Does the thought of buying or selling a business make you feel uncomfortable or overwhelmed?
Well, what if I told you that as scary as it may sound, there are people out there who will guide you and give you the necessary tools and resources, all the while setting you up for success?
Michelle Seiler Tucker is the leading authority on buying, selling, and improving businesses, as well as increasing a business’ revenue streams.
Over the past decade, she has sold several hundred businesses and franchises and continues to help buyers from all walks of life buy the American Dream, create financial freedom, be their own boss, and obtain a better quality of life.
Michelle’s mission is to always deliver more than is expected. She sees opportunities where many are discouraged or have given up by identifying and correcting the top mistakes business owners make.
Today, Michelle is the founder and CEO of Seiler Tucker Incorporated, is the author of Sell Your Business for More Than It’s Worth, Think & Grow Rich Today, and the soon-to-be-released book: Exit Rich. She is passionate about sharing her considerable knowledge and experience with others through her mentoring, training, and partnering programs.
In this episode of the Rock Your Money, Rock Your Life, Michelle and I discuss how you can take your business from a 5x to a 10x valuation, why you can only grow a business as much as you can grow the owner, and why your lack of profits are never the problem, but the symptom of a bigger issue.
Listen to the podcast here
Exit Rich: How To Buy & Sell Businesses With Michelle Seiler Tucker
Before we get started, I wanted to remind you that if you want more out of life, there is another way. What if there was a way you didn’t know about, whether you are lacking momentum in your business, getting the same results in your near out, you don’t have a supportive environment where people aren’t encouraging you to live your dream or you are tired of not living into your gifts? You are doing something that’s unfulfilling but you want a life that excites you. I know I can help. All you have to do is get on a call with somebody from my team that’s going to help you understand the strategies and tactics of success. Go to RockThomas.com/vipcall. We are going to help you rock your money and your life. What are you waiting for? Go ahead to the website. Let’s get started.
I have been doing this for a while but I feel like I’m getting these guests that are fascinating. They are also incredibly talented and skilled. They are bringing huge value to the show. The reason is this. If you are going to have an epic life, would you agree with me that winning the money game is important and that talking to people that are good at that segment of their life is important? People that are passionate.
Michelle Seiler Tucker is the Founder and CEO of Seiler Tucker Incorporated. She holds the M&AMI or Mergers and Acquisition Master Intermediary title as well as a certified mergers and acquisitions professional. She is also a certified senior business analyst. Michelle also owns as many other businesses as I do. When she works with people, she sees these opportunities to partner with them and helps scale their businesses. We hit it off in that regard. We have a lot of synergies.
As a twenty-year-old veteran in the M&A industry, she is regarded as the leading authority on buying, selling, fixing, and growing businesses. If that’s something that you have not taken a dive into, you are going to love this conversation. Normally, I go for 20 to 25 minutes but this one went way over because she was dropping bombs.
She’s got a new book coming out that is going to be off-the-rails epic and has got all these bonuses that go with that are cool. She and her firm have sold over 1,000 businesses in almost every vertical and have a remarkable track record of success. Her passion is saving America’s economy one small business at a time from going out of business.
One of her favorite quotes is to say, “It’s hard to read the label from the inside of a bottle. Sometimes, you need an outsider’s perspective to read the address and the label warnings that are prevalent in your business.” I like to say to people that the level of thinking that got you where you are isn’t going to get you to where you want to go. Therefore, having somebody else’s perspective helps you do a better job of making the right choices to succeed.
She is going to take you through the six Ps in her book, Exit Rich. You are going to find it massively valuable if you are a small operator. If you are thinking of becoming an entrepreneur or running a business and you want to scale that and grow that, you are going to want to get this book. This is one of my most enjoyable conversations with her from all my episodes, from the sense that when it comes to this particular field, you can tell she’s rich in the understanding of it. Let’s get to my conversation with Michelle.
We have the Founder and CEO of Seiler Tucker Incorporated, Michelle, with us. Michelle, it is an honor having you. I know you are super busy. To have you for a short time here to chit-chat about business, how to get into business, and how to be successful in business is a pleasure. Thanks for joining me.
You are welcome. Thanks for having me.
