Michelle Seiler Tucker is the Founder and CEO of Seiler Tucker Incorporated. 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. She has spoken alongside many prominent speakers: Eric Trump, Kathy Ireland, Mayor Rudy Giuliani, Donna Karen, Stedman Graham, Randi Zuckerberg, Steve Wozniak, and more. She is the Best-Selling Author of the book “Sell Your Business for more than It’s Worth” and has a new book coming out called “Exit Rich®.”
Exit Rich – https://amzn.to/3bXpYRs
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Michelle Seiler Tucker, Mergers & Acquisitions Specialist | Lessons Learnt From Selling 1000+ Companies
Thanks again for joining me. We’re sitting down with Michelle Seiler Tucker, who is the Founder and CEO of Seiler Tucker Incorporated. She holds an M&AMI, Mergers and Acquisitions Master Immediary title, as well as Certified Mergers and Acquisitions Professional, CMAP. She is a Certified Senior Business Analyst, CSBA, and she has been working in not only the startup space more exciting for me is the exiting where are you bringing that startup once it scales and grows, and now you want to have an exit event.
She is a veteran in the M&A industry. She’s regarded as leading authority on buying, selling, fixing, growing businesses. Her and her firm have sold over 1,000 businesses in almost every vertical and have a remarkable track record of success. She’s going to speak about sustainable scalability, building the sellable businesses, and the technique that she has repeated again and again with lots of entrepreneurs. This is an interesting one. Michelle, thank you for joining me. I’m curious to speak with you because most people speak about how to build a business and they don’t have that vision or that exit event in mind, which I think they should. I want to hear more about that. First, tell me your story. How do you get into this?
Thanks, Scott, for having me. It’s a pleasure to be with you. I didn’t wake up one day and say, “I’m going to sell businesses,” but I always knew as a kid that I was going to be my own boss. I was going to be an entrepreneur, and I didn’t really come from a family of entrepreneurs. My dad owned his own business and that was about it. I knew what I liked. Even as a kid, I never played with toys and dolls. My mom’s like, “What’s wrong with you?” I’m like, “No, mom. That’s the wrong question. You should be asking what’s right with me.” I would walk around the notebook and a pen and everything and ask everybody a million questions.
I would walk up to strangers and start asking questions, so my mom’s like, “She’s going to be the next Barbara Walters.” I knew I liked people and writing, and I would ask people, “What’s your problem? Let me fix it for you.” This was at 7 or 8 years old. I knew I was going to be a people person, a problem solver, a writer and an entrepreneur because I don’t like anybody telling me what to do. My biggest pet peeve is somebody telling me what to do. Even with my husband of, I’m like, “Don’t tell me what to do.” I’ve owned businesses in different industries and verticals.
I did get caught up in Corporate America. Xerox recruited me. I went to work for Xerox. I said, ‘Let me try this corporate position, Fortune 500.” I did that. I was there for about six months in sales. My nickname became The Closer every time they couldn’t close something, they would come to me and say, “Michelle, go close the deal. “You’re the closer.” My manager came to me and she said, “You should really throw your hat in a ring and interview for the vice president regional position for Xerox. You will never get it because you’ve been here six months and Xerox doesn’t promote when somebody’s only been here six months. You’re up against people who have been here 5, 10, 15 years.” I said, “If I’m not going to get it, why would I do it? Why would I waste my time?”
She says, “It’s a three-month grueling process, but it is a learning process and you’ll learn more doing this than anything else.” Everybody knows Xerox has one of the best training programs in the world, so I threw my name in a hat and she was right. It was a three-month grueling process. We had to meet with all the top-level executives at Xerox all around the world and do Q and As, presentations, demonstrations of their equipment to them, so it was a lot of pressure. I ended up getting it when everybody said I wouldn’t get it. I truly am The Closer.
Six months at Xerox, it’s not bad.
What happened was Xerox did what most companies should never do. You don’t take your top salesperson and promote them the management. Big mistake. I didn’t like it. When I went into management, I’m like, “All we’re doing is setting meetings to have more meetings, to schedule more follow-up meetings.” All we were doing was meetings. We weren’t doing what I love anymore. We weren’t meeting with the clients. We weren’t building lifetime relationships.
I told my husband, “I miss entrepreneurship, but I don’t want to leave my six-figure career with great benefits.” I stumbled across a franchise that had two locations and my husband knew the the owner. I said, “I want to buy a franchise and operate it on the side. They said, “No, we don’t want you to buy a franchise. We want you to partner with us because we know if you’re of your reputation. We know you’re The Closer. Partner with us and we’ll give you a franchise.”
