Michelle Seiler Tucker is the Founder and CEO of Seiler Tucker Incorporated. As a 20-year veteran in mergers & acquisitions, Michelle has sold hundreds of businesses. She owns and operates several successful companies and holds the following professional designations and certifications: Merger & Acquisition Master Intermediary (M&AMI), Certified Senior Business Analyst (CSBA), Certified Mergers & Acquisitions Professional (CM&AP) Certified Business Broker (CBB), Panelist for M&A Source, Keynote Speaker.
Michelle is also the Best-Selling Author of the book ”Sell Your Business for more than it’s Worth,” and her latest book “Exit Rich” is available now for purchase. In addition to being featured in INC, Forbes, and USA Magazine, Michelle 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. Michelle also shares her wealth of experience with perspective M&A advisors by conducting multiple training, mentoring, and partnering programs. Over the years, these programs have helped many individuals become successful M&A advisors and business brokers.
Recognized as the leading authority on buying, selling, fixing, and growing businesses, Michelle sees opportunities where many are discouraged or have given up. Her passion is to save businesses that might otherwise close. By identifying and correcting the top mistakes business owners make, Michelle will fine-tune a business into a well-oiled machine. Sometimes investing her own money to help owners build their businesses, Michelle’s primary objective is to sell for huge profits.
Michelle Seiler Tucker’s remarkable track record proves her dedication to her clients and has solidified her as a formidable force in her industry. She closes nearly 98% of all written offers and, on average, obtains 20-40% above the asking price for her clients. Through this process, she empowers her clients to afford the lifestyles they have always dreamed of and, most importantly, deserve!
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Michelle Seiler-Tucker – The Inside Track To Selling A Private Company [Podcast]
Every executive of a privately held company has to ask him or herself all the time, how much is my business worth? They might ask, who’s going to buy it? How long will it take to sell? When do I get my money? I’ll host of questions that are very disturbing if you don’t have good answers, so to give us some good answers, Michelle Seiler Tucker.
Michelle, welcome to the show.
Thank you so much for having me. It’s a pleasure to be here, Joel.
These are burning issues. These are not questions that people take lightly. In many cases, it’s their life’s work tied up in their business. Maybe it’s good for them to give to their family. Maybe it’s not, but they have these kinds of questions and problems. Hopefully, you can give us a little bit of resolution so that these people can sleep a little bit better at night.
I would love to. I love business owners to sleep well at night.
I imagine the day somebody closes and gets their money, they sleep pretty good.
They do as long as we do the work ahead of time. When I say do the work ahead of time, that means take them through the seller sanity check ahead of time because most of the business owners don’t know, what I need to live on. How long do I need that money? What am I going to do with that money? What am I going to do when I exit my business? What’s my beginning strategy going to be? Who’s going to take care of my employees? Who’s going to take care of my clients, etc. I bring sellers through this whole process because if they never plan their beginning strategy, they’ll never exit their business. Does that make sense?
What’s interesting about that is that they’re busy focusing on their business, and in order for them to exit, an entirely new set of issues has to be addressed, which most of these people are probably never thinking about that. Maybe the most important of which is what am I going to do with the rest of my life?
If we don’t plan their beginning stage and what they’re going to do next with the rest of their life, they’ll never or sabotage to sell. They do it all the time. I see it happen again and again. I try to get owners comfortable with, “What am I going to do next?” I had a husband and wife own a manufacturing business and they turned down six different LOIs. Every single LOI met the price and terms we set up in the engagement agreement.
They kept finding a reason to net pick. I finally said, “You got to figure out what you’re going to do next.” They called me and said, “We’ve always been passionate about a bed and breakfast. That’s what we’ve always wanted to own. We’re going to take the proceeds of the sale and we’re going to buy a bed and breakfast or we’re going to start one. We wanted one in Vermont.” That’s what they decided to do. Once they made that switch and figured that out, then the next off was to buy them. They accepted and made it through due diligence and we closed. Sellers have what’s called seller’s remorse.
What I’m hearing is that suddenly they were motivated to move forward because they had something to move forward to as opposed to going into the abyss, which they couldn’t relate to at all. Very smart. You’re a business sale and an intermediary.
I’m a Mergers and Acquisitions Master Intermediary. I’ve been doing this for many years and sold over a thousand businesses. I don’t just sell businesses. I buy businesses. I flip them. I also partner with business owners that are struggling to help them build a business, so it’s sellable for their desired price tag. I focus on buy and sell and fixing and growing.
One of the things that the brokers or people in the middle, the intermediaries, there’s side number 1, number 2, then there’s the deal. Your job is to advocate for the deal in the middle so that the deal gets done and help the seller get out of his way or something. Is that pretty close?
Yes, and there are a lot more moving parts than that. We always make sure that we have backup buyers. We never stop marketing. We never take the business off the market because the likelihood of a buyer falling through in due diligence is pretty prevalent. We also try to do the majority of our due diligence upfront because we want to make sure there are no skeletons in the closet. We want to know where the bodies are buried and where everything is before we do get into due diligence.
