Why do some companies fail while others succeed? What makes Amazon such a big winner while other, longer-established companies have now gone out of business or struggle to stay afloat? And how can we build our own business to the point where we can successfully sell it off for vast sums of money down the line?
My guest today is an utterly fascinating lady who shares insights that answer all of the above questions. As a seller of over 500 companies, Michelle Seiler Tucker is an expert at buying, selling, and fixing companies, and getting them on the buyer’s market. In fact, she has a reputation for selling businesses for way more than they’re worth (and has even written the book on it).
During our interview, she has so much great information to offer about every consideration for making a business attractive to potential buyers, and thus, sellable. She especially emphasizes being clear on when you want to sell your company, even when you’re just getting started as an entrepreneur. Listen as Michelle walks through her GPS Exit Model and 6P Method, pinpointing all the things that’ll make a difference in the growth and evaluation of your business.
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How To Exit Your Business Rich With Michelle Seiler Tucker
Our guest is a fascinating lady. She is called Michelle Seiler Tucker. She is an expert at mergers, buying and selling companies, fixing companies, and getting them on the market. She is quite something else. You’d understand what I mean by that when you listen to her. During the interview, she gives so much great information about the things that you need to focus on in order to build a business that you can sell.
She would be strong in the fact that you should be clear about when you want to sell it, what stage you want to sell it, and even at the time that you’re starting the business. She’s clear about all the different things. She’s got processes and models that she talks about during the interview. She does focus on the things that are going to make a difference to both selling a business primarily that we’re talking about and also understanding who might be the buyers that you should be targeting to sell your business to as you go forward.
There is a lot of content and great tips. There is a great offer on her book as well. Not only on the book but also on what she sells or gives away for free with the book, which is a bundle load of valuable information and documentation to run your business and also to set you up to sell your business. I encourage you to sit back and listen to Michelle. She is so clear, concise, and precise about the information she’s giving that you will take a lot from that. Sit back and listen to the interesting and fascinating Michelle Seiler Tucker.
Michelle, thank you for joining us here in the show. I’m looking forward to this.
Thank you. Thanks for having me. Me, too.
I want to come on and talk about your book, and we can see there behind you, the Exit Rich. I want to go back a bit. You’re a leading authority by any measurement on buying, selling, growing, and fixing businesses. How did you get started doing that and become the lady to go to if you want to sell or buy a business?
I’ve been an entrepreneur. I’m in different businesses in different industries. I always knew even from a young girl that I was not going to make a good employee because my number one pet peeve is that I don’t like being told what to do. Even though clients tell me what to do, it’s different from an employer telling me what to do.
I’ve owned different businesses. I did go to work for Corporate America. I did get a job at one point because Xerox recruited me. A year later, I transitioned out of Xerox and started my franchise development, franchise sales, and franchise consulting company. I was an equity partner with a couple of different franchisors. Many buyers kept asking me, “Michelle, do you have any existing businesses?” They wanted to add to their portfolio, or they were trying to leave Corporate America and buy their very first business.
I kept saying, “I don’t have any existing businesses.” I’m like, “Why do I keep saying no? I should be saying yes.” I’m all about the law of attraction. Bob Proctor always says, “Say yes,” so I’m like, “I need to start saying yes. What’s this going to entail?” That’s how I started my mergers and acquisitions firm out of necessity, and listening to what the consumers were asking for. That was a little over twenty years. I’ve attended many associations and conferences. I’m a Mergers and Acquisitions Master Intermediary, which is important in the US because the only way you can get that title is not by taking a course, not by going to college. It is by doing and selling businesses over $10 million.
I’m a Mergers and Acquisitions Master Intermediary, Senior Business Analyst, and a bunch of other acronyms behind my name. I’ve personally sold over 500 companies. My firm altogether sold over 1,000. I learned also a long time ago that what Steve Forbes says is true. 80% of businesses in America will never sell. That’s a pretty strong statistic because if business owners stop and think about that, that means you have less than 20% chance of success in selling your company.
