, whether it was on your own or working for somebody that first moment when you sold something and you had the feeling. You’re a master at selling. Give me a general period or something you were doing that was starting to shape you in terms of like, “This selling thing is going to be big for me.”

I started my first entrepreneurial endeavor when I was fourteen selling wedding magazines. I then went into selling copiers and went into sales at Xerox and got sucked into Corporate America. I was very quickly called the closer as Xerox because anytime somebody couldn’t close something, they would call me. I did so well that they promoted me within six months to Regional Manager overseeing 85 salespeople.

Why were you the closer? I want to know the skillset. What were you doing? What was the technique? What did you have that other people didn’t have but they saw in you?

The bottom line is I’m a great listener. I focus on what the clients need and want. It can determine rather quickly what their hot buttons are and how to give them what they want because clients buy what they want, not what they need. I am very good at that. I’ve sold over 1,000 companies.

I’m probably going to be stopping you a lot here because you’re not going to think this is so interesting but to me, it is. You are a master seller at these things. It’s about what they want, not what they need. Explain that.

You got to find the emotional hot buttons. You got to find what the clients are wanting, what makes them tick or what their hot buttons are. That’s what I’m good at. Clients buy what they want, not what they need. We go to the store to buy one thing and we end up walking out with a bunch of other things.

You have to find the emotional hot buttons. You have to find what the clients want, what makes them tick, what they're willing to do, and what their hot buttons are. Clients buy what they want, not what they need. Share on X

The reason you’re walking out with a bunch of other things is a sales process that is either going directly in front of you or behind the scenes that the average person doesn’t see. How long did you stay at Xerox?

I was there for six months. When they asked me to try out for the regional manager’s position, they also told me, “Michelle, you’ll never get it.” I’m like, “If I’m not going to get it, why should I apply?” They said, “It’s a great experience.” I ended up beating out people who have been there for decades. Shortly afterwards, I realized I didn’t like that position. I didn’t like management. I like sales. I love the thrill of the deal. I like making lifetime relationships with my clients.

I ended up looking for another business to buy and was looking at franchises and stumbled across a franchise. It had a few locations I was going to buy that and keep my six-figure job with great benefits. They came to me and said, “Michelle, we don’t want you to buy a franchise. We want you to become a partner with us.” I said, “I’m not going to leave my six-figure position and become a partner when you’re not successful yourself.”

They made me an offer and it was very difficult to refuse. I said, “Let me try it out for six months and see how it goes.” I traveled and did trade shows and hosted my events for about six months while keeping my day job. I made more money with them in six months than I had made in an entire year at Xerox. About 7 or 8 months later, I gave my resignation to Xerox and started my franchise development, consulting and sales career.

Let me keep it a line though that I saw from you that I like. It’s very simple. It’s right at the front of your work. “I was making a ton of money for someone else.” We could talk about that sentence for the next 60 minutes alone and why so few people in their life ever get to the point where they even consider that. I could already tell with your personality, you’re like, “Mike, I’m already past that sentence. I already know,” but most people don’t get that. They don’t ever get a chance to experience that feeling of, “I was making a ton of money for someone else. I don’t like that feeling and I want to make more money.”

It was that, plus it was also the fact that when I started managing 85 people, we were having meetings to have meetings to schedule another meeting. There’s so much corporate development traffic that I felt like we were never getting anything done. I’m a salesperson through and through. I was making so much money for them versus money for myself and my family. That’s why I went ahead and took the leap. I left my six-figure position.

Let me keep the term salesperson for a second. As I was going through your background and reading your work, I was thinking, “I’ve had a booking agent at various points in my life. I’ve hired real estate agents.” How does that contrast or compare to someone like yourself who helps individuals to either buy or sell a business? Even if you want to compare it to the stock market brokerage space, how does it compare and contrast in your mind?

I’m a mergers and acquisitions master intermediary. It’s extremely different from being a stock broker, selling a house or anything else because you’re dealing with someone’s most prized possession. You’re dealing with their livelihood. It’s an emotional transaction for both buyers and sellers whom we’re dealing with sellers or buyers remorse. Plus, there are a whole bunch of other caveats that we have to deal with that you never will have to deal with selling real estate or a stockbroker.