How did you get into mergers and acquisitions? I always joked with a buddy of mine that it would be a great place to go because it sounds so sexy and involved. Tell me a little bit about how you got into that.
It sounds sexy but there’s nothing sexy about it. Everybody thinks it’s sexy. I have always been an entrepreneur. I’ve always owned many different businesses. I also got stuck in Corporate America working for Xerox but then I left Xerox. I transitioned into franchise sales, franchise development, and consulting. My buyers kept asking me, “Do you have an existing business?” I said, “No. I only have franchises.”
I was also partners with a franchisor and area developers of many different states. I said, “I only have new franchisees.” I kept saying, “No,” and I don’t like to say no. I like to say yes. I said, “Why don’t I start an M&A firm? How hard can it be? How much harder can it be to solve existing businesses as it is franchises?” That’s how I started my mergers and acquisitions firm.
I have two questions for you there. First of all, which franchises did you sell? Secondly, I want to talk about what was the avatar or the type of person that wanted to buy a system.
I’ve sold so many franchises. I probably can’t even begin to tell you. That’s from Subway to Quiznos to Baskin Robbins to bigger ones to some franchisors who I’ve got to remain silent about because it’s still proprietary. I was a partner with one franchisor, which I would rather not disclose because I ended up having him buy me out when he didn’t want me to because I realized very quickly that our values did not align.
What kind of person is buying a franchise? Is it somebody that wants a proven system? Is it somebody that has capital? They are bored. Give us a couple of archetypes.
For a brand new franchise or even an existing franchise, it’s typically somebody leaving Corporate America. It’s somebody that’s not an entrepreneur, wants a cookie-cutter formula, and wants training systems. That’s typically your buyer of a franchise. It’s also an attorney or a doctor. It’s somebody that’s looking for additional revenue streams. That’s a big mistake.
I’ve had so many attorneys and doctor friends of mine call me and say, “I bought this smoothie franchise or ice cream franchise, and employees are not showing up. Everybody is stealing from me. Now, I have to leave my law practice to run this franchise.” My advice is always don’t do that. If you are a lawyer or a doctor, align with yourself so you can help them add congruent passive revenue streams versus going and buying a franchise where you are dependent upon people.
This show was created because I feel like 95% of people don’t get the money game right. They trade time for money. As you pointed out, you get somebody that has money like doctors, lawyers, etc. They think that they can run this business on this side very easily but don’t understand the skillset required to operate a business. They need to do hiring, training, discovering talent, motivating, inspiring, running meetings, holding people accountable, and reading financial statements. Could you describe to me somebody that’s good at doing something like that? What are some of the things that they bring to the table?
Entrepreneurs like to think that they are good at all that stuff. Everything that you mentioned, they are good at maybe some of that but are not always good at all of that. I always work with my clients based upon what I call the six Ps that I refer to in my book, Exit Rich. We work with an owner to identify their strengths and hire their weaknesses.
The first P in the six Ps is People. Hire the right people. Have the right people in the right positions and ask the who question. “Who does marketing, accounting, legal, manufacturing, transportation, logistics, etc.?” The bottom line is that you should never be next to the who. I work with my clients to focus on their strengths, hire their weaknesses, and create a business that works for them rather than working for them.
A lot of young entrepreneurs wear all hats.
Even the old entrepreneurs.
They have trouble training, so they end up hiring the wrong people. They are taking the job back and developing a negative attitude that nobody can do it like them.
All of that is true.
Would you like to go maybe through the six Ps? That might be valuable for the audience.
Sure. The first P we talked about is People. Steve Forbes says that 80% of businesses won’t sell. 8 out of 10 businesses don’t sell. The number one reason for that is that business owners haven’t planned their exit. They don’t think about selling until a catastrophic event occurs, whether that’s health issues, divorce, partner disputes, death or COVID. That’s the worst time to sell your company because that’s when your business is typically turning down, not up.The number one reason why eight out of ten businesses don't sell is that business owners haven't planned for an exit. They don't think about selling until a catastrophic event occurs. Click To Tweet
We work with our clients to develop what I call the GPS Exit Model, which we talk about extensively in Exit Rich. Once we get them to plan that GPS Exit Model, then we work with them to build the six Ps. The number one P is People. The second reason that businesses don’t sell is that the business is 1,000% dependent upon the owner.