I know the 80% but your success rate is something like 98%, isn’t it?
My success rate is 98% and I close 98% of all offers I write. We close about 80% of all businesses we take. We’re pretty successful but think about all the other businesses on the market that will never sell. The reason why we’re so successful is because we fix businesses. The number one reason why businesses are not sellable is because business owners haven’t created a business that buyers want to buy.
We fix businesses, we tweak them, we get them to operate on all six cylinders, all 6 Ps that’s why we’re much more successful. We’re not just putting businesses on the market and selling them as other advisors do. We’re getting in there, rolling up our sleeves, and fixing these companies. We specialize in buying, selling, fixing, and growing. I partner with business owners and asking my core competencies, resources, and capital. I fix their business, and put them on the build-to-sell program, and then we buy businesses and flip them and we sell companies.
We are talking about Exit Rich. You mentioned Steve Forbes and Bob Proctor. Both of them have given you great reviews for the book. You’ve also got great reviews from other people. Jack Canfield, James Lafferty, and many others are real fans. For any business owner, your book is a must-buy for them.
If I go back to the start of many businesses, most businesses are starters because somebody’s replacing a job that they had when they set out. However, in the philosophy that you express, the ST GPS Exit Model, your starting place is to determine your destination and start planning your exit then. That’s a big ask for many people. For many people starting their own business, initially, it’s about survival. Is it that important at that stage that they need to be planning their exit?
Stephen Covey always says, “Start with the end in mind.” One of the biggest issues with business owners is that they never plan their exit. It’s not so much about starting it from the beginning. It’s about starting it because they never plan their exit. They don’t think about selling until a catastrophic event occurs whether that’s internal or external. Internal is health issues, partner disputes, divorce, or death. External is this pandemic that we all have been living in. That’s the worst time to sell your business. I had a sweet lady call me not too long ago. “My husband dropped out of a heart attack.” He left her with a mountain of debt. She asked me if I could sell the business.
He didn’t have a business. He had no employees. He had a glorified job. He had been in business for several years. All the data was in his head. He had no processes. He certainly wasn’t operating on all the 6 Ps. He had nothing to sell. When the business died, he died. That’s what we’re trying to educate business owners on. You need to start your business with the end of mind and plan your exit from the beginning. If you do that, then you’ll operate your business so much differently. If you operate it with the mindset that you’re going to sell it one day, even if something bad happens, your spouse, your significant other, or your family will have a sellable asset.
Maybe explain your GPS Exit Model because I thought that was interesting and was helpful.
You live in France. When you want to drive somewhere, you pull out your phone, you go to Google Maps, and what do you plug in?
Where I’m going.
Your destination. If you don’t plug in a destination, what happens to you?
I don’t go very far or if I do, I’m going in the wrong direction.
That’s what happens to business owners. They don’t go very far. They’re going in the wrong direction. Business owners don’t plan to fail. They fail to plan. The biggest issue of business owners is they have no destination. They’re driving around the circles, up and down the financial hills to end up exiting poor and that’s the problem. I work with all my business owners to say, “Let’s figure out your destination. Let’s pick a number. What is your end game What is your desired sales price?”
When you say destination, what do you mean by that?
What I mean by destination is where you going, and where you want to end up at. When you plug in your destination, you have a specific idea of where you’re driving to. Business owners don’t. The destination is your desired sells price, your endgame. Business owners get hung up on the number. They’re like, “My number.” It’s just a number. You can adjust it along the way.
I always tell them, “Let’s talk about what you want to sell your business for. Let’s say you want to sell your business for $10 million. There’s a number.” What does the GPS Exit Model need to know? Where are you starting from? What is your current location? In other words, in business, what is your current evaluation? What is your business worth? I don’t know if you know this but in America, most business owners have never had their business evaluated.
I spoke with a guy. He’s been in business for several years. He never had the business evaluated. Business owners don’t think about business evaluation. They’re like, “This happened in my business. This catastrophic event happened. Let me go get my business evaluated.” Your business is your most valuable asset. Business owners have to change their mindset. Stop thinking of your business as your baby. Your business is not your baby. Your babies are at home. Go home, love them, kiss them, and hug them.