I said, “I’m not going to leave Xerox for a franchise. It has two locations. You’re not very successful.” I said, “I’ll tell you what I’ll do. I’ll try it for six months.” You don’t have to say yes or say no. Sometimes there’s a middle road that you can take. I said, “Let me keep my great position here,” because I was climbing up the Xerox ladder really quickly. I said, “Let me try it for six months and see what happens.” Within six months, I sold so many franchises. I quadrupled my salary at Xerox. It became a no-brainer to leave Xerox, partner with this franchisor and they gave me a franchise.
Here’s the problem. A lot of business owners will start a business they never build the foundation. They never put any infrastructure for it to succeed. They focus on sell but what happens when you get all these clients coming in and you don’t have the infrastructure? They were over-promising, under-delivering. They weren’t servicing their franchisees. I realized quickly that our values weren’t aligned.
At that point, I said, “Buy me out. What am I going to do now? I’ll transition to selling businesses. How much harder can it be?” I transitioned to selling companies, small businesses at first, and I transitioned quickly into selling large businesses and then learned that what Steve Forbes said is true, 8 out of 10 businesses don’t sell. Steve Forbes endorsed my book Exit Rich. I said, “If I don’t fix them and grow them and build to sell, I’m going to starve to death and I have to go back to Xerox.” That’s my story.
I like the story it’s interesting. One point that I want to take out that is that you didn’t go full into the entrepreneurship and totally negate your job. When you did that, when you took the franchise and you started and you were successful at it eventually, you still did it smartly. You did it the correct way and you dipped your tone to the water and then you found out it was successful. That’s a smart entrepreneurial lesson.
I think people start their businesses, they don’t know what they’re doing. They put all their life savings or energy into it, and they just quit their job and go full tilt. If they don’t have the right mentorship, that’s going to screw them over. You found out that you’re good at selling businesses. What is the market? What is the industry? Who are your competitors? Are you competing with lawyers? Who else does what you do?
I’m not competing with lawyers at all. I never compete with lawyers. Typically, other M&A advisors. I belong to M&A Source, so other M&A advisors, other brokers from time to time and sometimes investment bankers. Those are my competitors. However, it’s not a competitive industry. It’s not like a lot of other industries. Real estate is so competitive. Everybody sells real estate. It’s not as competitive as you would think. There are 32 million businesses in the United States, and there are 3,000 brokerage firms, M&A firms.
How do you choose which businesses that you want to help sell? What’s the business that you go after?
I don’t just sell businesses. I want to make that clear. I specialize in buying, selling, fixing, growing. I buy businesses and flip them. I also partner with business owners because there are a lot of businesses that are not sellable for the price tag that the owner needs to exit their business. I’ll partner with business owners investing my money, resources, time, energy, effort, and expertise. I’ll buy and flip or I’ll say, “This is your plan build. This is what you need to do. Come back to me when you’re done.” We have an online build-to-sell course that we’re finalizing so business owners can walk through that course.
The way that I decided who I’m going to sell is, personally, the businesses that I focus on are $10 million and up in purchase price. I have a team of analysts and agents and they’ll sell smaller businesses. For my company to decide to take on a client, the owner has to be realistic. The owner has to understand valuation. If they want $20 million for their business and their businesses are worth $5 million, they’re going to have to work with us at $5 million or not work with us at all.
There are plenty of brokers and advisors that will take that engagement and put it on the market and hope somebody educates their seller. I don’t do that. If my sellers are not coachable from the beginning and if they’re not going to listen to my expertise, then I don’t want them as clients. They’re going to move my statistics too.
I got ahead of myself. I got excited about trying to figure out who your target customer is. Before we jumped on this, I watched your Sizzle Reel on YouTube. You made a good point, and you do a lot of keynote speaking, which is impressive. This is something that entrepreneurs have to hear. A lot of people build themselves a job and not a business. That’s the basis. What does that mean? What do entrepreneurs screw up?
