FYE-GI | Business Valuation

 

In this episode of Disruptive CEO Nation, we speak with mergers and acquisition expert Michelle Seiler Tucker about her new book Exit Rich. Michelle is passionate about supporting business owners building a business that is scalable and salable. She covers the principles of the Six P’s Method that she believes, if followed, a founder can guide a business to a positive valuation and future sale.

Michelle Seiler Tucker is the Founder and CEO of Seiler Tucker Inc. She holds a M&AMI (Mergers & Acquisitions Master Intermediary) title and as a 20-year veteran in the M&A industry, she has a wealth of experience regarding buying, selling, fixing, and growing businesses. Her and her firm have sold over a thousand businesses in almost every vertical and have a remarkable track record of success.

In addition to being featured in INC, Forbes, and USA Magazine, Michelle is a keynote speaker and makes regular radio and TV appearances on Fox Business News and CNBC.

 

Connect with Michelle Seiler Tucker:

Personal Facebook, Business Facebook Page, Instagram, Twitter, & LinkedIn

Website: www.seilertucker.com

Book: www.exitrichbook.com

 

Connect with Allison:

Website: allisonksummers.com

#Exitrich #business #businessbuilder #founder #owner #valuation #DisruptiveCEONation

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Michelle Seiler Tucker Founder And CEO Of Seiler Tucker Inc.

You want to take a read no matter where you’re at in your business journey because wherever you start, there’s got to be a finish at some point. Our guest is a leading authority on buying, selling, fixing, and growing your business. She and her firm have sold over 1,000 businesses in almost every vertical, and has a remarkable track record for success.

Even if it’s just learning about things you need to think about to keep your early business stable, firm, and sustainable, you need to read this. In addition to being featured in Inc. and Forbes, being a keynote speaker, and having TV appearances on Fox Business News and CNBC, part of the reason our guest is here is that she has a new book that we’re also going to learn about. With that, I would like to introduce you to Michelle. Michelle, give everybody all of your full details and the business that you operate.

I’m a Merger and Acquisition Master Intermediary, and 1 of 3 women that hold that title. That’s pretty prestigious because when I entered this industry, it was a male-dominated industry. It still is. I’m also a senior business analyst, and I’ve been in this for a little over 20 years, specializing in buying, selling, fixing, and growing companies. I will buy businesses and flip them like people flip real estate. I’ve also partnered with business owners, helping them to save their businesses, and build their businesses into sellable assets.

Your firm has your name on it. Tell everybody the name of your firm.

My firm is Seiler Tucker, and my book is Exit Rich.

Let’s dig into Exit Rich. You can give us the whole framework, but one of the things that I have to ask you right out of the gate that you talk about is identifying what type of business you own. Some people get it wrong. What do you mean by that? I found that so interesting and compelling.

There are different types of businesses. There are seven types I refer to in the book. You need to figure out what type of business you own and what type of business owner you are. As far as what type of business you own, they can go to Seiler Tucker Academy, and take the quiz and find out. You’ve got to ask yourself, “Do I own a small little business, a coffee shop, a restaurant, a cafe, a retail store, and that business depends upon me? If I’m not in the business, the business is not going to be successful, and it’s probably not scalable.”

Do you own a business that’s been in business a little bit longer that’s maybe hands-off and doesn’t require much attention from the owner? Those businesses are sellable. To me, there’s not any such thing as a hands-off business. The car washes, the laundromats, the trailer parks, the RV parks, and things of that nature are more hands-off. Those businesses are sellable because investors and buyers want businesses that they don’t have to work in every day.

FYE-GI | Business Valuation

Business Valuation: Buyers want businesses that they don’t have to work in every day. They want to buy a business, not a job.

 

There are businesses that have been around for decades and have the same owner and employees in place, maybe operate on all six cylinders, all 6 P’s that we refer to in my book, Exit Rich. There are larger businesses that operate for maybe $10 million, $20 million, $30 million, $40 million, or $50 million gross revenue and have an EBIT over $1 million. That’s a middle-market business. You have to identify.