Treat your business as the most valuable asset that it is. You need to know what that asset is worth every day. It’s crazy to me. We go to the doctor once a year to get a physical annual checkup to make sure our heart’s still ticking and we’re kicking. We drive a car to the mechanic to get an annual tune-up but we don’t take our most valuable asset and get an annual evaluation checkup. There are events to increase evaluation and decrease evaluation. Every year, you must know what your business is worth. Let’s say, your business is worth $1 million and you want to sell for $10 million. Now you have a destination and you know where you’re starting from.Treat your business as the most valuable asset that it is, and you need to know what that asset is worth. Click To Tweet
The next thing is, “How many years do I want to do this? what’s my timeframe?” Let’s say you want to do it in ten years. The next step is determining who are your buyers going to be. Notice I said buyers and not buyer. The reason for that is because clients come to me all the time and say, “Michelle, I have a buyer. I need you to represent me with that one buyer.” I’m like, “No,” and they go, “What do you mean no?” I go, “I’ll represent you but we’re also going to put the business on the market and bring multiple buyers. Here’s the problem. I’m going to have to get in there. I’m going to have to look at your business. I’m going to have to probably fix your business.
I promise you, you’re not operating on all six cylinders, number one. Number two, we have to do the valuation. We have to clean up your financials. We have to get all the documents together for due diligence and stick them in a data room. That’s a tremendous amount of work. That one buyer, in all likelihood, will never close on the sale of your business. You have no backup buyers. Plus, how can we ever get you maximum value if we can’t create a bidding war because we have a party of one? We need competition.
There are five types of buyers in America. You have to determine what buyers are going to buy your $10 million company. 90% of buyers are first-time buyers. They don’t buy $10 million companies. They buy ice cream shops, coffee stores, restaurants, and the small businesses. You then have turnaround specialists. They buy distressed assets. They don’t buy multimillion-dollar companies.
Private equity groups, the third type of buyer, buy based upon platforms and add-ons. A platform is they want to get into healthcare and are not currently in healthcare. They won’t even look at your business for less than $3 million in EBITDA. EBITDA is Earnings Before Interest, Taxes, Depreciation, and Amortization. I’m saying that just in case the audience doesn’t understand that. If they’re in healthcare, if they have that platform, they’ll look at businesses for less than $1 million in EBITDA.
The fourth type of buyer, strategists and competitors, pay the highest multiple. They’re buying no synergies that can help catapult their business to next level, such as contracts, patents, trademarks, and databases. The last type of buyer is what I call Storm Chasers. They’re serial entrepreneurs, sophisticated buyers. They chase cash flow.
They’re industry agnostic. If you’re trying to sell a $10 million company, your buyers are going to be private equity group, strategists/competitors, and storm chasers. You have to reverse engineer your plan and say, “If I want to sell for $10 million, where do my gross revenues, my cogs, my operating expenses, and most importantly, my EBITDA have to be?
If you want to sell for $10 million, EBITDA needs to be around $2 million, depending upon your synergies. It can be less if you have a lot of synergies. That’s the next big question. What are the synergies that buyers looking for? What are the specific criteria that they’re willing to pay top dollar for? You build your business to meet their specific criteria. It’s like when you start a business, “Here’s my widget. It’s consulting, dentistry, and manufacturing. Here’s my target market.” You build your widget to meet their specific criteria.
You do business consulting in leadership. That’s your widget. Your specific criteria are those companies that can benefit from leadership and management training so that they can grow and scale their business with the right people. Your business is your widget. Those three types of buyers are your target market. You need to build your business and your widget to meet their specific criteria. That’s how you sell businesses for millions of dollars. The last step in that equation is your why.