You’re dealing with employees, vendors, CPAs, landlords, attorneys and franchisors, in some cases you’re dealing with inventory assets and real estate. You’re dealing with what I call the Six Ps, making sure that the business is functioning on all six Ps. There are a lot more moving parts and obstacles that we have to overcome. A lot of deals will fall apart in due diligence. It’s like juggling a bunch of balls all up in the air to make sure that the sale happens. You’re not dealing with that in real estate or most other industries in sales.

Due diligence is like juggling a bunch of balls all up in the air to make sure that the sale happens. Share on X

Let’s take it back in time a little bit since I’m jumping you around. I hope you’re comfortable enough with that. Take me back in time to the first time you either sold or helped someone buy a business. Can you recall that time? I’d love to hear that story.

I started in franchise sales, development and consulting but then I had my partners buy me out and I transitioned into selling companies. The very first business I sold was a flower shop. You don’t know what you don’t know. I had a seller and found the buyer very quickly. The buyer and seller hire an attorney. I asked them if we had to have a lease. The attorney said, “No. We don’t have to have the lease. We can get the transferred lease done after the fact.” The landlord was out of the country.

We go to the closing, the buyer and seller are there and the attorney says, “Where’s the lease?” I said, “Wait a minute. You tell me we didn’t have to have a lease.” He said, “No, you have to have a lease. You can’t close a deal without a lease.” The whole deal blew up right there at the closing table. We ended up closing a week later when the landlord came back in town but that attorney gave me the wrong advice and then threw me under the table during closing and made me look bad in front of both my clients.

It’s easy to look back over hundreds of sales but becoming the matchmaker for buyer and seller, how did that process start to unfold? How did you start to regularly find buyers and sellers? Was it a quick process for you?

It was probably quicker for me than most. The reason for that is I’ve been in sales for a very long time but I had lots of referrals. I have owned other companies and I had referrals from those businesses, plus I had referrals from those clients. Plus, when I had my franchise development business, I had referrals from my franchisees.

My business took off rather quickly on a referral basis but I also did the typical things. Back then, I don’t think I did much Google or anything like that. It was mostly telemarketing, referrals, and even some direct cold calling, in-person and direct mail pieces back in those days. It was referrals. Probably, pretty quickly I had 15 to 20 sellers I was working with on a referral basis.

Give the audience some scope here. For example, how small or large of a deal have you done? Maybe some a range of 4 or 5 different types of businesses. I’m sure the range is quite wide but I’m curious. I want to hear from you about the range of the sales and the types of businesses.

For over 1,000 transactions that my company has done, it’s hard to remember what’s the lowest and the highest. The lowest is probably $30,000. It was a kids’ bounce house that we sold. There might be a lower one. I’ve had over 1,000 deals and it’s hard to remember all the details. The largest ones have probably been about $60 million to $70 million.

We have several between $40 million and $90 million that we’re working on in different industries. We sold an $18 million oil manufacturing business. This oil manufacturing business has been in business for years and had eighteen different patents. It’s very unique. One business was thriving and the business was dying. The thriving business was operating in all our six Ps while the other one was headed into bankruptcy. We ended up finding probably about 550 buyers. We did not bring all 550 buyers to our seller but we disclosed and qualified all 550 buyers.

We didn’t narrow it down but we had twelve different LOIs. There are five different types of buyers. We have private equity groups, competitors, strategics and some serial entrepreneurs. There was a serial entrepreneur that made us an offer on this business. It was appraised in the $9.8 million range and made an offer for $15 million for 80% of the company. The owner retained 20% plus their salary and benefits. During due diligence, we ended up getting the buyer to agree to buy the other business for $3 million that was headed to that foreclosure. $18 million for a company that was valued at $9.8 million for the business that was thriving.

Due diligence was quite extensive. The deal almost fell apart for a multitude of reasons. The biggest reason during due diligence on a Sunday was I kept noticing that when the buyer’s due diligence expert was there, the seller’s CPA kept shoving things in the drawer. This deal included that the buyer would receive all AR but the seller would have to pay off all AP. When she left for the day, I started going through the drawers and realized that she was hiding all types of invoices that needed to be paid off by the seller at closing. We were also going to ask for escrow money to make sure that those invoices were paid off. We come to find out she had been embezzling or stealing money from the seller.

You’ve had to have seen this many different types of businesses with this many different types of people. You’ve seen everything. Are you geographic in any particular area? Are you all over America or beyond America? What are your borders?