I had a dentist that came to me a couple of months ago. He wants to sell his dental practice. He has been in business for 45 years. He has 1 dentist and 3 hygienists. I said, “We can sell your business but we are going to tie the price. The price is going to be attached to you staying for at least 2 to 3 years.” He said, “I’m not staying. I’m tired. I’m burned out.” I’m like, “Too bad. When you leave, the patients leave. If you are not willing to stay, there’s nothing to sell.”
People are number one. Number two is Product. Product is your industry or your service. You got to ask yourself, “Is my industry product on the way up or on the way out? Is it thriving or dying? Do I have an Amazon or a Blockbuster?” Unfortunately, many industries that were thriving are dying because of the pandemic, and then vice versa. Even if you are in a dying industry, that doesn’t mean you pack up, go home, and curl up into a fetal position. That means that you got to align yourself with an expert, whether it be Rock or me.
Ask those transformational questions. Amazon did this back in the ‘90s. Amazon asked themselves, “What business are we in?” They said, “We are in a book-selling business.” They then asked themselves, “What did we do well better than anybody else?” They said, “We do fulfillment well.” The thorough question and the most obvious question is, “What business should we be in?” Amazon said, “We should be in the fulfillment business.”
Those three transformational questions are what transformed Amazon from a small bookseller to the multibillion-dollar worldwide conglomerate that they are now. Business owners have to get out of their transactional and start becoming transformational. That’s why they need to work on their business instead of in their business because only when you are transformational is when you can see true growth.
Keep on going. This is awesome stuff.
The third P is Processes. Processes are an exit strategy. Most business owners don’t think about an exit strategy or processes until something bad happens. We are selling a manufacturing plant and one of the employees got hurt on the floor. It’s a catastrophic event. There are lawsuits piling up. He’s probably going to end up filing bankruptcy, and it’s not going to be sellable. He said, “We need a health and safety process.” I go, “You think? You needed that before this happened.” Processes need to be designed from day one of buying or starting a business. Most business owners get this wrong.
Most business owners design their processes around their own agenda, not around the customer experience. I will give you an example of chiropractors. I’m not picking on chiropractors. My husband is a chiropractor. Chiropractors’ schedules are like this on Monday, Wednesday, and Friday, they are open from 9:00 to 11:00. They are closed from 11:00 to 2:30, then they are back from 3:00 to 5:00. On Tuesdays, it’s this and that. Nobody can keep up because they didn’t design their processes or their hours around the customer experience. They designed it around their own agenda. There’s McDonald’s back in the ‘40s. Did you ever watch the movie The Founder?
It’s a great movie. Back in the ‘40s or ‘50s, remember, they had all the sonic-type drive-ups. McDonald’s said, “We want to improve fast food. We want to design processes around a customer experience. We want our customers to get great tasting food that’s hot fast.” They went to the tennis courts. Do you remember that?
They took the place to the tennis courts and drew out the processes with chalk. They kept bumping into each other. It took them all day to figure out who was going to take the order, who was going to toast the buns, and who was going to cook the burgers. You can eat at a McDonald’s anywhere in the world and get the exact same experience. They never said it was going to be healthy. They never said it was going to be organic. That’s what business owners need to do. Have you ever dealt with a business where you had to talk to 5, 6 or 7 different people to get your problem resolved where you were like, “I will never do business with them again?”
Business owners need to get this right. They got to design the processes around the customer experience. If you get this wrong and you are not creating what I call wow experiences for your clients, your competitors will. Your processes should be efficient, productive, and most importantly, well-documented. We are selling a business in the $50 million range.
Their processes and policy procedure manuals are so outdated. You want to make sure they are updated. You want to make sure you have SOP checklists, employee handbooks, non-competes, and employee contracts. You got to paper everything. You got to get all that data out of the business owner’s head into the processes, CRM, different software, etc.
I work a lot with entrepreneurs and people that are small little business where they’ve got 1, 2 or 3 people working with them. They are still wearing a lot of hats. They haven’t documented anything. They want to scale. They think they are ready. We have a conversation around everything you are talking about, and they are resisting it. They don’t value it the way you are talking about it.