Why do you want to sell your business for $10 million? This stuff sounds easy, but it’s not easy. You know that because you train entrepreneurs. It sounds easy, but it’s not easy. The why is everything. The why has to be powerful enough to keep you in the game, to keep you motivated, and to keep you weathering all the different financial storms that are going to come your way like this pandemic. Your why has to be power and not powerful enough to keep you in the game. That’s the GPS Exit Model.
That was a great explanation of it and I love it. If you go on to say, “It’s the value of the business,” but there are drivers of value in the business and you refer them to your ST 6P Method. I thought that was important because your business is going to have a value, but it can go up and down the scale depending on lots of different factors. It’s not just about profit, but other factors. Maybe explain the 6P Method. That’s helpful for people to get a sense. Many people create lifestyle businesses. Are lifestyle businesses sellable?
It depends upon how dependent is that lifestyle business on the owner. The problem is a lot of entrepreneurs have created a glorified job in which you go to work at every day versus a business that works for them. The problem with lifestyle businesses is they’re dependent upon that owner. They do not operate on the 6Ps. They might have some proprietary synergies, proprietary assets, so they could be sellable to somebody who wants a lifestyle business. They’re going to have to stay on for a while.
Talk about your 6P Method.
You know this because this is your core competency. This is your specialty. The First P is People. You don’t do anything without people. That’s why I put P first. You don’t build a business. You build people and people build the business. Entrepreneurs have to get out of their own way. We have to stop thinking that we’re good at everything.
Most entrepreneurs are not good at management. They’re not good at leadership. Entrepreneurs also think, “If you want it done right, you got to do it yourself. They have their finger in every pie.” You’ll never grow unless you let go of that control. You have to focus on your strengths, hire your weaknesses, and realize you’re not good at everything. Put the right people in the right seats. You got to ask the who questions. Who handles marketing, customer service, handles quality control, legal, accounting, manufacturing, logistics, environmental? The list goes on and on.
The clue here is that you should never be next to the who. What we’re trying to do is build a business without you. Exit Rich is not just about selling your business. It’s all about building a sustainable, scalable asset. People is everything. If you’re going to sell that business for $10 million, you have to have a layer of management. Entrepreneurs need to work on their business, not in their business. That’s the biggest issue. That’s why the businesses are not sustainable and they’re difficult to scale.
The Second P is Product. Let me give a bit of history here. When I wrote my 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 fail within the first 1 to 5 years. That’s common knowledge. We all know that. When I did the research for Exit Rich, I was flabbergasted to find out that the business landscape has flip-flopped. Only 30% of startups will fail. This is in America. Out of 27.6 million companies, 70% of those businesses that have been in business 10 years or longer will go out of business.
It used to be startups were at great risk, not anymore. Now, existing businesses are at great risk. You hear about this in the media all the time but they only talk about public companies. Toys “R” Us has been in the business for several years goes out of business like Kmart, Stein Mart, Pier 1. What the media doesn’t talk about all the private businesses. These business owners are acting poor. They’re selling for pennies on a dollar, closing their businesses, and even worst, filing bankruptcy.
If you got over the first hump of the first couple of years and you started trading profitably, in your opinion, why do those businesses start going down the other side of that graph and disappear?
It used to be that if you’ve been over that hump over 5 to 10 years, you’re going to be in business forever. That’s not the case anymore. Businesses are going out of business of what I call lack of AIM. You should Always Innovate and Market. Business owners stop innovating. Toys “R” Us didn’t do anything new in 75 years. Blockbuster had the opportunity to buy Netflix twice, sat back, and did nothing. Look at all the companies out there that don’t innovate. Business owners are stuck on their original idea and they don’t want to do things differently. They want to keep doing things the way they’ve always done them. You are either growing or dying. There’s no in between.
The second P is Product. You got to look at your product in your industry and ask, “Are you on the way up or out?” Do you have an Amazon? If so, you should be selling. You sell when you’re in your prime. Do you have a Blockbuster and you’re about to go bust? You should always innovate. Look at Amazon. They’re always innovating. Amazon acquired Whole Foods years ago. They acquired MGM because they’re getting into the movies. Amazon is a giant, but they’re not stopping. When you stop growing is when you start dying. When you stop innovating is when you start dying.