That is the basis and that’s one of the biggest reasons that businesses are not sellable, that 8 out of 10 businesses don’t sell. Entrepreneurs have built themselves a job, meaning that the business is attached to them. They’re doing everything. I’ll give you some examples. Let’s say you have a dental practice, one dentist, dental hygienist. If you pull that one dentist out of the dental practice, is there a business? No. The dentist has created a job to where he goes to work every day. He hasn’t created a business that works for him.One of the biggest reasons that businesses are not sellable is because entrepreneurs have built themselves a job, meaning that the business is attached to them. They're doing everything. Click To Tweet
He can’t take qualifications, he can’t leave his practice and that’s a job. That’s not a business. Same thing with a chiropractor. We’re trying to sell a chiropractic clinic right now. They had two chiropractors and the owner was confident so that those two chiropractors were staying, and they’re not. Now we’re back to square one. You got to build a business that can operate without you and that’s the first P that we talk about, the six Ps in Exit Rich. It is people, you got to build a business. You don’t build a business. You build people and people build the business. Otherwise, you have a glorified job.
You have frameworks and models, and these frameworks are meant for exiting. That is your bread and butter. You, at one point, want to have a transaction for the business. There are two models that you mentioned. There’s GPS Exit Model and six Ps. These are proprietary. You built these over your career. This is what you teach entrepreneurs.
These are good models to go through regardless of having that exit plan. These are good frameworks for building successful businesses. I don’t know what your thoughts are on that but I would love to dissect at a high level. You can’t go with all the detail on the show, but at a high level, what are these frameworks? Which one do you want to start with?
Let’s start with the GPS Exit Model because it leads into the six Ps. Exit rich is not about selling your business. As you said earlier, rather you want to sell now or later, exit rich is about building a sustainable, scalable asset that you have to sell when you’re ready. There are many business owners that would love to sell but they’re being forced to sell for pennies on the dollar, closing their business or file bankruptcy. When I wrote Sell Your Business for More Than It’s Worth in 2013, I did the research back then and found out that 85% to 95% of startups would close.
We all know that startups are always at great risk, but those 1 to 5 years are the most vulnerable when a startup will go out of business. When I wrote Exit Rich in 2019, in 2020, I did the same research and I learned that the business landscape has changed dramatically. It’s only 30%. It’s a flip flop, it’s only 30% now of startups that will go out of business. Startups are at less risk. However, out of 27.6 million companies, those businesses have been in business for ten years or longer, 70% of those businesses will go out of business. That’s a huge number.
They’re failing much later.
They’re failing much later. You hit the nail on the head. It used to be, Scott, that if you were in business 5, 6, 10 years, you’re golden. You can write your ticket. That’s not the case anymore. The business landscape has changed. Now you hear about the public companies all the time, like Toys”R”Us. They have been in business 70 years, gone. K-mart, gone. Sears, having trouble. JC Penney’s, Montgomery Ward, iMart, Pier One. GNC is closing down 900 locations. What you’re not hearing about are the private companies.
Those are public companies. You’re not hearing about the private companies on every street corner in every state across our great nations. The reason for this is because business owners stop doing one thing I call AIM, which is Always Innovate and Market. Amazon has changed the way that consumers purchase products and services. Amazon has made it so easy to purchase anything. You can buy a horse on Amazon and have it delivered to you in two days.
Business owners have to keep innovating. The GPS Exit Model is set up for success, and the problem with business owners is they don’t think about selling until a catastrophic event has occurred. They’ll call me up when they say, “There was a death. The owner died. There are health issues or there are marital issues. We’re going to have a divorce.” Also, COVID, a hurricane, a tsunami or a tornado or fires in California. The list goes on. The worst time to sell your business is when a catastrophic event occurs because a business is typically turning downward.
Business owners don’t have a plan, and the GPS Exit is designed to plan your exit from day one, starting or buying your business. When you want to drive somewhere, what’s the first thing that we all do? We don’t pull out maps anymore. You’re too young to remember maps, but now we pull out our phones. We plug in our destination. It’s so easy these days. We tell our GPS where we want to go. It’s the same thing in business. The business owners need to figure out their end game. They need a destination to drive to. They need to figure out what they want to sell their business for. If they say, “I want to sell my business for $20 million,” great. Now we have a start of a plan. We have a number. We have a target.
Now, what does the GPS need to know? The GPS needs to know where are you starting from. What’s your current location? Business owners need to know their current valuation. Scott, I’ve been in this industry for many years. Humans get annual physical checkups every year if the humans that want to stay on this earth for a long time. We take our cars into the shop and we get checkups on our automobiles, but we never get evaluation checkups on our business.
It is financial suicide because there are things that happen that increase and decrease your valuation. COVID has decreased evaluation for a lot of companies, but there are other industries that have increased evaluation for. Know your endgame. “I want to sell for $20 million.” Know where you’re starting at. What is your business worth now? Let’s say it’s worth $5 million. The problem is that business owners don’t have a roadmap.