Help me because I struggle with communicating that to people. I explain it like this. Tell me if it resonates with you. I’m like, “You are still the director of sales. You are still out there doing sales. I got that. You are still HR and hiring people. I get that. There’s a thing called the CEO hat. You are not wearing that hat. You are not coming out and working on the processes because you are so much in the weeds. You’ve got to spend 5 hours to 10 hours a week building those systems and documenting things,” but they keep on putting it off. How do you handle that?
Have you ever watched The Profit with Marcus Lemonis?
I have not, but I’m going to put it on my list.
You should watch that. Marcus Lemonis always butts heads with the owners. It’s what you said. He tells them what to do and what they should be doing. He tells them that they should be the CEO, that they shouldn’t be doing this and that they should be doing that. They are always butting heads with him. They never listen to him. I’ve had the same problem sometimes.
I partner with business owners. I don’t just sell businesses. I invest money, time, and energy. There are a couple of things here but what I found throughout the years is that you can only grow the business as much as you can grow the owner. You have to grow the owner. That can be through different courses or podcasts. It’s like Bob Proctor listening to different experts, etc. That can be books you read. You will never grow the business beyond what you can grow the owner. That’s number one.You can only grow the business as much as you can grow the owner. Click To Tweet
Number two, entrepreneurs are probably the worst process people ever. I don’t think they should be the ones doing processes. Focus on their strengths. If their strength is sales, let them sell. They have to be that CEO. At some point, they are going to have to get out of sales but I don’t think their strength is processes. Get an integrator. The owner is the CEO. That’s the visionary, whereas you need an integrator to integrate the processes and integrate it in each department and hold everybody accountable. I never think the owner is the best person for that in most cases.
I agree 100%. A lot of times, they are not ready to scale. They are still thinking about the small budget and want to save versus adding talent that can help them scale and expand the vision. I agree with that. What’s the next P?
This is the highest multiple. This is the highest value driver. This can take you from 5X to 7X, 8X or 10X. Let me give you a crash course quickly on evaluations. I’m not going to get deep into evaluations. Businesses under $1 million in EBITDA, meaning Earnings Before Interest, Taxes, Depreciation, and Amortization, typically trade between anywhere from 2 to 4. Businesses over $1 million in EBITDA typically trade for five and up.
Number 1) The goal is to get your EBITDA to over $1 million. Number 2) Build these proprietary assets. There are six pillars in proprietary. The other two Ps are quick, so this takes me a little bit longer. Number one is branding. The more well-branded you are, the more I can sell your business for as long as your brand is relevant in the minds of the consumers. Is anybody paying any money for Blockbuster? No. The most valuable brand in the world, do you know what that is?The more well-branded you are, the more you can sell your business for as long as your brand is relevant in the mind of the consumers. Click To Tweet
Is it Nike, Coca-Cola, McDonald’s or Apple?
Apple is the most valuable brand of all. Apple is worth $249 billion. That’s without cashflow, real estate, account receivables, and inventory. When you build your brand, you build the value of your exit. Trademarks are huge but you got to make sure that you get the right trademarks. Let me explain. You are in Arizona. Somebody sets up a business in Arizona. They go to the State of Arizona. They get a trademark for their company name but never check the Federal database.
You can be in business for 5, 6, 7 or 10 years and, all of a sudden, receive a cease and desist letter in the mountain that you got to stop using that company name. You can hire an attorney. You can throw a bunch of money at it but you will probably lose. Go and spend the $1,500 to $2,000 and protect your company name or your podcast.
Your podcast should also have a Federal trademark. That’s for anything that’s your USP or Unique Selling Proposition. I have the ST 6 Ps and ST GPS Exit Model. I’m selling a couple of companies that have exclusive products that have Federal trademarks for their products, and each grocery store chain has that exclusive product. Buyers will pay more money for proprietary. They will pay more money for those trademarks. They will pay more money for those relationships with those grocery stores.
There are also patents. If you’ve ever watched Shark Tank, every single investor always asks the same question. They are like, “Do you have a patent on that? Do you have a patent pending? Do you have your utility patent?” Many times, they will say, “I will give you an offer contingent upon the patent.” There are also contracts, whether that’s manufacturing contracts, distribution contracts, vendor contracts, or exclusive contracts. Those are for franchisors that have franchisees. Client contracts are the most valuable, especially the ones that have reoccurring revenue or a subscription model.