If you have a Blockbuster, that doesn’t mean that you go home and give up. It means you got to pivot. That’s the other P, Pivot. Ask yourself three transformational questions. Amazon did this back in the ‘90s. Ask yourself, “What business are you in?” Amazon said, “We’re in a book fulfillment business. We fulfill book orders.” Number two, “What are you the best at? What is your core competency? What do you do better than everyone else?” Amazon said, “We do fulfillment better than everyone else.
The third obvious question is, “What business should we be in?” Amazon said, “We should be in a fulfillment business, fulfillment products for everyone all around the world.” Those three transformational questions transformed Amazon from a small book fulfillment center to the multibillion-dollar worldwide conglomerate that they are now.
Look at what they’ve done in the web services.
You have to ask your clients, “What do you need? What do you want? How can I make it easier for you to do business with us?” The company that provides and makes it easier for consumers to purchase products and services is a company that’s winning. Amazon is winning because they make it so easy to buy anything. You can practically buy a horse on Amazon and have it delivered in two days. Amazon asks their customers, “What do you need? What do you want? How can I make it easier for you to do business with us?”
Business owners stopped asking their clients, “What do you need? What do you want? How can I make it easier for you to do business with us?” That’s what we have to do. Plus, here’s the other reason businesses got a business. They have one profit center. They have one way they get paid. Many businesses failed in as pandemic because they don’t have multiple revenue streams. A restaurant gets paid in one way. You come in, you eat, and you take food to go. That’s how they get paid. They don’t have any other profit centers like eCommerce businesses, selling stuff that’s unique to their restaurant.
What’s the other P?
Processes. You will never scale without processes. Processes is like an exit strategy. Business owners don’t think about processes until something bad happens in their company and they’re like, “We need a process for that.”You will never scale without processes. Business owners don't think about processes until something bad happens in their company. Click To Tweet
The Process is the boring P.
Processes are ongoing. Here’s where business owners get this wrong. Business owners design a process around their own agenda, not the customer experience. For example, doctors, what are their hours? 9:00 to 5:00, Monday through Friday. When do people work? 9:00 to 5:00, Monday through Friday. They design their processes, their hours around the doctor’s own agenda. You got to design the processes around the customer experience. Did you ever watch a movie The Founder based upon the McDonald Brothers, McDonald’s restaurant?
It’s a great movie. Back in 1950s, the McDonald Brothers said, “We want to build a fast-food restaurant, fast food system. We want to design it around the customer Experience. We wanted the customers to experience great tasting food that’s hot and fast, 30 seconds or less. They designed those processes. They went the empty tennis court, spent nine hours there, figuring out the processes. Even though the processes were designed in 1950 and tweaked along the way, it’s why you can eat at McDonald’s anywhere in the world and get the same experience.
Us business owners have to stop and ask ourselves, “What do we want our clients to experience?” It’s not what’s good for us. What’s in our best interest? What’s in the client’s best interest? If you don’t create wow experiences, you won’t stay in business for long. Your competitors will be happy to do it for you. John, have you ever had a problem with a bank, a retail social media company, and you’ve called and pressed all these different numbers to get a live person on the phone? You tell your whole story and they’re like, “I’m sorry. Let me connect you to the right person.”
They end up disconnecting you or they transfer you to somebody who you tell your whole story again to and they’re like, “I’m sorry. This is the wrong department.” They haven’t designed the processes around the customer experience. Processes must be design around customer experience, productive, efficient, well-documentable policy, and procedure manuals, SOP checklist because that’s the first thing buyers look at for due diligence.
The fourth P is Proprietary. The other two Ps are very quick. This one’s going to take me the longest to explain because Proprietary is the highest value driver. I’ll give you a crash course and evaluations. Businesses that have under $1 million in EBITDA will trade for anywhere from 1 to 3, maybe 3.5 multiple of EBITDA depending upon the synergies they have. If you’re a SaaS company, everybody thinks that you get multiple gross revenues. That is not true. That is a misconception.