There’s also the one I call the one-man show or one-woman show. Let’s say you have an interior decorator, and it’s just her. If I pull the interior decorator out of the business, there is no business. Let’s say that you have a chiropractor, and it’s only one chiropractor. I go to sell his business. You pull him out of the business, and there is no business. It’s the same thing with a dental practice, an MD practice, a pediatrician practice, or a real estate agent or broker. We try to identify what type of business they own and get them to own a business that buyers want to buy.

A lot of the entrepreneurs and business founders I’ve talked with, when they get it right, they understand that they need to set up a business that can have a life without them. It’s great wisdom. You talked about the 6 P’s method. Will you expand on that for our readers?

In my several years in the trenches, selling businesses, fixing businesses, and growing businesses, I came up with what I call the 6 P’s, which are the six cylinders. If a business can operate on all six, then they’re going to have a sustainable, scalable, when they’re ready, sellable business. Number one is People. You don’t build a business. You build people. The people build the business for you. A lot of business owners have people in their business, but they don’t have the right people in the right seats.

You’ve got to make sure you have the right core competencies in the right seats. You then have to ask the who question. Who opens the door? Who deals with clients? Who deals with customer service issues? Who deals with logistics and transportation? Who deals with manufacturing, legal issues, and environmental issues? The list goes on and on.

The key here is to never put you next to the who. You want to build a business that runs without you. You want to make sure that you have a name next to all of those who’s, and it’s not you. The more that you can work on your business instead of in your business, then the more that you can create a bigger business that works for you rather than you working for it. Buyers want to buy a business, not a job.

The phrase “working on your business, not in your business” is so critical to many people. You can’t say it enough because it’s so easy for business owners to get pulled in, drawn in, focus on this, and focus on that which they need to, but then they need to know how to be like, “I’ve gone in, and I’ve done it, and I need to retreat,” and have the who assigned to deal with it.

Business owners and entrepreneurs are not always the best at everything, They’re not the best operators. Entrepreneurs need to focus on their strengths and hire their weaknesses. Most successful entrepreneurs you’ll see will always hire somebody who’s smarter than them in other areas. I hate to use Donald Trump. I may use Donald Trump. He had George Ross, who was his attorney. Donald Trump might have made the deal, but George Ross made sure it was legal. You always got to hire somebody who’s smarter than you. Does that make sense?

Absolutely. Tell us more about the 6 P’s. We’ve got People.

The second P is Product. This is important too. All my Ps are important. Product is your industry. You have to ask yourself. Is your industry on the way up or on the way out? Do you have an Amazon, or do you have a Blockbuster? This question is relevant especially given the pandemic that we’re in, because there are a lot of industries that were thriving before COVID that are dying. There were industries that were dying before COVID that are now thriving.

Ask yourself. Do you have an Amazon or a Blockbuster? If you have a Blockbuster, you have to pivot and ask yourself three transformational questions. What business are you in? What do you do well? What business should you be in? A business that you started is not necessarily the business that you should be in. Let me give you an example. Amazon started in the book business. Amazon asks themselves, “What business are we in? We’re in the book business. What do we do well? We do fulfillment well. What business should we be in? We should be in a fulfillment business.”

A business you started in is not necessarily the one you should be in today. Click To Tweet

Those three transformational questions took Amazon from a bookseller to the multi-billion dollar worldwide conglomerate that they are now. Many people get stuck in their products like Toys “R” Us. Toys “R” Us has been in business for so many years. They did nothing to innovate. They did nothing to change, and they ended up going out of business. A lot of business owners get stuck with the product in the industry that they started in, and they forget to ask themselves, “What do we do well? What do our customers want? What do they need? How can we transform?”

