FYE-GI with Mission Matters | Selling Your Business

 

Many entrepreneurs would like to build a successful business that could one day be exited for a substantial gain. In this episode, Adam Torres and Michelle Seiler Tucker, Founder & CEO at Seiler Tucker Inc., explore the ST GPS Exit Model and how entrepreneurs can use it to realize their goals.

 

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Learn How To Build A Sustainable, Scalable, And Sellable Business With Michelle Seiler Tucker

I like to welcome you to another episode of the Mission Matters Business show, your source for all things business. My name is Adam Torres. You can follow me on Instagram @AskAdamTorres. Keep up with my book releases, book tours, schedule signings, and all that other good stuff. I always love to connect with you there. If you like to apply to become a co-author of one of my upcoming books, head on over to the website MissionMatters.com and click on Become an Author to apply. I have Michelle Seiler Tucker on the line, and she is the Founder and CEO over at Seiler Tucker Inc. Welcome to the show.

Thank you for having me. It is a pleasure to be with you.

I’m excited to get into our topic. We will be talking about how to build a sustainable, scalable, and sellable business. Heading Seiler Tucker, you have a unique vantage point with how many businesses and investors you have worked with. To kick it off, we should probably start at the beginning. Why is it important from your vantage point to plan your exit strategy from day one specifically using the ST GPS Exit Model?

According to Forbes, 8 out of 10 businesses will not sell, or 80% of companies are not selling. The number one reason businesses don’t sell is that the business owners never think about their exit until a catastrophic event has occurred, rather that is internal or external. Internal meaning health issues and the partner is divorced. External means the pandemic we are in. That is the worst time to think about selling your business because your business is typically turning downward and not doing well. The best time to sell is when your business is booming.

I always tell my clients to start with the end in mind. “Plan your exit from day one on buying or starting a business and follow the ST GPS Exit Model.” When you want to drive somewhere, what do you do? You plug in Google Maps, take out your Google Maps on your phone, and you plug in your destination. Number one, you need to know where you are going or driving. Otherwise, you are going to drive around in circles. That is what happens to business owners. They are on plan to fail. They fail the plan. They are driving around in circles, going up, driving up and down in financial hills, and they end nowhere because they don’t have an end game, destination, and desired sales price.

FYE-GI with Mission Matters | Selling Your Business

Selling Your Business: You need to know where you’re going or driving to. Otherwise, you’re going to drive around in circles. And that’s what happens to business owners.

 

Everyone needs to figure out what that number is. Just pick a number. Let’s say you want to sell for $20 million. We have a start of a plan. What does ST GPS Exit Model need to know? It needs to know where you are starting from, your current location, and your evaluation. I don’t know if you know this, Adam, but most business owners do not get a business evaluation. They don’t think about a business evaluation. We go to doctors to get annual health checkups and make sure our bodies are in good shape. Why not make sure your most valuable asset, your business, is in good shape? You should get a business evaluation checkup every single year.

The best place to get that is not a CPA. It is a financial mergers and acquisitions expert to get that checkup because there are events that can increase the valuation or decrease valuation, like the pandemic that we are in. You need to know what your business is worth every single year. Let’s say you are worth $5 million. You want to sell it for $20 million. You need to determine the timeframe. You want to do this in ten years. What do you need to know? You need to know whom your buyers are going to be.

There are five different types of buyers. I say buyers not buyer, because in all likelihood, that one buyer will fall apart, you need backup buyer number one. Number two, you want to create competition so you get the highest price. You can’t create competition if you only have one buyer. Let me tell you who the buyers are not going to be. It is not going to be a first-time buyer because they are not going to buy a $20 million company. 90% of buyers are first-time buyers, and they buy small businesses. You have turnaround specialists. They are not going to buy your company because they bought us for assets.

You can't create competition if you only have one buyer. Share on X

It is probably going to be a PEG, which is a Private Equity Group, a strategic/competitor. They paid the highest multiple of EBITDA because they are buying synergies or sophisticated entrepreneur who is industry agnostic but chases cashflow. You got to determine, “I know my three buyers. I want to sell for $20 million. I’m only $5 million now, and I want to do this in ten years.” What is the next thing you need to know? You need to know, “What are the financials? Where do the financials need to be to sell for $20 million? Where does the gross revenue have to be gross pocket margins? Most importantly, where does the EBITDA have to end up?”

If you want to start for $20 million, you need to have an EBITDA of at least $3 million to $5 million. EBITDA is Earnings Before Interest, Taxes, Depreciation, and Amortization. You need to know what synergies they are looking for and what the characteristics will cost a buyer to pay top dollar for your business. Build upon those synergies and characteristics and build to meet those buyers’ specific criteria. The last step is to know your why. Why do you want to sell for $20 million? If it were easy, everybody would be doing it. You need a powerful why to keep you in a game and weather financial storms. That is the ST GPS Exit Model.

Looking at the way you have set it up and done it in your business makes sense. A lot of business owners are exactly what you said. When they are planning it and doing things in the beginning, they are not thinking about the exit or even the potential for that. It is not necessarily intentional. Nobody intentionally goes out and says, “I want to make these mistakes.” It is something that maybe happens because of a lack of knowledge or something else. Speaking of mistakes, I know this little change from a business owner to a business owner. It sets you from the level of experience as an entrepreneur. I know that certain themes tend to arise over and over again. What are some of those big mistakes that you see business owners make?