The only industry that gets a multiple of gross revenues is SaaS Companies. Businesses over $1 million in revenue will start at 4.5, 5, and up depending upon these synergies. You said earlier, “It’s not always about the profits. It’s a lot of times about the synergies.” Proprietary is the number one value driver. There are six pillars to proprietary. Number one is branding. The more well-branded you are, the more I can sell your company for as long as your brand is relevant in the mind of the consumers. Is anybody paying money for Blockbuster? No, they went bust. The most valuable brand in the world is?
Probably Amazon. Is it Apple?
Amazons in the top ten. Apple is worth $359 billion. That’s just the brand. That’s not cashflow, assets, inventory, and anything else so build your brand. Next is trademarks. Trademark your company name, your slogan, your podcast, and your products. The mistake the business owners make is they get an idea in their head, “I love this name. Let me go to GoDaddy and see if it’s available.” They go to GoDaddy to plug it and they’re like, “We got the domain.”
They go to their state and they get a trademark in their state, but they never check the federal database. I’ve seen businesses in operation for 5, 10, or 15 years, all of a sudden, receive a cease-and-desist letter. They have to stop using that company name because they don’t own the federal trademark. If you plan on doing business internationally, you want to make sure you protect your company name, both federally in the United States and internationally across the globe.
Here’s another thing. People forget about their products. We have a company that sells products. They have twelve exclusive products. Each one is federally trademarked and then each one is exclusive to retail chain. One’s in Walmart, one’s in Target, and one’s in TJ Maxx. We’re selling this company for $60 million. They have a federal trademark. You have to protect your IP. Patents are our number one.
If you’ve ever walked Shark Tan, Dragon Den, or any of those, the first question they always ask is, “Do you have a patent on that?” We sold a company that wasn’t making much money but they had 18 patents so we sold them for $18 million. Your company can be one of those businesses are not extremely profitable, but you have the IP. Also, your IP should be held in a separate corporation. Never include your IP in the same corporation that you do business with because you want to protect that IP from lawsuits.
Contracts are extremely valuable. Manufacturing, distribution, franchisor with franchisees, any type of vendor contracts, exclusivity, client contracts are the most valuable of all because buyers want to buy company with revenues, especially those contracts that have subscription models with rare kind revenue.
Here is a mistake the business owners make with contracts. In America, 98% of all sales are asset sales, not stock sales. I’ve never met a business owner in many years, thousands of deals later, where they’ve had the two-sentence transferability clause that says, “This contract is transferable upon a new entity.” If your buyer doesn’t agree to a stock sell and your clients won’t agree to consent to transfer before the closing, then your deal can fall apart.
If you have thousands of clients, are you going to go to all of them? We have a landscape company. It has over 1500 contracts. Are they going to go to every single client and ask for consent to transfer? No. Number one, you don’t want your customers knowing you’re selling your business yet. You got to make sure you get that two-sentence transferability clause and be proactive.
The next thing is databases. Databases are huge and you can be losing money and sell your company for millions or billions. Facebook paid $19 billion for WhatsApp. WhatsApp was not just not making a profit. They were hemorrhaging, but they had a synergy. They had 1 billion users. That’s what we’re talking about right now, these synergies. Facebook knew they could ROI and monetize on the sale of that.
Here’s the other thing. A lot of business owners are like, “Michelle, I have 250,000 followers on Twitter and 1.5 million on Instagram.” Who cares? You don’t own that. What you need to be doing is create a funnel to capture all those leads on all these social media channels and get them into your database so now you have and own an asset.
Celebrity endorsements are big. We have a client that has products with Oprah. Strategics will pay a lot of money for that celebrity endorsement because everybody wants their products in front of the queen of everything. Radio personalities are huge. What do radios do? They have advertising and radio personalities endorse products. They can only endorse one vertical at a time.