They drive around in circles, going up and down to financial hills to end up nowhere or out of business. That’s what we want to prevent. Once you know your endgame, $20 million, your current valuation, $5 million, now you need a timeframe. Let’s say you want to do this in 10 years. Now we have a startup plan. We need to reverse-engineer it. Now you need to know who your buyers are going to be.
I say buyers, not buyer. Many sellers put their eggs in one buyer’s basket and I can promise you, in all likelihood, that deal will fall apart. You need backup buyers. There are five types of buyers. Let me tell you who’s not going to be your buyer? A first-time buyer is not going to buy your business because your business is $20 million. First-time buyers cannot afford a $20 million company.
First-time buyers are one type of buyer. Turnaround specialists are not going to buy your company. It’s either going to be a private equity group, strategic/competitor, or a serial entrepreneur. Now you need to know what’s the numbers need to look like? For me to sell $20 million, where does the gross revenues have to be? What are the profit margins and most importantly, where does the EBITDA, Earnings Before Interest Taxes Appreciation, Amortization, have to fall? If you’re going to sell for $20 million, it’s going to have to be around $3 million to $4 million.
You need to know what the characteristics and synergies that buyers will pay top dollar for? You then build that business based upon that blueprint of what buyers are looking for. That’s how you create a bidding war. When you’re ready to sell that asset in ten years, you are ready. You’re not having to start from the beginning. You need to know your why. Why do you want to sell business for $20 million? How many people have come up with goes or New Year’s resolution, Scott, and never keep them?What are the synergies that buyers will pay top dollar for? And then you build that business based upon that blueprint of what buyers are looking for. Click To Tweet
All of them.
That’s right. The reason they don’t keep them is they don’t have a powerful why. The why has to be so strong that it has to keep you motivated. It has to keep you in the game. It has to keep you weathering the financial storms and all the catastrophic events that occur because they will occur. You’re going to have a powerful why to keep you motivated. Once you figure that out, start building a business on the six Ps. Any questions on that?
No. I’m going to ask what the six Ps are. I guess my question, because you work with a lot of entrepreneurs, is why is this not more common sense? It makes sense to me when you explain it. It makes sense to me to have the vision. It makes sense to me that even if you don’t know if you want to sell, to aim for the KPIs and the milestones that an investor would deem to be a purchasable business. If your business is purchasable, you’re doing well. You’re doing good. It’s a good goal to have. Why do people not take this into account?
Common sense is not very common. It’s so logical. It’s so common sense that. Build a business even if you don’t want to sell it. At least you got a profitable asset that’s making you money and it’s on cruise control. The biggest reason why is because business owners just get stuck in the mentality of running their business. I call entrepreneurs firefighters because what are they doing? They’re building their business, putting out fires. Every day, lots of fires occur.
A lot of entrepreneurs are wearing a lot of different hats and they’re putting all of these different fires and they’re working in the chaos in the business versus on the business. You need to work on the business as a visionary and have an integrator. They can carry out your vision and make sure it gets integrated and it gets implemented.
Business owners go so stuck in their head, plus they think, “This is my baby. I’ll never sell my baby.” It makes no sense. It’s the same thing like a parent that has kids. What do we do? We plan for our kids. Where are they going to go to school and college? If we do estate planning, we have a will. We don’t plan for the biggest asset. It’s because business owners have these blinders on and they’re not thinking about their future. All they’re thinking about is now that’s why we have to change it. If we don’t change it, we’re going to have a lot more than 70% of businesses go out of business. Small businesses are the backbone of our economy, employing over half the US workforce. If we lose small businesses, we lose our economy.
Now with the tumultuous nature of brick and mortar and wherever that’s going to end up after pandemic and lockdown, this future-proofing and planning is more important than ever.
This pandemic also changed the way that we purchased products and services. It’s changed what’s important to us. It changed how we buy things. Amazon changed it first and now the pandemic changed it even more. Nobody even wants to go to the grocery store anymore.
I’ve gotten good at grocery delivery. It’s interesting how much we’ve shifted our habits.
Habits can shift quickly but the problem is the business owners are not pivoting enough to keep up with the shift in habits.
When you said that AIM, what was it? What’s the acronym?