Michelle, I couldn’t agree with you more. My hotspot of the week that you’re hitting on is people, companies, and business leaders. I work a lot in the nonprofit space. I’m constantly watching people not ask the right questions, and therefore, they’re not developing the right strategies or solutions. I couldn’t agree with you more.

They always say, “The smartest person is the one who asks the right questions.” We ask the right questions. and the best questions. In our business, I don’t know if you guys know this, but the business landscape has changed dramatically even before COVID. When I wrote my first book, Sell Your Business For More Than It’s Worth, in 2013, I did the research, and 95% of startups would fail. We all know that, but when I wrote Exit Rich and did the same research, out of 26.7 million companies, I found out that 70% of the businesses that have been in business for ten years or longer are going out of business. That was before COVID.

You hear about public companies all the time like Toys “R” Us, Kmart, Stein Mart, Montgomery Ward, JCPenney, GNC, and Pier 1. What you’re not hearing about are all the private companies on every street corner in every town and every state that will drop in like flies. These business owners, unfortunately, are forced to sell for pennies on the dollar, close their businesses, or have to file for bankruptcy.

Exit Rich is all about not letting that happen to you. Don’t become a statistic. Build a sustainable, scalable business and AIM. The reason these businesses go out of business is that they stopped AIM. AIM is Always Innovate and Market. Toys ”R” Us did nothing to innovate. Blockbuster sold Netflix. They had an opportunity to purchase Netflix. They did nothing. They sat back and went out of business.

As I’m listening to you, Michelle, you think about old traditional brands that have been successful in innovating, and I have to throw this out because of my kids. The brand Barbie is insane in what it did to reinvent and innovate. Barbie has her own streaming that is on 24/7 and takes on tough social issues that you would never think Barbie would be chatting on.

They innovated. They keep innovating and marketing. They keep staying relevant in the mind of consumers. That’s what you have to do. That’s what so many companies stop doing. Here’s the bottom line. The reason why business is changing so much is that whoever makes the easiest for the consumer to purchase products and services from them is a company that’s winning. Amazon is winning because Amazon makes it so easy to purchase products from anywhere in the world and have them delivered in two days. They just bought twelve more planes so they could get it to you quicker.

FYE-GI | Business Valuation

Business Valuation: Whoever makes it the easiest for consumers to purchase products and services from them is a company that’s winning.

 

When I was in China, I remember there was this one time that I was feeling homesick. All of a sudden, this bicycle comes up, and it’s got this cardboard box with that Amazon smile on the side. I’m like, “I don’t feel so far from home anymore.” We got people and product.

The third P is Processes, and processes are big. It’s all about processes. It’s all about systems. A lot of business owners don’t think about processes until something happens. Something somebody gets hurt on the manufacturing floor. We need a process for that. Customer complains. We need a process for that. Processes should be designed from the beginning you start your company with the customer experience in mind. Have you ever watched the movie The Founder with the McDonald brothers?

I have.

Do you remember McDonald’s back in the ‘40s? They’re like, “We want to start a fast-food restaurant. We want to design a restaurant around the customer experience.” Back then, in the ‘40s, they had Sonic-type drive-ups. The problem with it back then in the ‘40s is the food was always cold. The order was always wrong, and it took forever to get the food.

The McDonald’s brothers said, “What do we want? What do we want our customer experience to be? What do we want the customer to experience when they come to McDonald’s? We want to deliver great-tasting food that’s hot and fast in two minutes or less. How do we do that? How do we design processes with the customer experience in mind?” They went to the empty tennis court. Do you remember that they took all their employees to the tennis court?

I do.

They mapped out the process, erased it, and mapped it out again. They were all day mapping out the process to decide who takes orders, who toasted the buns, who cooks the burger, who puts the pickles on the buns, and who gives it to the client in two minutes or less. Those processes right there are why you can eat at McDonald’s in China. You can get McDonald’s in Singapore. You can eat McDonald’s in Russia, the USA, New Zealand, and wherever because of those processes.