We sold a skincare company that had the top positions on different radio celebrities and nobody else could bump them off. No other skincare company could get that position. It’s the same thing with eCommerce businesses. If you’re manufacturing pillows and you have the top three spots on Etsy or you’re a manufacturing coffee machines and you have the top three spots in Amazon, these are prime real estate positions that strategics will pay more money for. Any questions there?
What are your 5th and 6th P?
Next is the Patrons. That’s your customer database. In America, most businesses follow the 80/20 rule where 80% of their revenue comes from 20% of their clients. They have customer concentration. We once were selling a media business that had only five clients. We were selling between $10 and $15 million. The five clients were the largest casinos because they catered to casinos. They lost two in the process. Revenues dropped in half. EBITDA dropped in half. They were no longer sellable.
The last P is Profits. The reason I put profits last is because lack of profits is never the problem. I can begin to tell you how many clients call me and say, “Michelle, I have a profit problem.” I’m like, “You have a process problem. You have a people problem. You don’t have a profits problem. Lack of profits are the symptom of. If you’re operating on all five Ps, you can’t help but be profitable.”
That’s interesting that you put at the very end.
That’s why I put it at the end. It’s a symptom of. It’s a function of.
You have a very good reputation for selling businesses for way more than they’re worth. That’s a common comment that I see about you. How do you do that? How do you sell the businesses and have the reputation for selling businesses for more than they’re worth?
It’s funny because that was the name of my first book. I got some bad feedback about that title. I would hear, “You’re not being fair to the buyer. You’re pulling one over on the buyer.” That’s not true. The way we sell businesses for more than it’s worth is number one on paper in America. A lot of businesses aren’t worth much because if you look at the net income on paper, the net income could be $250,000 but there’s so much being run through that business that maybe they’re making $1 million or $1.5 million.
The first thing we do is normalize the financials and get to the true adjusted EBITDA or true seller discretion earning. Number two, we evaluate businesses on synergies on these 6 Ps and we figure out in these evaluations because evaluations are more of an art rather than a science. The key to evaluations is understanding buyers, understanding what the 5 types of buyers are and what those three types are willing to pay more money for, and understanding who’s going to outbid who.
Here’s the bottom line. If we have a business over $1 million in EBITDA, we know that we’re going to be able to create a bidding war. It’s hard to do this under $1 million EBITDA. We are going to go to market without a price. We know we’re going to bring hundreds of buyers to that one business. There are more buyers for good businesses than there are good businesses to buy.
There are not as many businesses over that $1 million than EBITDA so when we get those, we have hungry buyers and buyers are outbidding other buyers especially for certain synergies. Buyers will pay more for contracts. Buyers will pay more for different things than other buyers will. That’s how we can get more than what the business is worth. A business is worth what a buyer’s willing to pay for it based upon the value it brings them.A business is worth what a buyer's willing to pay for it. Click To Tweet
Overall, what do you see as the biggest mistake that business owners make?
I’m going to give you two things. Number 1) Not planning to interact like we already talked about and not thinking about their business as an asset and planning for that sale. Number 2) Business owners are not creating a business. They created a job, not a business and they’re not functioning on all 6 Ps. Those are the biggest mistakes.
How do you know when it is the right time to sell your business?
I always say it’s the right time to sell your business when your business is in its prime. How do you know that? Businesses have life cycles like humans do? The adult stage is when you should sell. I’ll give you a story. Toys “R” Us is 2015 was doing $11.5 billion in revenues. They should have sold. In 2016, they filed bankruptcy. They went from adult to senior citizen. They went from $11.5 billion in revenue to senior citizen filing bankruptcy. What’s after senior citizen?
Digging a hole in the ground.
They dug a hole in the ground. They died. They closed up 1,500 locations in 30 countries and completely went out of business and died. You sell when you’re in your prime because what goes up must come down, unless you’re always invading. Nothing lasts forever.
You talked about a range of buyers. Do you need to be clear as you’re growing and developing the business? Do you need to be clear about what your potential buyer might look like?
Absolutely. Go back to your widget. Your widget is consulting. Is every business owner a prospective target client for you?