I’m all over the USA. We are based in New Orleans but we do deals all over. We’ve got some large deals we’re working on. We have done deals in Canada, Colombia and Trinidad. I’ve been asked to go to Dubai and open up an office which I would love to do. With the internet, even before COVID, we were using Zoom and all the technology. We sell businesses before that are sight unseen. We can do what we do right here in New Orleans. It’s pretty much anywhere in the United States and Canada.

Do you scratch yourself and say, “What an interesting journey?” You’re working for Xerox in sales and then a complete shift to where you get to be at the catbird seat of all these buyers and sellers and making a marriage and get compensated for making that marriage. That’s a great feeling, I imagine.

It is. I don’t just sell businesses. I also buy businesses and flip them. I also partner with business owners whose businesses are not sellable for the price tag that the owner needs to exit. I’ll partner with a business owner investing my money, time, energy, effort and resources and sometimes I’ll bring in additional partners. It is a marriage. I have lifetime friends from franchisees that I sold several years ago and business partners that I’m in business with. One of my best friends is a business I sold back in 2005 right after Hurricane Katrina in New Orleans.

Let me ask you the big Amazon question. I can probably get in a car and drive across America and see hollowed-out stores and malls that are honestly empty because of Amazon. People love convenience. My father loves getting those brown boxes every day with goodies. This is American life. This has had to have been an interesting observation for you because of the size and scope of the businesses that you’re describing. Some would-be buyers and sellers have probably been hurt dramatically by Amazon.

They have. When I wrote my first book in 2013 called Sell Your Business for More Than It’s Worth, I did extensive research. It was common knowledge back then and now and people think in a way that it used to be that 85% to 95% of all businesses will go out of business. When I wrote Exit Rich in 2019, I had my team do the research and I was flabbergasted by the results because the business landscape has changed dramatically.

FYE-GI with Trend Following Podcast | Exit Rich

Sell Your Business For More Than It’s Worth

There are 30.2 million businesses in the United States employing over half of America’s workforce. Back in 2013, 85% to 95% of startups in 1 to 5 years will go out of business. In 2021, out of 27.6 million, 70% of businesses that have been in business for 10 years or longer are at great risk of going out of business. Do the math. These businesses are dropping like flies.

You hear about the big box stores all the time. Public companies like Toys R Us, Kmart and JCPenneys. GMC closed down 900 locations but what you’re not hearing about are the private companies and smaller businesses on every street corner in every town and every state across our great nation that are dropping like flies. Unfortunately, many of these business owners are going to be forced into closing their businesses, selling for pennies on a dollar or even worse, filing bankruptcy. When business owners file bankruptcy, they’re not just losing their business assets but they’re losing their family assets too because most business owners commingle assets.

Amazon has taken a lot of that business but owners who’ve been in business for over 10 years have stopped doing 2 things. I call it AIM. They stopped innovating and marketing. They stopped asking their clients, “What do you want? How can I make it easier for you to do business with me?” The ones who make it easiest for consumers to do business with them are the ones who are going to be winning. That’s why Amazon wins because Amazon makes it easy for anyone to buy almost anything they want and have it delivered on Prime within a few days.

I am the biggest salute of Jeff Bezos and the American system. Pick a great idea and if everyone loves it, you make a lot of money. He’s done that. It’s going to be interesting to see over time though if all of the smaller businesses get eaten up in one person’s success. As you point out with AIM, they weren’t going in the right direction and somebody like Jeff swoops in and got a great idea. It’s a real conundrum here as a capitalist that you’re talking to and I’m sure you are too if everything goes away, literally almost and then it’s in the control of one company. I don’t know what to do with that.

I agree 1,000%. Business owners have to start innovating. Look at Toys R Us. They started in 1940.

For how long they were the same with no innovation?

They’re the same. When they started Toys R Us, they modeled it after a grocery store where they stacked toys up to the ceiling and that was the model. They never change their model or innovate. Never did they do anything different. It’s the same thing with Blockbuster. Blockbuster saw Netflix. They saw the writing on the wall. They sat there fat and happy and did nothing. That’s why they ended up going out of business. That’s a problem with these retailers. They’re not innovating. They’re creating a business and pivoting with a customer experience in mind.

I can think back to being a kid going to Toys R Us. You go to Toys R Us and it was metal shelves with the stuff stacked. There was no experience. You still loved it as a kid but you look at it now and you’re like, “They were doing nothing except stacking the merchandise up and expecting you to buy it.