It’s interesting. The questions that I start out with are, how much is the business worth and who’s going to buy it? Those are front-end questions but they’ll never get through the front end if they don’t do the things you’re talking about to get to the close. The front end is a lot different than the close. There are a lot of things that happen, which is what you’re describing in between. I want to sell my business, and you get a check. Let’s go through a handful of those things. What would you say are the most important things that the management or the owner of a company needs to do in order to sell their business?
The biggest saying is to plan your exit, believe it or not. Number one is plan your exit. Nobody thinks about selling until they have to due to a catastrophic event has occurred. Business owners who thought about selling are now saying, “I got to sell it because of COVID,” because their business is going down. Business owners never think about selling until a catastrophic event has occurred, external or internal, health issues, divorce, partner disputes or all kinds of different reasons.
When you are thinking about selling, that’s typically the wrong time for you to sell. 8 out of 10 businesses don’t sell according to Steve Forbes. Steve Forbes endorsed are book Exit Rich. The big thing is plan your exit. Determine what is my desired end game? What is my desired sales price? What do I want to sell my business for?
If you want to sell your business for $20 million, then fine. I call it the Seiler Trucker GPS Exit Model. That’s your destination, but you need to know your current location or valuation and where you are starting from. A few businesses worth $10 million and you want to sell it for $20 million. What’s your timeframe? Five years? Reverse engineer it and say, “I’m manufacturing. Who’re my buyers?” There are five types of buyers.
First-time buyers are not going to buy my business, but a private equity group might be interested in my business. If I have over $3 million in EBITDA, then a private equity firm might consider purchasing my business for a platform. Private equity goes in two ways, platforms and add-ons. A private equity group might be a good fit, a strategic or competitor. You need to know who’s your buyer going to be and what’s their buying criteria. What are they looking for? What is the EBITDA needs to be? Everybody always focuses on gross revenues. It’s not about the gross revenues. It’s about the EBITDA. Most private equity groups won’t even look at you unless you have over $3 million in EBITDA. You need to plan that exit first and foremost.
Do you start working with companies five years in advance?
I do, and I have. I got a company now that we’ve been working together for five years. Our plan is to sell for $10 million and we’re almost there.
You help companies think about it and organize themselves because, from a financial accounting perspective, a lot of the smaller, middle-size companies, the $10 million and $20 million companies, don’t necessarily have the best financial accounting records. Sometimes they treat these companies like they’re their personal piggy bank. They save taxes upfront but pay the price when it comes time to sell because their EBITDA is almost nothing sometimes.
We do work with business owners that help them plan their exit. Some business owners can’t hang on. They don’t want to wait until they can get to that $20 million price tag. My whole message in Exit Rich is plan early and never stop planning. Slow and steady wins the race. As far as financials go, we work with business owners to plan and operate their businesses in all 6 P’s. You’re right, but not just small business owners.Plan early and never stop planning. Remember, slow and steady wins the race. Click To Tweet
We have a business who are selling now that’s got a $12 million EBITDA and they treat their company as a piggy bank and we’re adding back about $3 million of it. We normalize the financials. We add back personal expenses and non-reoccurring expenses so we can get to the true business expense and determine what that seller’s discretionary earnings are. You’re right. They do treat it as a piggy bank.
Do you counsel people to stop doing that and let a couple of years of financial statements build up the normal way so that they can increase their valuation and get a good multiple?
It depends upon where their head is, when they need to exit, and why they’re exiting. We normalize the financials but we tell people, “Don’t stop keeping cash. Count everything. Don’t hold cash. Don’t hide cash.” We do counsel them on their financials.
How involved are the CPAs and attorneys who have been guiding these business owners? They have a pretty substantial amount of influence over how this happens.
I’ll start there. Most of the attorneys that clients have been working with are not experts in mergers and acquisitions. They haven’t done any deals. They might be good at contracts or what they do but they’re not experts in M&A. Some of the accountants are good, and they understand how to reduce tax liability, decrease tax liability when you sell your business, asset allocation, and all these things. Some do and some don’t. I do have firms that I’ve been working with for many years that I will introduce to a client if need be. A lot of times, our firm will work with their local council or CPA.
I’ll share a little secret, and you probably know this little secret. The CPA and the attorney have a little hidden agenda sometimes. The CPAs have had this client for many years. They’re cash cows and make money on it every year. As soon as it goes to a new buyer, it’s probably going to go to a new CPA and attorney. The CPA and attorney stand to lose as a result of this transaction. They make some money doing the work that year but they ultimately stand to lose in the long run. Do you find that to be true?
Not really, and let me explain why. I have some big firms that I work with that both are accountants and attorneys. They’re not in there to take that business or get the local month-to-month business. They’re in there to assist with due diligence, making sure the LOI has the correct language in there and decreasing tax liability and asset allocation.
In my last deal, I bought them into. They save my client $1.8 million in taxes. They’re there to do the heavy lifting to make sure the deal gets done and save clients money. The local CPAs don’t always have those core competencies and the expertise to do that neither does the attorney. I’ve had some pushback with accounts that are like, “We don’t need to use them. We know what we’re doing. Our attorneys have said that from time to time.”