Here’s the caveat to contracts. 99.9% of all sales are asset sales, not stock sales. Most business owners don’t have the two-sentence transferability clause. I once had a franchisor sell. I didn’t handle the sell because if I did, this would’ve never happened. The franchisor sold to a private equity group. The private equity group did their due diligence. They had 1,500 franchisees.
They never ever looked at the contracts to make sure they were transferable. Only 2 out of 1,500 transferred because they didn’t like the private equity group. They didn’t like the people. They ended up going out of business and filing for bankruptcy. They sued the entire legal team. You’ve got to have that two-sentence transferability clause because if your clients are like those franchisees, we are not going to sign consent to transfer. They weren’t signing new franchise agreements. That is very important.
Databases are huge. You can be losing money and sell your business if you have a database. Facebook paid $19 billion for WhatsApp. WhatsApp was hemorrhaging. They weren’t just losing money. They were hemorrhaging but they had a synergy. Buyers buy synergies. There are five different types of buyers. They had a billion users, and that’s what Facebook was willing to pay $19 billion for because they knew they could ROI and monetize.
Celebrity endorsements are big. We’ve got a client that has Oprah endorsing her products. A competitor strategic will buy that in New York second because they want to get their products in front of Oprah. Radio personalities are endorsing your skincare line or your diet or supplement company. They can only endorse one vertical at a time because otherwise, they lose credibility. It’s hard to get those online positions because we sell a lot of eCommerce businesses. If you got a number one position that is in the top three spots on Wayfair, Amazon,or Etsy, these are all that we call intellectual property assets that drive value and will get you a much higher multiple.
You know your stuff.
The fifth P is Patrons. This is your customer database. Most business owners follow the 80/20 Rule, where 80% of their business comes from 20% of their clients. That’s an issue because if you lose a few clients, you are in big trouble. It doesn’t mean that it’s not sellable because we sold an oil manufacturing company that was appraised at $9.8 million. Sixty-five percent of their revenue was tied to a BP contract.
I have 550 buyers and narrowed it down to 12 ROIs. They were all concerned about customer concentration. I find one strategic that has similar products and services. He said, “I’m not concerned at all,” because he wanted to get his products and services into BP. He has never been able to get his foot in the door. He paid $15 million for 70% of the company, which was 126% more than what the business appraised for.
The last P is Profits, which is what all of us care about. The reason I put profits last is that lack of profits is never the problem. If you are not making money, that’s not your problem. Your problem is that you are not operating on 1 of the other 5 Ps. Lack of profits is never the problem. It’s the symptom of not operating 1 of the other 5 Ps. Clients come to me all the time and say, “Michelle, I have a profit problem.” I’m like, “You have a people problem or a process problem.”
Why is it that many smaller operators at least are not that vigilant with their numbers? They will talk like, “I did $1 million last year.” I will say to them, “That’s awesome. What’s your net?” They will go, “I don’t know.” Have you ever heard of that before?
That’s not just small companies, either. That’s middle-sized companies, too. The reason for that is that they are running it as a small business. I have a company that’s $50 million. We will sell it for between $50 million to $60 million. They don’t know their numbers. Business owners are so used to living out of their business and running everything through their business that they have no idea what they are making. I always tell clients, “If you are going to do that, that’s fine because I normalize the financials and will add all that back. I will add back everything but cash. If you are running cash through a business, that’s on you. You are not going to get paid for that cash because that’s not legal.”
What business owners need to do is keep a spreadsheet. Every month, they need to have a detailed spreadsheet of their cars, insurance, meals, travel, entertainment, and all of this stuff. They need to do it by month, categorize it, and then have the final total per year. we’ve done thousands of evaluations. We’ve sold over 1,000 companies. The problem is that when we go to do an evaluation, we don’t have a crystal ball.
I can’t tell you what you are running through your business. Business owners forget. I’m dealing with this medical company. They send us all their bank statements and tell us to go through their bank statements. I’m like, “I can go through your bank statements and still not tell you everything that’s personal. That’s your job.” If you are going to run personals through your business, document it.
There’s another thing that people do. Tell me if this rings true for you. Let’s say they do $1 million, and then they tell you, “I make about $250,000.” You are like, “That’s good. There will be a three-time multiple in value. That’s approximately $750,000.”