I don’t know if you ever watched the movie, Home Alone but I watched it every weekend with my kid, Home Alone and Home Alone 2. In Home Alone 2, remember that the little boy is at the toy store and it was in FAO Schwarz. They show all these experiences and everything at that toy store. Toys R Us never provided any experiences. What are consumers into? Consumers are into experiences. They would rather stay at home, order what they need, get it shipped to them in a few days and spend the rest of their time on quality experiences with their family. That’s the problem with these business owners. Business owners have to start asking themselves, “What business am I in? What business should I be in?”

Have you started or are you already selling online businesses, whether they’re advertising or informational businesses? You’re in that business as well too.

I am. We are industry agnostic. We’re more EBITDA-focused. We’ve sold eCommerce businesses. We have online training businesses, online education and all types of businesses. We’re pretty much in every industry.

Is there an aggregate number in terms of your total sales? It’s got to be quite big, I’m guessing.

Total sales?

In terms of the number of how much volume. If you do this many transactions and some of the numbers you’re talking about, it adds up.

If I could have done something differently, what would I have done differently? It’s probably kept better records on the size of the deals and industries but it’s a huge amount.

Let me ask you about some of the eCommerce businesses that you’re seeing. What are you seeing in that particular space? This can often be a lot of very young people figuring out a niche. They could be extremely young and making a boatload of money and then they’re potentially selling.

Typically, our client has always been 50 and up. Baby Boomers have typically always been our clients for brick and mortar locations. We are working with a lot of eCommerce and SaaS businesses. Those tend to be younger business owners. It’s good and bad. One of the issues that I see with some of these younger business owners for these SaaS or eCommerce businesses is that they’re not building a foundation.

We have one client that sells on Amazon and their website. I would say 85% of their business comes from Amazon. If they lose Amazon, they’re out of business. The problem with this company is they don’t have anything. They don’t have an infrastructure. They have a product and manufacture out of China but they don’t have any contracts in place and have no backup plan if they lose that manufacturer. They have one patent and don’t have any employees.

When we evaluate businesses, we evaluate them on the six Ps. Number one is People. A lot of these companies don’t have people. They’re outsourcing everything. It’s good and bad. It’s good from the standpoint that you have lower overhead. It’s bad from the standpoint that you’re not functioning on what I call all six Ps that make a business successful.

FYE-GI with Trend Following Podcast | Exit Rich

Exit Rich: A lot of companies don’t have people. They’re outsourcing everything- and it’s good and bad. It’s good from the standpoint that you have lower overhead. It’s bad from the standpoint that you’re not functioning on the 6Ps that make a business successful.

 

This company has no people and management team in place. They rely on outsourcing everything. They outsource their customer service, sales and marketing. Other than the owner, there is nobody. They bought in one individual that is trying to take control and do operations and management and are trying to train this person but the business is not sellable unless we sell it to a strategic that has the infrastructure in place. That’s what I see with a lot of the younger generation. They can make money and figure that out. They can sell products but they don’t have the infrastructure that’s going to be sellable that most buyers are looking for when they buy a business.

You are probably aware that the root of that is somebody who’s been on this show, quite successful, a very successful author and podcaster and wrote The 4-Hour Workweek, Tim Ferris. He was the one that said, “Travel the world. Get rid of the infrastructure. Get lean and mean.” I knew a lot of guys that made a bloody fortune doing what you’re describing but you’re pointing out the risk. It’s not even a hidden risk that if you outsource everything and then you want to sell what you have, the buyer is going to go, “What am I buying?”

Buyers want to buy a business that has people. You can’t operate a business without people. They want to make sure there’s a management team and some non-competes in place. They want to make sure that there are tenured employees. They also buy the products so they want to make sure the product is driving on a dime. They want to make sure processes are in place and are efficient or designed with the customer experience in mind and then proprietary. They want to make sure there are some patents, trademarks or some IP.

They want to make sure that the business is well-branded and that there’s customer diversification, which is patrons and then profits. Everybody wants to buy a profitable business. I always say profits are never the problem. It’s always a symptom of not having the right people in place, products and processes that are efficient and protecting your IP. That’s what buyers are looking for. They have to have that infrastructure. We’re going to be able to sell his company but we’re not going to be able to maximize the value.

That’s the issue. You can get a number but it’s not going to be the number that you know you can get if they’re covering all their bases.

A lot of these owners are like, “I had a great year.” These SaaS companies and online eCommerce businesses take some time to build up momentum and start making some great EBITDA. The problem is all these owners want to base the value on one year. Buyers are not going to base the value on one year. They want to look at three-year history.