Always Innovate and Market
I love that acronym. It’s so relevant. That’s one of the best acronyms I’ve heard to teach over to entrepreneurs, for sure. The other thing I want to touch on, because this is part of this framework, this part of Exit Rich and what you do for entrepreneurs is the six Ps. What are the six Ps? I’m sure they’re valuable for entrepreneurs. That’s why I want to go into them.
They are valuable and let me tell you, even if you’re not going to sell your business, if you use this foundation, you’re going to have a profitable business. They can operate without you. Number one is people. You don’t build a business, you build people and people build the business. You got to make sure that the business is not dependent upon you because buyers want to buy a business, not a job. You have to have the right people in the right seats. Many entrepreneurs want to do it. They’ll do everything.
Entrepreneurs need to focus on their strengths and hire their weaknesses. Make sure you have the right people in the right seat, and then Scott, most importantly, ask the who question. Who opens the door? Who handles customers? Who deals with marketing? Who handles customer relations, customer service issues, legal, accounting, workers comp? Who handles environmental logistics, transportation, manufacturing? The lists goes on.
The clue is you should never be next to the who, Scott. The best way they build the business without you is to make sure you have answered the who and put the right people in the right seat and have a layer of management. Most entrepreneurs are not good managers. A lot of entrepreneurs are not always good leaders. They’re not always good at operations. Focus on your strengths. Hire your weaknesses.Most entrepreneurs are not good managers. A lot of entrepreneurs are not always good leaders. They're not always good at operations. So focus on your strengths, hire your weaknesses. Click To Tweet
The second P is product. Product is more crucial now than ever before. That’s the industry you’re in. You have to ask yourself, is your industry on the way up or out? Are you thriving or dying? Do you have an Amazon or a Blockbuster? If you have a Blockbuster, don’t panic. This is not the time to panic. This is the time to align yourself with an expert. A lot of times, an expert and an outsider can see things that you cannot see.
When you’re in a fog, it’s foggy. You’re in the middle of the chaos. It’s hard to read the label from the inside of the bottle. I always say, “Get an outsider’s perspective.” Ask three transformational questions. If you are in an industry that’s dying, number one, do what Amazon did. Amazon asked themselves, “What business are we in?” This was years ago. “We’re in a book-selling business. What do we do well, better than anybody else? We do fulfillment better than anyone else. What business should we be in? We should be in a fulfillment business.” They moved that quickly into fulfillment. Remember, transformational. Many business owners are transactional.
You got to get out transactional and become transformational. Those three questions took Amazon from a small bookseller to a multibillion-dollar conglomerate that they are now. The third P is Processes. Many business owners, Scott, never think about processes until something happened. Let’s say all of a sudden, somebody gets hurt in a warehouse. We need a process for health and safety. Our clients get upset and are bashing a company on the internet. We need a process for customer appreciation. Processes need to be designed from the beginning of your company. Have you ever watched a movie, The Founder, based upon the McDonald’s brothers?
With Ray Kroc? Yes
Yes. Did you watch that movie?
Yes, I did. He was almost obsessive about process where he was timing how people were moving around the kitchen.
Even before Ray Kroc, the McDonald Brothers back in the ‘40s, they had the drive-up Sonic-type restaurants. Back in the ‘40s, they never perfected the processes, so the food was always cold. The order was always wrong and it took so long. McDonald’s, back in the ‘40s, without Ray Kroc, said, “We want to design a restaurant fast food restaurant with the customer experience in mind. What is our customer objective? We want our customers to get great-tasting food that’s hot in two minutes or less. How do we do that?” Do you remember when they went out to the empty tennis court? This is way before Ray Kroc.
Yes, I do. I’m thinking back. I watched that on Netflix a while ago, but I can’t remember what they di. I remember the scene.
They went to an empty tennis court. They took all their employees and said, “Let’s figure this out.” They drew it out and they erased it and drew it out and they were there all day until they finally figured it out. “Who takes the order? Who toasts the buns? Who cooks the burgers? Who puts the pickles on the buns? Who gives the order to the clients, two minutes or less?” Those processes now, yes, they get perfected as you go. Yes, they get tweaked as you go, but those processes are why you can eat at a McDonald’s in Singapore, McDonald’s in Australia or USA because the processes are designed with the customer experience in mind. No matter where you are, it’s the same experience.
It was almost like they were choreographing the workflow.
They were choreographing. They did it with the customer experience in mind. This is a point I want to drive home to your readers. Many business owners map their processes with their objective, not with the customers. That’s why they have a lot of unhappy clients. There are a lot of processes that alienate us. Think about when you’re trying to call your credit card company and you have to push all these buttons. You have to push like twelve buttons before you can get a live person. That’s not a good process. There’s so many processes.