It depends upon the synergies. It could be more. Remember, the multiple is dependent upon where your EBITDA is and what synergies you have.
You dig a little further and find out that their mother helps out in the business, and they don’t pay her. The wife works part-time and does some accounting and some paperwork but they don’t pay her. They don’t take a salary, and they are working. I go, “If I buy your business, who’s going to do all that work?” They go, “That’s not my problem.” I go, “I’ve got to hire three people, and it’s going to cost me $220,000 to hire those people. Now, your profit is $30,000, which means your business is worth nothing.” Have you ever seen that before?
I see that all the time. The way we would look at that is if you are the owner and getting $250,000 through distributions, then the buyer would have to be a hands-on owner-operator because then, they can get that $250,000. For any other buyer, we would have to add back everything.
The hands-on purchaser needs to understand that they are buying a job. They are not buying a business.
We tell them that. There are five different types of buyers. We are selling most of our businesses to PEGs, which are private equity firms, strategic competitors, and serial entrepreneurs. Those are the three types. They are not going to buy a job, so they would never even consider that business. That would have to be a first-time buyer that’s looking to leave Corporate America and buy a job because they feel it’s better than where they are. They have no idea that they are doing everything and re-doing everything.
They think that they are going to be having a lot of freedom, and then they realize that they are free to work all the time.
I see stuff like that all the time. The other thing that I see is a business owner will come to me and say, “I want $10 million for my business. It’s worth $10 million.” I’m like, “How did you come up with $10 million? Your EBITDA is $100,000.” It’s because that’s what they need to retire. That’s what they need to send five girls through college and pay for their weddings. That’s what they need to buy their next business or to get out of debt because they are upside down in debt. We have been doing evaluations for over twenty years, and I pretty much have seen it all. I’ve had people bring me shoe boxes and stuff. It’s crazy.
I run a few real estate offices. I used to be in real estate sales. Sometimes, I would sell a property, and people would go, “I need $560,000.” I go, “It’s only worth $450,000. Why do you need $560,000?” They are like, “I’m moving to San Francisco. Homes are more expensive there. That’s what I need.” I’m like, “Why don’t you move to Hawaii? They were even more expensive. We will sell your house for $750,000.” It doesn’t make sense.
We have a whole chapter in Exit Rich dedicated to mindset. It’s what I call this Seller Sanity Check because we sit down with our sellers and help them get real. It’s not about what you need. It’s about what the value brings to the buyer. We go through all these processes with our clients because they never treat their business as a real asset. They are so close to their business because they think of it as their child or as their baby. They are never building it to sell. When they are ready, it’s all about what they need to enter the next phase of their life, not what the business is worth.
I’m going to read Exit Rich. I haven’t yet, but I love everything you’ve said so far. What’s the best way for people to get hold of this book or get more of you?
Are you in Scottsdale?
You should have my co-author Sharon Lechter on your show. She’s in Scottsdale but she’s in Arizona. Sharon is my co-author. She is also the co-author of, Rich Dad Poor Dad with Robert Kiyosaki, who is also in Arizona. Plus, she’s written several books for the Think and Grow Rich, Napoleon Hill Foundation. She also is a CPA, financial literacy expert, and advisor to many different presidents. She writes the mentor’s corner after each one of our chapters.
Plus, we have been endorsed by Steve Forbes. Kevin Harrington, the original Shark on Shark Tank, wrote the foreword for us. People can get their hands on Exit Rich at ExitRichBook.com. The book comes out in June. The actual launch date is in June 2022. However, you don’t have to wait until June 2022. If you go to that website and pay $24.79, which includes shipping in the United States, we will email you the digital download. Plus, we will send the hard cover to your doorstep upon the launch date. We will give you a lifetime membership into the Exit Rich Book Club where there’s all this video training.
If you like what you are reading here on the show, there’s more of this plus documents. Those are documents to run your business and documents to sell your business. We have sample employment agreements, employee handbooks, organizational charts, a sample letter of intent, purchase agreements, closing docs, due diligence, and checklists. Everything you need to run and sell your business is there not just for your review but for your download, too.