Some people do it though. There is an audience out there that has a higher risk appetite where they feel like, “I’ll take a stab at this.”

If the right synergies are in place, then yes. It’s like Facebook paid $19 billion for WhatsApp and WhatsApp was synergizing money. You’re right. If the right synergies are there and the buyer thinks that they could ROI or monetize those synergies, then they’re willing to pay for those synergies and a pretty handsome price for such. Maybe even if the company is not operating on all six cylinders, they’ll still buy like Facebook bought WhatsApp because WhatsApp had a billion users and they knew they could monetize that.

If a man or a lady’s out there and they’re 70 years old and they’ve got $5 million in the bank and want to buy a business, they want to buy something that’s going to have a certain turnkey aspect to it.

Those are mostly first-time buyers. First-time buyers or 90% of the buyers want something with stability and a turnkey aspect. These eCommerce and online businesses are attractive to buyers but they’re going to be more attractive to competitors and strategics. They won’t be attracted to private equity groups and sophisticated.

You’ll have to update me on the number but when a business goes to sell, 90% of listed businesses or however they’re listed, don’t sell. Selling a business, even if you want to do it, your chances for success are not high.

They’re not. Ninety percent is thrown out there. I’m going to go with Steve Forbes. Steve Forbes says that 8 out of 10 businesses will not sell and that’s true. That’s why we work with our business owners to get their businesses to operate on all six Ps to get their business to a solid foundation and make sure it’s sustainable and scalable so that we can sell the business.

Let me get into the nitty gritty here of a skillset that you have. I want to know what’s going on in your mind, the technique and how you move the pieces on the playing board when you have a seller and multiple potential buyers. I can think back to my first book, no name author and the publisher gave me $15,000. The second book came after the first book sold 100,000 copies.

All of a sudden, I had an agent and a bidding war. That was interesting to watch. I was like, “Six major New York publishers are having a bidding war.” The disparity between the bids was amazing. There was a couple that was very high and some of the others dropped off quickly. The whole process was amazing. Let’s talk about bidding wars. When you have that potential seller, whatever the business and amount. Let’s say you’ve got at least two very eager buyers that want that baby. Talk about managing this process to get your seller the highest amount of money.

First and foremost, I always talk with my clients at the beginning. Believe it or not and this might shock you and your audience but some business owners don’t want a bidding war. They want to make sure that the seller of their business meets the seller’s sanity check. They want to make sure that the buyer is going to take great care of their employees and clients and grow their legacy and price tag to afford their lifestyle when they exit their business.

I had a $15 million business that we sold in South Louisiana. It was appraised in the $9 million range. We had probably about 600 buyers for that. We don’t bring all 600 buyers to our clients so I don’t want your audience to misinterpret that. We disclose and qualify 600 buyers and narrow it down. We probably had about ten LOIs on that particular business. It got to a bidding war-type situation but then right away our sellers said, “We don’t want to go back and forth and play this game. This is the buyer we like because we feel that they’re going to grow our legacy and take care of our clients. We feel that we can move forward with these buyers versus some of the other buyers that want to pay more and buy our business.”

We still got our client $15 million for 70% of the business when the business was appraised in the $9 million range. This was a strategic buyer because they had similar products and services but were different and didn’t have the patents that my client had. Plus, my client had 60% of his revenue tied up in one customer, which was BP and that would scare most buyers but this buyer was interested in paying a good price for it.

I had another buyer that was willing to pay more but my sellers said, “No, we’re going to go with this buyer.” Not all sellers want to get into a bidding war. They want to be comfortable and have that warm and fuzzy feeling that they’re entering a partnership because when you get to this level, it’s not always about selling 100% of the business. A lot of times it’s going to be 70%, 80% or 90%.

Not all sellers want to get into a bidding war. They want to be comfortable and have that warm and fuzzy feeling with who they're entering a partnership with. Share on X

I should add that when I did that contract for my second book and got a very good publisher, I’m not hiding anything here because people could figure out who the publisher is pretty quick but in hindsight, there were pros and cons. One could make a very good argument that I could have taken $100,000 less to go with a smaller publisher where I had perhaps more control than the expensive deal with the top publisher where you had far less control.

That’s very interesting because one of our endorsements is Jack Canfield who wrote Chicken Soup for the Soul. One of the things that they always talked about is their expensive publisher agreement which got a great price. Their publisher outbid everybody else but then they felt like they ended up losing money on the royalties. They could have gone with fewer fees upfront and got more money on the back end. You got to look at the whole picture. It’s not just about the price.