Think about how much business you do with other companies that are like, “That’s a terrible process. They should rethink that.” Processes should always be designed with a customer experience in mind. Be productive and efficient. Here’s the caveat. Well document it in a policy procedure manual with SOP checklist. You’d be surprised how many companies, $10 million, $20 million, $30 million, $40 million, $50 million that don’t have good documented processes. I can’t even emphasize enough.
It doesn’t matter if it’s stuck up here in the CEO’s head. It has to be something you can teach.
That’s another brilliant point. We have a fabrication company we’ve been trying to sell for a while. I knew it was a problem when I took it on, but I took it on as a favor to a friend. Two owners. They have been in business 35 years, Scott, four employees. Where is all the data? In their head. The reason we haven’t been able to sell it is the owners are almost 80 and the buyers are like, “There is so much information on their head, none of it’s documented. We don’t know what to do after we would buy the business. How would we operate that business?” It’s important to get that document out of the CEO’s head onto paper so it can be duplicated.
We got three Ps left. I want to make sure that we don’t run at a time because it’s good stuff. We could probably go for longer. What are the last three Ps?
The last two are quick. Proprietary is going to take me a bit at a time. It is the highest value driver. Proprietary can take you from a 5x to 10x multiple like that. The number one in proprietary is branding. How well-branded are you? The bigger the brand, the bigger the price as long as that brand got is relevant in the mind of the consumers. Is anybody going to pay anything for Blockbuster?
No. Netflix turned it down a few times. There was a company that offered to purchase Blockbuster, and I think they turned it down.
Yes, they should’ve taken that, and they were offered to buy Netflix and they turned that down.
That’s what I meant there.
They could have bought Netflix and they turned that down. Big mistake. They also didn’t AIM, they didn’t innovate. Branding is huge. The biggest brand in the world is?
I don’t know. I guess, Amazon. Everybody knows Amazon. Tesla’s up there right now.
Apple is the biggest brand in the world. The Apple brand is worth $189 billion. That’s without cashflow. That’s without equipment, inventory, receivables, assets, or anything real estate. Build your brand, build your exit. Trademark, Scott, very important. Here’s the problem. In America, business owners go start a business or they buy a business. This works on the buying side, too. They never check the federal database.
They go and get a state trademark for their company name. They’re in business 5, 10, 15, 20 years. All of a sudden, they receive a letter in mail that says, “You have to cease to desist. Stop using this company name because somebody else has your federal trademark.” Spend the $1,500 or $2,000 and protect your company name. If you have a podcast and you’re starting to build some momentum, you better go trademark that. Get a federal trademark. I registered Exit Rich, I registered the six Ps, and did GPS Exit Model. Go protect your IP. Also, patents are huge. Do you watch Shark Tank?
Yes, I do.
Every shark always asks what question?
Do you have a patent? Do you have a trademark?
Go out and get those patents. It’s very important to get those patents. We sold a company for $18 million. It was losing money they had eighteen patents. It was sold off for $1 million a patent. The other things that are valuable are contracts like manufacturing contracts, vendor contracts, distributor contracts. Franchisor. If you have a bunch of franchisees, the most valuable of all contracts are client contracts because buyers want to buy cashflow.
They want to make sure you have reoccurring revenue, you got customers on contracts so they’re going to continue to get money for 1, 2 or 3 years. Here’s a caveat to contracts. They have to have the two-sentence transferability clause. If you all haven’t learned anything yet, learn that, the two-sentence transferability clause, because 99.9% of all sales are asset sales, not stock. If you have 300 contracts and you’re not transferable, it literally could stop the deal in its tracks.
When you sell, is it normal that when you create these contracts, that’s what you’re setting up ahead of time so that the client can’t exit the contract when the business sells?
Correct. There was a franchisor that sold that have 1,500 franchisees. The buyers, a net private equity group, by the way, never did their due diligence. The legal side never did all the due diligence. They did due diligence, but they never looked at the contracts. None of the contracts were transferable. They had this big party for all the franchisees.
Two franchisees transferred over, all the rest of them started their own franchise together. They didn’t have a non-compet. The franchise agreement was null and void because it was not transferable in the assets sale. That private equity group ended up going out of business and filing bankruptcy and suing their entire legal department for not protecting them. Databases are really important. Databases are typically overlooked by most advisors. You can be losing money but you could sell. What we’re talking about right now are synergies.