Go back to your business. Your business is your widget. You need to be crystal clear up front who’s going to buy your business. If you have a coffee shop, it’s not going to be a private equity group. It’s not going to be a sophisticated entrepreneur. It could be a competitor that wants to buy other coffee shops, but you got to be crystal clear on who your buyer is going to be.
Build your business to meet their specific criteria so you can maximize value and cash out when you’re ready. The reason we identify our target market when we go into business is that we know where our products and services are not going to appeal to everybody. You have to have that specific target market and you’ve got to build everything to meet their buying criteria. It’s the same thing with your business.
Michelle, I have to apologize and I’ve taken up much more of your time than I said I would, but it’s been fascinating.
I love doing this, so I’m good.
You’re good and you’re good at it. Let’s be honest about it. You’re an easy person to interview. Before we wrap up and you can tell people where they can get your book and get in contact with you, there is two questions I ask everybody. One is a book other than your own that has made an impact upon you. What is the book and what is the impact?
I would say Think and Grow Rich by Napoleon Hill Foundation. The impact has been huge. One of my blessings is that Sharon Lechter, who was my co-author of Exit Rich, wrote Rich Dad Poor Dad with Robert Kiyosaki and she’s written several books for the Napoleon Hill Foundation.
Isn’t it extraordinary with Think and Grow Rich? That was written so long ago and it’s still so relevant, isn’t it?
It’s relevant. What’s good about it too is that I always say, “When a student is ready, the teacher appears.” When you read a book, you get certain things out of it that you need at that time. Put it down, make your notes, highlight it, and then go back to that same book a year later. Read it again and you’re going to get a whole different perspective. You’re going to get things that you didn’t get last year because you’ve grown as a person. We will never grow the business beyond what we can grow the owner.
This has been great, Michelle. I enjoyed it. Where can people reach you? Where can they reach you now? Where they can they go? Presumably, they can go to Amazon and buy your book and any other place like that?
SeilerTucker.com is my main website. They can also connect with me on social media. You can get the book two places, ExitRichBook.com and also Amazon. I do encourage everyone in America to go to ExitRichBook.com because there, we have all the value. Well, everybody around the world can go to ExitRichBook.com for $24.79. That is our launch special.
Steve Forbes endorsed Exit Rich. He said, “It’s gold mine for entrepreneurs as they leave way too much money on the table.” Kevin Harrington, our original shark on Shark Tank wrote the foreword. Sharon Lechter’s my co-author, and like you said, we have wonderful testimonials from extreme, very successful business owners. You could go to ExitRichBook.com and buy the book there plus shipping because we’re past launch date now, but we’ll still have the go-to nuggets.
We’re still going to give you the massive value at ExitRichBook.com. We’ll give you a lifetime membership to the Exit Rich Book Club for those video training of me doing real deep dives and different techniques and strategies that we’ve been talking about here that I’ve been teaching the business owners for the last twenty years plus documents to operate and sell your business.
We have sample policy and procedure manuals, employee handbooks, and org charts to sell your business. We also have sample letter of Intent, purchase agreements, due diligence checklist, closing documents, and more. All the documents to sell and operate your business are there, They’re available for your review and download. If you want an attorney to recreate these documents, it will cost you over $50,000. This is a huge value.
What a giveaway for the price of a book.
A huge giveaway plus a 30-day free membership in the Club CEOs, which is an entrepreneurship mastermind where we ask those transformational questions so business owners can pivot to build that sustainable, scalable, and when they’re ready, sellable business. It’s all at ExitRichBook.com so go and get your copy.
Michelle, I now understand better the answer to the question of why it is that you are able to sell businesses for more than they’re worth better than I did at the very beginning. Michelle, thank you so much indeed for taking part in the interview. It’s been a fantastic one, a real eye-opener, and great information that you gave. Thank you so much for being a guest here.
Thank you so much for having me.
- Michelle Seiler Tucker – LinkedIn
- Sell Your Business For More Than It’s Worth
- Think and Grow Rich
- Rich Dad Poor Dad