You got to have the experience to know that. Jack‘s been on this show, he’s great. I loved our conversation. If you think about it, I love watching antique car shows. It’s not the same thing. If you’ve got 100 people in the room and they’re all bidding on an antique car, on some level, the owner wants to make sure the antique car is going to be taken care of but ultimately, in that situation, it’s the highest price. Some of the examples that you and I are talking about are more complicated.

Most sellers are attached to their business. It’s their baby. I’ve had sellers walk out at due diligence and in the closing room because it’s their baby and they suffer from seller’s remorse. It’s a whole educational process that we have to take our sellers through. We have to get them comfortable with exiting and what’s next in their life. I always tell people that we’ll never exit a seller from their business until we help them plan their future.

You’ve mentioned proprietary aspects like patents. When you are helping a seller to sell, speak to confidentiality. I have to imagine that in a competitive world, some potential buyers are not really buyers, perhaps they’re looking to gather information and that happens.

You’re right. That’s why it’s so important for a seller to hire a mergers and acquisitions advisor because competitors want to know who’s up for sale. They want the dirt on their competitor. You have to be careful. I’ve been doing this for many years and confidentiality is our number one priority. We advertise everything extremely discreetly.

We have an industry that hardly has any competitors. There are maybe two. We have to advertise that very discreetly and not give away any proprietary information whatsoever. We sold a staffing agency that’s appraised in the $30 million range. We probably had about 200 or 300 staffing agencies interested. Every single time we would email our client and they had to approve it in writing before we would give information on their company. We never show information on our client’s company to a competitor without their expressed permission in writing to do so.

If anybody thinks you’re not playing on the up, then it’s a trust factor. Your whole business is based on that.

That’s why we have to qualify buyers. You’d be surprised how many advisors and business brokers don’t qualify buyers. I don’t care how rich they are or how big their business is. We want their financials and a letter from their bank because if you’re showing a business to an unqualified buyer, then you’re risking a breach of confidentiality. We always obtain something that proves that they can afford to buy the business. Confidentiality is typically never breached by the broker or the advisor. It’s typically breached by the owner. The owner tells somebody who tells somebody who tells somebody and then before you know it, everybody knows.

I brought up the example of the hypothetical buyer, 70 years old that has multimillions to potentially buy. Talk about some of the businesses out there. This is more of a broad question. I’m sure some people in the audience are thinking about this like, “If I’ve got some extra money and I want to trust the thinking that Michelle is talking about,” something that’s somewhat turnkey with all these Ps that you’re talking about.

People that are not spending $60 million but people that are spending lower amounts where they can, instead of only putting it into the stock market in a passive index fund. What are some of the types of businesses that people can imagine become available for sale? Let’s say a business that’s $1 million or $5 million. What types of businesses can the average person who has worked their life has made a decent chunk of change and wants something different than a passive index can buy? What are some of the ranges of businesses that become available?

It’s not always but the larger the business typically the easier it is to run. These businesses should operate on all six Ps. They should have the right people in place and the right industry but remember, businesses that have been out for over ten years are at risk of going out of business because they stopped innovating and marketing. Some of these industries, in that $2 million to $10 million, I don’t know if you want to say easy to own and operate but they are maybe easier than other industries. We sell a lot of dental labs. As long as you have the technicians in place and a management team. We’re closing on one. That’s a good and stable industry. It’s sustainable. It’s not going anywhere. Technology is coming in but you’re still going to need technicians.

The larger the business, the easier it is to run. Share on X

Staffing is always a good industry. It’s always hot and in demand but you got to make sure that they have the right people in place because it can be a difficult and stressful industry and business to operate. I took a lady who was in banking for many years. She was five years away from retirement. She called our office because she wanted to buy a restaurant. Her name is Brenda. I started asking her questions like, “Brenda, why do you want to own a restaurant?” She goes, “I’ve always wanted to own a restaurant.” I said, “Have you ever worked in one?” She said, “No.” I said, “Do you have any family members that have worked in one?” She said, “No.” I said, “What experience do you have?” She says, “None.” I said, “You don’t want to own a restaurant.”