The mistakes are pretty much the same, believe it or not. Smaller businesses will make more mistakes than owners of bigger businesses because owners of bigger businesses have figured a lot of this stuff out. I like to take the biggest mistakes owners make by taking you through the 6 P’s because I can do both at once.

The number one mistake is not timing your exit from the beginning. That is why 80% of businesses don’t sell. The number two mistake is creating what I call a glorified job in which business owners look at every day versus the business works for them. Therefore, the first P is People. You don’t build a business. You build people, and people build the business.

You don't build a business; you build people. And people build a business. Share on X

Entrepreneurs are control freaks. They want to do everything. You can’t do everything. You need a focus on your strengths. Hire your weaknesses. Make sure you have the right people in the right position and seat. Most importantly, ask the who question. Who handles customers, marketing, legal, manufacturing, distribution, logistics, and environmental? The clue here is that you should never be next to the who. You need to build a business that runs without you.

The next P is Products. You got to ask yourself, “Your product, industry, and service, is it on the way up or is it on the way out? Driving or dying? Do you have an Amazon or Blockbuster?” Most business owners have what I call a Blockbuster, especially now because of the pandemic. If you’re in a dying industry and you are not diversified, it doesn’t mean that you pack up, go home, and crawl under your bed into a fetal position.

You got to align yourself with an outside expert and mentor somebody who has been down your road before and asked these transformational questions. Amazon did this back in the ‘90s. Amazon asked themselves, “What business are we in?” That is number one. They said, “We sell books. We are a bookselling business.” Number two, “What do we do well better than anyone else?” They said, “We do fulfillment better than anyone else.”

Number three, “What business should we be in?” That is when Amazon said, “We should be in a fulfillment business. We should be selling everybody’s products, not just books.” Those three questions transformed Amazon from the small bookseller to the multibillion-dollar worldwide conglomerate that they are now. You got to pivot. The way to pivot is to get out of the transactional and become transformational.

The way to pivot is really to get out of the transactional and become transformational. Share on X

Number three is Processes. A lot of business owners make the mistake of not having efficient, productive processes and not designing their processes with the customer experience in mind. They don’t think about processes like they don’t think about exit strategy until something bad has happened in their company. They were like, “We need a process for that.” It is a little late now.

You need to design your processes from the beginning with the customer experience in mind. McDonald’s did this back in the ‘40s. They said, “We want to create a fast-food restaurant around our customer experience. The customer experience is to get great-tasting food that is hot and fast.” You can eat at McDonald’s anywhere in the world and get the same experience. They never said it is going to be healthy for you or it is going to be organic. Many companies do the opposite.

I’m sure you have dealt with companies where you were like, “This is the worth customer service ever. I have to push a phone twelve different times to get a live human on the phone.” That is because their processes are designed based on their own agenda, not based on the customer experience. Make sure you design your processes around the customer experience, productive, efficient, and well-documented with policy and procedure manuals, protocols, SOP checklists, employee handbooks, and non-compete. You need all this documentation. The first thing a buyer’s going to do is walk in and want to see this. They are due diligence.

The fourth P is the biggest value driver. This P can take you from a 4, 5, 6, 7, or 10 multiple. These are Proprietary assets. Proprietary is the highest value driver there is in all the Ps. There are six pillars to proprietary. I will try to move through them quickly because the other two P’s are not going to take as much time.

Number one is branding. The more well-branded you are, the more I can sell your business. You can’t just brand your personal brand. You have to brand your company brand. Think about it. What is the biggest brand in the world? What is the most valuable brand in the world? Apple is one of the biggest brands in the world.

FYE-GI with Mission Matters | Selling Your Business

Selling Your Business: Build your brand because the more well-branded you are, the more you will get for the sale of your business.

 

Apple is worth $249 billion for the brand, not including assets, real estate, inventory, accounts, receivables, cashflow, or anything. Just the brand has worth $249 billion. As long as your brand is relevant in the mind of consumers, we can sell it for a lot of money. Nobody is paying for Blockbuster. The brand has to be relevant. Trademarks are huge. Make sure you have company trademarks, slogans, logos, podcasts, and everything that is unique, your USP, Unique Sell Proposition, should be trademarked.

The biggest mistake that business owners make is they go get a state trademark for the state that they are operating. They never check the federal database. All of a sudden, within a few years, they could receive a cease-and-desist letter, and they have to stop using that company name. It has been $1,500 to $2,000. Get your name federally trademarked so you don’t have this problem down the road because you will hate to have to rebrand and start all over.

Patents, protect your IP and inventions. Have you ever watched Shark Tank? Every single investor is always asked, “Do you have a patent? Do you have a patent penny? Do you have a utility patent?” Patents are big. Contracts are huge, manufacturing, distribution, vendor, franchise or contracts, and any type of exclusivity, especially client contracts.

Client contracts are the most valuable of all contracts, especially if they have a reoccurring revenue stream or subscription model, because buyers want to buy a business that has money flowing in. Here are some biggest mistakes business owners make when it comes to contracts. They don’t have to choose in this transferability clause. 99.9% of all cells are asset sales, not stock sales. If the buyer agrees to a stock sale and your clients won’t sign a consent to transfer, you are going to have a big problem.

 

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