Databases are a synergy. Contracts are a synergy. Patents are a synergy. You could be losing money and sell your database. Facebook paid $19 billion for WhatsApp. WhatsApp was hemorrhaging but they had a billion users. What I’m trying to get your readers to understand is build these synergies because this is what gets you the highest price and this is what creates a bidding war. Last but not the least in proprietary, and I’m almost done with this, is what I call IP real estate. Let’s say that you have a skincare line and you’re on Oprah’s Favorite Things and Oprah Winfrey has endorsed it. Do you how much money that’s going to get you for the sale of your company?
Let’s say that you manufacture couches and furniture, and you’re number one on Wayfair, Etsy, and on Amazon. Any of those search engines is huge. Strategic will play a huge penny for that. That’s it for proprietary. My fourth P is Patrons. I ask your customer databases. Most business owners follow 80/20 rule, where 80% of their business comes from 20% of their clients.
If they lose a couple of clients, they can literally be out of business. You want customer diversification, not customer concentration. A lot of businesses have customer concentration. Plus, if you’re aging, if your business is 15, 20, 30 years, your clients are probably aging out. You always have to AIM. Innovate so you can get the Millennials. The Millennials don’t buy the same way that Baby Boomers and Gen X buy.
The last P, the most important P to entrepreneurs, is Profits. Everybody’s in this to make money but profits are never the problem. They’re always the symptom of not operating on one or the other five Ps. Clients will come to me and say, “Michelle, I have a profit problem.” I’m like, “No, you have a people problem. You have the wrong people. You’re trying to do everything yourself,” or “No, you have a process problem. Your process is costing you this much waste, which is causing you to lose money.” Profits is never the problem. It’s always the symptom. If you’re not making money, go back and look at those five Ps.
If somebody’s focused on the profit, then they’re all about the lagging indicators for why their business is failing.
It is a good KPI. When you’re not profitable, that is a key performance indicator that you’re missing some of these five Ps.
I knew it was going to be a good framework. Those are all very good points.
It’s common sense, though, right?
It is until you’re stuck in the day-to-day, you don’t have time to think about it or you’re stressed and you keep putting it off. I’ll reevaluate my standard operating procedures later on. I’ll relook at my workforce. I’ll make sure that I’ll audit my team. I have to push that out until later when I’m chasing a big client. I’m doing all these different things that I probably shouldn’t be doing as a CEO or a Founder.
That’s why you have to have an integrator. That’s why you have to have somebody because visionaries are typically not the integrators and you can’t do everything yourself. You have to have somebody else. Make sure your policies and procedures are intact. Make sure that your IP is protected. Make sure you got checks and balances that somebody’s not stealing money in your company. This happens all the time. I would say one out of five companies I’ve worked with had an embezzlement problem.
It’s surprising that it’s at that level, but if it’s the entrepreneur’s not paying attention, then you can’t just assume everyone’s going to be trustworthy. They’re given the accounts, the books, all that for years and nobody’s paying attention to what they’re doing.
That’s why you got to have checks and balances and inspect what you expect. Trust but verify.
To close up, I have a couple of rapid-fire questions to bring out some last insights from you and your career. Is there anything that was from your book or something to do with what you do that you wanted to bring up that we didn’t talk about?
I do want to tell your readers where they can go buy Exit Rich.
Let’s do it. Tell them at the end. You’ll give them your social stuff and they’re going to go check you out and go get the book on Amazon or wherever it’s listed. What I’ll ask you now is a few rapid-fire questions from your career. I want to draw out some lessons. Somebody is looking to work in M&A. I made the mistake of saying, are you competing with lawyers? Investment banks are a smarter thing to compare your work with. I’m just thinking suits for whatever reason. If somebody wants to work in M&A, what do they do? What do they have to learn? How would they pursue a career like yours?
The M&A world is not an easy world. It’s a tough world, with about a 98% failure rate. The first thing you want to do is not do it alone. You want to find an organization that has multiple locations or somebody that’s opening up multiple locations or go work in an M&A firm. We have a partnership program. If somebody is looking to get into M&A, they can partner with us and we have a five-day training course. We have a 600-page training manual. We do all the evaluations and all the corporate leg work here and we provide all the leads and everything else. I would just say don’t do it alone. Go into business with somebody you’re in business for yourself and not by yourself because it is a tough industry. You need credibility. The most important thing in M&A is credibility.The most important thing in M&A is credibility. Click To Tweet
What is one myth about selling a business that you want to debunk?