The first thing that we want to do is qualify buyers, especially first-time buyers on not how much money they have but how much they’re willing to spend. Just because you have it doesn’t mean you’re willing to spend it. You got to make sure that they’re willing to pull the trigger. She had about $350,000. She will spend $300,000 to put down on a business and $50,000 for working capital. She was pulling money out of a retirement fund, which you can do to buy a business without paying any taxes or penalties.

I said, “I’m not going to put you in a restaurant. That would be the worst thing I could ever do for you.” She didn’t have an industry in mind. I ended up putting her in a flooring business. She said, “Michelle, I want to make more than what I’m making now. I’ve been in banking for years. I’m making about $120,000 to $150,000. I would like to make around $200,000 to $250,000.”

This business was making over $400,000 a year. It included real estate. I talked to sellers into only taking $300,000 down, which was pretty much unheard of because that was 15% or 20%. They took it and put her in this business. Even after paying debt service to the owners, the owner seller-financed it. They were the bank. She’s making over $350,000 a year. She has expanded the business and is making $500,000 a year now.

That’s the story if people hear it, they think, “That’s motivating,” and then they’re going to like, “What else can Michelle tell me?”

The secret sauce here is finding a good advisor that’s got your best interest in mind. Not just trying to sell you something and make commissions but has your best interest at heart and are going to make the right fit so you’re happy long-term and meet all your criteria as far as what you want to make. SPA would’ve never worked for her for a multitude of reasons but find a business that a seller will seller-finance. Most of our clients, especially those of lower size will agree to seller finance. I can get first-time buyers into businesses with maybe 20% to 30% down.

Interestingly, you mentioned the restaurants. I’ve been binge-watching Gordon Ramsey’s, Kitchen Nightmares and Hotel Hell. I got to tell you how many of these owners were like, “I decided to buy it. I don’t have any experience with it at all.” He shakes his head every time.

He could buy a lot of industries. That’s what sophisticated and serial entrepreneurs do. You can buy a lot of businesses without having any experience but restaurants are not one of them.

Let’s talk about one last issue in our conversation. We’ve briefly mentioned it. We’ve talked about the closing of America and the reasons why Toys R Us collapses and all that fun stuff but COVID is an extra nightmare on top of the lack of innovation and new insights. Speak to COVID from your perspective because it looks like you start to think, “Is America turning the corner?” It then doesn’t look like it. It’s almost like we imagine, we can shut everything down and then turn it on a few years later and it’ll still be there. That’s probably not going to be the case.

Probably not. Several industries are going to have a tough time coming back if they ever come back at all. I’ve seen industries that were not doing well before COVID that are now thriving. Manufacturing is crushing it. We have several manufacturing companies for sale where we have hundreds of buyers that want manufacturing. Manufacturing is crushing it but anything hospitality-wise is getting crushed. Anything with the travel industry, airlines, event space and photographers are having a hard time. Think about who’s involved in hospitality. Those industries are dying but it doesn’t have to be that way.

A lot of these restaurants and hotels, especially restaurants can turn it around. They can pivot. If they think outside the box or throw the box away, there are so many things that they can do to stay in business. They might not do as well as they were before COVID but they can survive. When this is over, they can thrive. I always tell my clients, “You have to pivot. Ask yourself what business you are in.”

I’ll give you a great story. Commander’s Palace is one of the most famous restaurants in all of New Orleans. They ask themselves what business they are in. They’re in the experience business of creating experiences. How can they still create experiences with COVID? What they came up with is wine and cheese tasting. They can do wine and cheese tasting between $150 to $500. They’ll send you a package. Anywhere in the world can join. You’re not going to get their wine and cheese. You’ll go somewhere local.

I went to this wine and cheese Zoom hosting an event and there were about 600, 700 or 800 people there. The majority of them were from New Orleans. They were making money and creating experiences. There was another famous chef that says, “I’m going to send you a package to your house, do a Zoom call with you and do a cooking experience with your family.” There are a lot of different ways that industries and businesses can turn things around, pivot and do things differently. You got to think about the way you used to do business. It’s not the way you should do business anymore.

FYE-GI with Trend Following Podcast | Exit Rich

Exit Rich: There are many ways that industries and businesses can pivot and do things differently. You just have to think about how you used to do business, not how you should do business anymore.

 

There’s a classic book out there called The Experience Economy and it talks about coffee. You got the commodity and then you can buy your base coffee somewhere. That’s the service. You then got the experience, which is ultimately the Starbucks type of thing. You know this more than me. People will ultimately pay almost anything for an experience that transforms them.