Many companies design their processes to alienate and upset clients, not to improve the customer experience. Processes must be designed with the customer experience in mind. They must be efficient, productive, and well-documented. I can’t even begin to tell you how many companies don’t have policy and procedure manuals. They don’t have an SOP checklist. Our clients are not trained, and our employees are not trained on such. You want to make sure your processes are intact because this will help your business be sustainable and scalable.

Processes must be designed with the customer experience in mind. They must be efficient, productive, and well-documented. Click To Tweet

To your point, I always talk to company founders about, “You run it like a business.” Younger company founders don’t always have that experience. I come in and say, “Your governing documents and SOPs are important. If you do want to sell your company, people are going to look at that stuff. It’s part of the total package that you’ve built it correctly.” Yet a young entrepreneur is so into building their mission and brand awareness and getting their products to market. It’s important that young entrepreneurs and business builders hear this stuff from, unfortunately, those of us that are a little bit more seasoned and have been around the block.

It’s great advice. I don’t want to take all our time on your 6 P’s, and we want to leave people hungry for more to go to the book and pick them out. Let’s switch to some of the generic advice that when you come and meet a company, and say, “I always talk about readiness factor, and you probably do the same. What’s your readiness to be sold and have your exit strategy?” Any insights that you would give us?

I do look at the 6 P’s, all of them, when I go to see if a company is ready. I also go through a seller sanity check because a lot of sellers will walk away from the closing table because they have seller’s remorse. I want to make sure that my sellers are ready to sell. I walk them through this process to figure out, “After you sell, what do you do next?”

I help them identify their beginning strategy, so they’re comfortable with their exit strategy. If business owner doesn’t know what they’re going to do next, then they’re not comfortable. It’s difficult. Most business owners are comfortable doing day-to-day, doing everything they do all day long. They’ve run this business for several years.

The other side of that is extremely uncomfortable for them. I help my clients figure out, “What are you going to do next?” It might be a retirement. I sold this manufacturing business, and it was a husband and wife, and they kept backing out of all the deals and kept not signing the LOIs. I’m like, “This is a good deal.” They’re like, “We don’t know what we’re going to do next.” Finally, they called me up, and I said, “We finally figured it out. We have always been passionate about bed and breakfasts. We’re going to take the proceeds of the sale, and we’re going to go buy or start a BnB back in Vermont. I said, “Perfect. Let’s get another LOI.”

We ended up closing that business within three months after they decided what they were going to do next. It’s important for business owners to get crystal clear about what they’re going to do after the sale of the business. Plus, we got to get crystal clear with what they need from the sale. A lot of business owners will come to me and say, Michelle, I want to sell my business for $20 million.” The business might be worth $1 million.

FYE-GI | Business Valuation

Business Valuation: It’s important for business owners to get crystal clear with what they’re going to do after the sale of the business and what they need from the sale.

 

Just because you need $20 million to retire doesn’t mean that’s what the buyer’s going to give you. I get clear with the sellers to map that out. How much money do you need? How much do you need a month? How much do you need a year? Can we put it in some different trust so that we can decrease taxes, decrease capital gains, and different strategies, and things like that?

I also take them through, “What’s the most important thing for you in selling your business? Is it the money? Is it making sure your employees are taken care of? Is it making sure that your customers are taken care of? Is it making sure that somebody grows your legacy?” I got to take them through the seller sanity check to make sure that, Number 1) They can make enough to walk away. Number 2) They’re comfortable with what they’re going to do next. There are five types of buyers, but we know what type of buyer we’re looking for and what their priorities are. Does that make sense?

It makes complete sense. The piece I want to ask you next is about valuation. We know that a lot of people who have an early-stage business tend to only want to certify their valuation if they think they’re going to get investors. They’re doing their seed round funding or what they’re doing. You’ve got this period where maybe people aren’t getting that third-party valuation, and clearly, when they come to you, they have to do it as you described. What’s your advice or thought about independent valuation?