The sellers think they can do this on their own. It’s like if you need heart surgery, are you going to rip up in your chest, pull your heart out, operate on it and stick it back in your chest? No. Selling a business is your most-priced asset. You need an expert. There are too many things that can go wrong.
A lesson that you would tell your younger self.
Get a mentor early on. Align yourself with mentors and experts who’ve been down your path early on. I didn’t really start getting a mentor or start working with any type of mentors or leaders until 2011, 2012. I’ll be the president of the United States if I started earlier, although they don’t make enough.
Last question. In business or career, what does success mean to you?
Success to me means lots of referrals. It means that I’ve made an impact on somebody’s life, that I’ve helped somebody succeed or helped somebody sell their legacy. Success to me means that I helped business owners exit rich when so many of them are, unfortunately, exiting poor.
You’re killing it from a professional point of view. You’re making money, but it’s a feel-good story at the end of the day too. It is also unselfish when you think about like what you’re doing. It’s a good feeling. Most importantly, where can people get the book? We order the book, check you out on social.
First and foremost, let me tell them a bit more about the book. I’m proud that Steve Forbes endorsed the book because that means Steve Forbes doesn’t put his name on everything. Plus, the book is an Inc. original. I was surprised that he endorsed it when it was an Inc. original. They published books too. Forbes does. Sharon Letcher is my co-author who wrote Rich Dad Poor Dad with Robert Kiyosaki. She’s a five-time New York best-selling author.
Plus, she’s written several books in the Napoleon Hill Foundation. She’s a CPA, a financial literacy expert, the advisor to many different presidents and her husband is an intellectual property attorney. At the end of every chapter, you have her wisdom from her perspective and sometimes her husband’s perspective, especially when we talk about proprietary. We have heavy hitter testimonials from Les Brown, who I love and adore. Brian Tracy, Tom Hopkins, Mark Victor Hansen, Jack Canfield, and Ford Riley.
You got some very big names on there. Good for you. Congratulations,
We have some really big names. Where can I get Exit Rich? Exit Rich also is not just about selling. It’s about building that foundation. There’s 6 or 7 chapters dedicated to valuations and how to negotiate with each of the different types of buyers and what’s the important negotiating techniques for each one of those buyers. Go to ExitRichBook.com. They can get the book right now for $24.79, which is less expensive than Amazon. We will email the digital download to them immediately, Scott, so they don’t have to wait. We will send a hardcover to their doorstep to anybody in the USA. Outside of the USA, we will send them the Kindle and then they will all get a lifetime membership into Exit Rich Book Club.
Exit Rich Book Club is video content and me training all these different principal strategies and techniques that I’ve built over the years. Plus, even more importantly than that, is documents. A lot of business owners are like, “Michelle, you have it as an example an employee handbook or non-compete or an org chart or a policy and procedure manual?” A lot of business owners are like, “I don’t even know what a letter of intent looks like or what a purchase agreement looks like, or a sample due diligence checklist or closing docs.”
Here’s the thing about all these documentations. There were thousands upon thousands of dollars to get them created or to look for them on the web and I have them all right there for your immediate download. That right there is probably worth $25,000. We also give them a free membership in the Club CEOs, which is a mastermind. It’s an entrepreneurial group. We do hot seeds Q&A and things of that nature.
I’m glad you broke that down. I didn’t realize there was so much to it. You get the book, but then you get a whole bunch of others.
You get the whole bunch of other now and then we send this beautiful 360-page hardcover to your doorstep.
A lot of people come on the show and speak about books and some of the books are based on their life and are highly specific to what they’ve done in their careers. Talking to you, I feel comfortable saying that this is for any entrepreneur, not just if you’re exiting. The principles that you’re discussing, I’ve worked with entrepreneurs, I’ve worked in a lot of different business environments and these are all things that people have to learn. That’s a lot of value for a book. I’ll end up checking it out after this. There are a couple of things that I want to learn. I might have access to that mastermind group too. That’d be useful for me. That’s good.
Thank you. We’re always adding more content to the library too.
Outside of the book, do you have other places that people should go to connect with you?
Yes, my website is SeilerTucker.com and they can also text Michelle to (888) 526-5750 and all of my social media will pop up. I have Twitter, YouTube, Facebook, LinkedIn and Instagram. I have all that stuff.
- Seiler Tucker Incorporated
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- Rich Dad Poor Dad
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