That’s why retail is dying. There are so many businesses like Toys R Us never created an experience. It is a chore to go to Toys R Us. It is a nightmare, especially during the holidays. You got to fight the crowds. Nobody in there knows what they’re doing. Nobody can help you. It’s not an experience. It is a nightmare. A lot of these retailers have created nightmares, not experiences and that’s the issue.

The funny thing about that is that Amazon is not creating the experience. The opportunity for an experience is still there except for getting the product fast. It’s an efficient experience.

What Amazon has done is made it easy for the consumer to buy what they need and want. That’s what’s great. One thing that did come good out of COVID, especially for my household is we don’t have to go to the grocery store anymore. We can get everything delivered to our doorstep. That’s awesome because I hate going to the grocery store. Toys R Us is opening back up with five locations. They’re going to be much smaller boutique stores providing experiences. That’s what retailers are going to have to start doing. If not, you’re going to see more retailers drop like flies.

Interesting story, life and business that you are in the middle of. Once I get you rolling, I could probably pick your mind for hours. I could take you down to stores but you could probably only tell me so much because you do have these confidentialities and NDAs. You can only tell me so many cool stories about all these interesting people that you’ve met behind the scenes, buyers and sellers. I can only imagine.

I can tell you great stories about what not to do and how not to mess up your business. I’ve seen it all.

What’s the biggest thing people do to mess up their business and the sale? What are the top 1 or 2 things that people do?

Let me give you a story. Remember, I talked about a $30 million staffing company. One thing the owner told me during the process was, “Michelle, everything’s in a trust. I’m untouchable. Nobody can touch me.” My skin crawled when someone tells me that because I’m like, “Why are you telling me that?” It’s throughout the process of selling his business.

We had over 250 staffing agencies and hundreds of buyers. We could have sold this business for over $30 million. He decides to leave his wife and marry his high school sweetheart. He’s already married which is illegal. They then have a catastrophic injury that occurs because they’re industrial staffing and an employee loses a limb. Right before Christmas, he falsifies information on workers comp reports.

While he’s trying to sell this?

Correct. They lose worker comp insurance. The business started trending down very quickly. They went from $3 million in EBITDA down to hardly anything. They ended up in bankruptcy court. I ended up selling the business for $1.2 million in bankruptcy court as a stalking horse for my buyer who was going to pay millions for it.

I can think and I’m sure the audience can think of in their minds how they would describe the behavior of that particular person. How would you describe the behavior? Is it ignorance, stupidity, cavalier or overconfident?

He’s a narcissist. He thought he was untouchable. He didn’t care about any of the employees. Everybody lost their jobs. He didn’t care about any of his clients. He’s in bankruptcy court being grilled by his wife’s attorney. Luckily, I was still able to sell it to pay off most of the debt, not all the debt but that’s probably the worst I’ve seen. I’ve seen all kinds of crazy stuff that owners do that mess up their business. It’s not ignorance. It’s narcissism. A lot of them think they’re untouchable.

They get too cocky. They think they’re untouchable and then something breaks or goes away.

The biggest mistake that business owners make is not planning their exit. That’s number one. Business owners don’t think about their exit until a catastrophic event has occurred, internal or external like COVID, health issues, divorce or partner disputes. You should be thinking about your exit from day one and building a sellable business. Most businesses don’t sell because they’re not sellable and they’re certainly not sellable for the price tag that the owner wants.

FYE-GI with Trend Following Podcast | Exit Rich

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

That is some of the detail that people are going to have to check out in your book because you do get into the nitty gritty of this whole process. It’s cradle to grave. We can only touch on some highlights and stuff of the book Exit Rich: The 6 P Method to Sell Your Business for Huge Profit. Michelle, cool stuff. It’s a fun conversation. I hope you enjoyed yourself.

I did. I would love to come back on and go into greater detail. Also, everybody can get the book at ExitRichBook.com where we’re providing extra value for presales.

The main website where people can go is ExitRichBook.com. Hopefully, when I can make it back to the country and all this COVID stuff is over, I have to come through New Orleans and let me buy you lunch. You tell me where to go and I get to buy.

You buy lunch and I’ll buy dinner.

Sounds like a good deal.

My favorite restaurant is Emeril’s Lagasse’s Restaurant.

I made the open-ended offer so that I’m like, “Whatever it gets handed, I’m there with the bills.” Michelle, thank you for coming on. I appreciate it.

Thank you for having me.

 

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