We do valuations. I’ve done thousands upon thousands of valuations. Have you ever watched Shark Tank?

Yes.

I love it on Shark Tank when they’re like, “Your valuation is way too high.” The common theme on Shark Tank is that their valuations are always way too high. They’re not even in revenue and giving themselves a $3 million valuation. People got to understand valuations. There are synergies. We didn’t get through the 6 P’s, but there are synergies, especially in proprietary, that people will pay a lot of money for. Facebook paid $19 billion for WhatsApp, and WhatsApp was hemorrhaging money.

There are ways to sell businesses that are not in revenue as long as you got a synergy that somebody is willing to pay for. WhatsApp had 1 billion users and Facebook knew that they could monetize that. When these people go on Shark Tank, they’re completely clueless about valuations, and they lose an investor because their valuations are unrealistic.

It’s the same reason that 8 out of 10 businesses don’t sell. Sellers are unrealistic in their valuations. Buyers are like, “I’m not paying for that. I’m not paying you $20 million when your EBITDA is $100,000.” I do valuations and educate sellers on how we come up with valuations and what buyers pay for. If you want to sell a business for $20 million, you better have the EBITDA, Earnings Before Interest, Taxes, Depreciation, and Amortization to support that price.

8 out of 10 businesses don't sell because sellers are unrealistic on their valuations. Click To Tweet

Michelle, I want to encourage our readers. Tell them what your corporate website is, and tell them what the website is for the book.

My corporate website is SeilerTucker.com. We’re in pre-sales, so you can buy the book on Amazon. However, if you go to ExitRichBook.com, you can get the book for $24.79, which is less than Amazon. That includes shipping the hardcover to your doorstep. You can immediately order the book. Read the book because we’ll send you the digital download. When the book comes out, we’ll send it to your doorstep, plus you get a lifetime membership into the Exit Rich Book Club.

FYE-GI | Business Valuation

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

There, we have me doing video training of all these different strategies and techniques and valuations but what we have that’s important is documentation. A lot of business owners are like, “Michelle, I’ve never seen an organizational chart before. I’ve never seen an employee handbook. I don’t even know what a letter of intent, a purchase agreement, due diligence checklist, or closing docs look like.” All the documentation that you need, and we’re always adding more documents, is there for your review but also for your download.

That’s so wonderful. I can’t express to early-stage entrepreneurs how important it is to have an understanding of everything that you mentioned. Maybe they’re not at the point where they need those documents or that they have the bench strength to get all of their infrastructure, processes, and procedures, but they need to have it on several months down the line. They need to get their house in order once they get off and running. I encourage my readers to not just read the title Exit Rich and think, “This isn’t for me,” because it’s for anybody who operates a business at whatever stage. Is that correct?

It is because Exit Rich is not just about selling your business. It’s about staying in business because 70% of business owners are going out of business, and that’s before COVID. It’s about building a business that works for you rather than you working for it. It’s about building a business that’s scalable, and when you’re ready, it’s sellable. Steve Forbes, who endorsed Exit Rich, says, “8 out of 10 businesses don’t sell.” Why do you think that is? That’s because business owners never plan for the sale of their business. Even if you don’t want to sell your business one day, that’s okay, but you’ve built a sustainable, scalable, profitable business along the way.

Michelle, I so appreciate the gift of your time. I thank you for joining us. I would like to encourage our readers. If Michelle said something that resonated with you, or if you know somebody who needs to hear her wisdom, use her company services, or pick up a copy of the book, please refer this episode to them. If there is an intelligent business owner, entrepreneur, or thought leader that you think I should be speaking with, send me a note at Connect@AllisonKSummers.com. Until then, keep your eye on the future. Michelle, thank you again for being a guest and sharing so much insights with us.

It was a pleasure. Thanks for having me.

 

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