If you went to an attorney to try to recreate all this, it would cost you over $30,000. We are also giving a 30-day membership into Club CEOs, which is a mastermind where we ask those transformational questions and help business owners build a sustainable, scalable business for when they are ready to have a sellable asset. All of that is for $24.79 at Exit Rich Book Club.
That’s crazy stuff. I don’t like what you are saying. I love what you are saying.
Your audience can also text Michelle at (888) 526-5750. All of my social media pops up there. Go ahead and follow me. Connect with me on LinkedIn. Our websites pop up. Our main website is SeilerTucker.com.
I had Robert Herjavec from Shark Tank on my podcast. I’ve shared the stage with Robert Kiyosaki here in Arizona for a charity event. It started with me inviting him to one of my events. After we had dinner, we became friends but I have not met Sharon Lechter yet. I’ve listened to her a little bit on Clubhouse. I know of her. She’s the one that helped bring out, Outwitting the Devil, right?
Yeah. She wrote several books for the Napoleon Hill Foundation. Outwitting the Devil is one of them. She has several books.
The two of you are like, “Whoa.”
You can have both of us on your podcast at once. That would rock your world.
I would love to get her on the show. Maybe you can assist with that at some point in time.
We will make an introduction.
I have another question for you. There are a lot of people that are these entrepreneurs that want to grow. You being in that field of mergers and acquisitions and scaling in all of that, what are some of the models that you can use when you bring in an experienced individual into a company, and they help grow the company? They might get equity. They might get a play of that over a period. Can you speak to that a little bit?
What are some of the models if you are looking to go in and consult or partner with a business owner? Is that what you are asking me?
Yeah. It’s a little Shark Tank-ish. You get a piece of the action but you bring value. You bring connections, network experience, systems, and models to a young entrepreneur and then take 20% of the equity or what you have. You don’t invest but you bring experience.
There are all different kinds of models out there. You’ve heard them all on Shark Tank. You heard Mr. Wonderful. He likes to have a license and arrangement. You’ve heard Barbara Corcoran and how she likes to structure deals. I don’t like to trade time for dollars like you don’t like to trade time for dollars. I’m not big into, “Pay me to consult you,” but I am big into partnering and partnering with a business owner. I take equity. It depends on how much equity I take because it depends upon the business. It depends on how much time, energy, and effort I have to put into it. Do I have to invest any money? All of that comes into play.
Also, sometimes, I don’t take anything from the existing business. I partnered with a graphics business. They called me to sell them. Their graphics company specializes in vehicle reps for first responders. They were operating out of 3 of the 6 Ps. They had no people, processes or proprietary. They were working on the garage. They were husband and wife with one employee. I did invest money. I took them out of that office, moved them into a real office of 6,000 square feet, and hired 20 to 25 people. I also got them a COO and took equity in that business.
However, I let them keep everything from the existing business and we started a new company because I thought that was fair. I thought that was the right thing to do. I let them keep all the money from that. We started a new co where we became equal partners. That’s how I structured that deal. I might not do it that way. Many different things come into play but that’s one of the ways you can do it.
Whatever they had existing up until that time, you invested and partook in the upside scaling.
I invested in a new company, the new co, and I let them keep everything from the old company. In that way, it’s clean going forward. We don’t have any debt. We don’t have any liability. There are no tax issues. That’s what we did on that particular business. There have been other situations where I’ve taken 20% or 15%. Sometimes, even in lieu of commissions when I sell a business, I might work with a buyer and take equity because the buyer was like, “I like you. I want you to be a partner in my company.” As long as it’s okay with the seller and we are transparent, I’ve also done deals like that. I don’t like being a partner without being a managing member. That’s one of my stipulations. Never say never but that is one of my stipulations.
Do you like to be a managing member?
Yeah, because if we butt heads, I want to be able to have the final say so I make the final decision. That’s what Marcus Lemonis always requires, too. I’m like, “What I say goes. We might be 50/50 but I’m the managing member.”
How do you get a small operator to come around on that? Is it credibility?
It’s credibility. It’s what you bring to the table. Some will, and some won’t. Maybe walk away from the ones that won’t or decide what’s important to you. I have a list of my negotiables and my non-negotiables. It’s like selling a business. You got your list of negotiables and non-negotiables. You got to figure out what’s important to you.
We only have so much time in a day. You got to look at what you have time for. Can you add value? Do you have the time? Do you have the energy? How big can you get this? My big thing is that I’m not going to partner with a business owner if they are not going to agree to exit within 3 to 5 years or 3 to 7 years. I don’t want to stay in it.
Are you able to get them to understand that you are going to come in and you are going to look, operate, and see what’s happening, but then you may delegate a lot of the execution to your team?
Absolutely. I’m not going to run the business for you. I’m not doing that. I help hire a COO and help get an integrator but I’m not running a business. I am on weekly phone calls. I sit in board meetings. I have my team at my M&A firm participate and do different things. It depends on what that company needs, but I’m not going to be there physically. I own businesses in different states. This graphics business is in Texas.
I’m going to wrap up. I’ve taken you much longer than I thought because this has been juicy and great. Thank you so much. How important is it for you to have a great team around you, the people parts like great accountants, lawyers, and all of that so that once you see the vision, you can trust them to execute?
It’s everything. There’s no I in a team. You can’t do everything by yourself. It’s not an island. You don’t build a business. You build people, and people build a business. It’s important, especially in transactions. I’ve got great teams of accountants, attorneys, and even financial advisors who help our clients defer taxes and trust programs. I couldn’t do any of those deals without those partners. It would be impossible.You don't build a business. You build people, and people build a business. Click To Tweet
I always like to make sure I have my team onboard because attorneys can kill deals, in case you didn’t know that. I like to have deal makers, not deal breakers, on my team. Plus, I have a team of analysts, brokers, and assistants. There’s no way I could get done what I do if I didn’t have the best team around me. I’m always working on that. I’m always improving that. I’m always hiring more people.
This has been a sensational session on Rock Your Money, Rock Your Life.
Rock your business and exit rich.
The key is don’t go in until you know when and how you are going to go out. That is probably something you teach.
I teach about the whole exit strategy and how you should figure out your end game from day one of starting.
Michelle, what an honor. What a pleasure. Thank you so much. We are going to have you back. The last thing is with COVID here, what are some of the 1, 2 or 3 things that you think are opportunities coming up and things that people should stop being involved in? Things they should stop participating in and move away from. It’s things they should stop hanging onto and trying to say, “This is the way it used to be, and I want to continue to operate that.”
Before I wrote Exit Rich, I wrote, Sell Your Business For More Than It’s Worth in 2013. Back then, it used to be that 95% of startups will go out of business. When I wrote Exit Rich in 2019 and 2020, I did the exact same research. You are probably not going to believe this but the business landscape has flip-flopped even before COVID. It’s only 30% of startups will go out of business but out of 27.6 million companies, those businesses that have been in business for ten years or longer, 70% of them will go out of business. The number one reason for that is lack of aim.
Business owners stopped doing what I call innovating and marketing. You always have to innovate and market. AIM means Always Innovate and Market. What do you let go of? You let go of what’s not working. It’s back to, “What business am I in? What do we do well? What business should I be in?” You got to pivot and let go of the things that don’t work for you.
The reason that 70% of businesses are going out of business is that they are stuck in their old ways. They want to keep doing things the way they’ve always done them. You are either growing or dying. There’s no in-between. You got to let go of the way you’ve always done it and figure out new ways. You got to innovate and pivot. Otherwise, you are going to go out of business. You are going to become a statistic, and I hate to say that for any business owner.
Thank you so much for spending this quality time with us for our audience. What a treasure chest of information. Make sure that you get her book, Exit Rich and everything that Michelle mentioned that comes with it for $25. That’s an absolute deal. It’s sensational.
That’s like two meals at McDonald’s. You can afford it.
It will be the best money you spend if you are an entrepreneur, guaranteed. Thank you so much.
Thank you. Thanks for having me. It has been an absolute pleasure to be with you. We rocked it.
We rocked it out of the house again. Thank you so much.
You are tuning to a session of Rock Your Money, Rock Your Life. We will see you in the next episode.
- Exit Rich
- GPS Exit Model
- Rich Dad Poor Dad
- Think and Grow Rich
- Club CEOs
- LinkedIn – Michelle Seiler Tucker
- Robert Herjavec – Rock Your Money, Rock Your Life Past Episode
- Outwitting the Devil
- Sell Your Business for More Than It’s Worth
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