I tell the seller, “At the end of the day, it’s you, but if we lose a deal because you didn’t listen or you don’t have the right firm working as a team in the spirit of getting the deal done, not just in the spirit of trying to get your way and renegotiate the deal so you look like the smartest person in the room or boost your ego or whatever the reason might be. You might lose a deal.” Attorneys kill deals. We all know that.
I can’t make a seller hire a certain firm but we suggest. We’re like, “Here are your options. You decide what you want to do.” The firms we use are not in there to take the local people’s business. They will work side by side with the local people, and if the local CPAs are on board with it, they’re going to learn a lot of stuff they never knew before.
That makes a lot of sense. These agreements, if they’re not written right, you can claw back, and there could be all kinds of other problems that you don’t want to deal with.
There are clawbacks and all kinds of other issues. If you’re trying to mitigate taxes, you have to make sure you have the proper language in the LOI that makes it to the asset purchase agreement and the closing docs. You got to have a paper trail. You got to follow everything. If you don’t know what you’re doing, you could cause the seller some major harm. I’ve always been a fan of hiring experts.
I’m with you. Let me ask about one of the things you mentioned that the sellers get concerned about their employees. How do you see these businesses dealing with the employees after some transition is complete?
Most buyers want to buy a business that operates on all 6 P’s and all six cylinders. The number one P is People. Buyers don’t want to go in, have to start over, and hire all new people. People are all the company. We’re still in a dental lab in Houston and we wrapped up due diligence. The last piece of due diligence was to go out and take all the employees to dinner and have a meeting the next day to meet with all of them before we close.
That was very important to them because they said, “If the employees are not on board, then we’re not going to move forward in the sale of the business.” Most buyers are adamant about the employee staying on and having a good working relationship with them. Most buyers don’t want to come in and get rid of everybody.
What kinds of techniques are sellers using to get their employees to feel comfortable and committed going forward so that they stick around? A lot of times, we got to have a three-year clause. It’s something that people got to stick around for a while. What are buyers and sellers doing to incentivize employees to stick around successfully?
It all depends upon the size of the transaction. The bigger to deal, the more stuff that buyers want. They want non-competes and everything else. In this dental business that we’re doing, the owner already had contracts for all the key-in people. All the management team already had non-competes. They’re making sure those non-competes are transferable, which they are to the new owner. A big thing for your business owners to know is any contracts you have. Make sure you have a transferability clause in there because it’s going to be an asset selling on a stock. 99.9% of all deals are asset sales.For any contracts you have, make sure you have a transferability clause in there. 99.9% of all deals are asset sales. Click To Tweet
Let’s talk about that. You gloss over it because that’s a jargon thing. Let’s explain what that 99% is and why that is so critically important.
99.9% of all deals are asset sales. Buyers want asset sales and sellers want stock sales. Buyers don’t want to buy the liability in the owner’s business. If there are any penny losses, outstanding tax issues, or anything that can come and be a burden on the buyer, the buyer doesn’t want that. They want to buy a business that is free from all liability. You can add harmless language, identification clauses, and all that good stuff but buyers would rather depreciate the assets, buy an asset, sell and start clean.
Almost every sell is an asset sell unless there is something that cannot be transferred or it’s a business that’s been in business for decades. Let’s say they have government contracts and have had the same EIN number since day one for 80 years. It would be a huge upset to change that EIN or a construction company that’s due in the municipality. They have all this bond. You call it the bonding that they have to have these major jobs, government contracts, and everything. That’s hard to do in asset sales. There are exceptions to the rule, but 99.9% of all deals are asset sales.
If buyers want asset sales so they can start clean, could you explain the other side why sellers want stock sales?
It’s because of capital gains. You’re a financial advisor, right?
I run a hedge fund and I’m a CPA. I’m not helping with those deals, by the way. I don’t do CPA work. I want the audience to understand that the seller wants to sell the lump sum business as a corporation with the stock. They probably own the stock for $1,000 and they’re going to sell the company for $20 million, then they’re going to get capital gains rates on the entire sale. It’s a much less favorable treatment to do it as an asset sale but it’s much more advantageous to buyers. Buyers get their way 99.9% of the time.
That’s why it’s imperative to have the right team to mitigate that tax liability and have some tricks of the trade to decrease that. We have firms that we work with. All they do is specialize in mergers and acquisitions transactions to help decrease the seller’s tax liability because a buyer will move on the next deal.
The other thing is, taxes aside, part of the reason buyers want these asset sales is that it breaks all the contracts with the employees, the pension, and everything. Now, they bring the new employees over and rehire them. Isn’t that how it works?
They do. In this one that we’re selling, they do not have to sign new contracts and everything because there was a transferability clause in the contracts, but they’re not on the hook for a paid vacation and all the previous benefits.
It makes me think of something else. All people are different but have you seen generous sellers with their employees where they say, “It’s my money and business but I want to share some of it with you because if it weren’t for you, this wouldn’t have happened.” Tell us a story about something that you’ve seen happen.
There are quite a few cases that I’ve seen like that. I’m trying to think about a specific incident. I saw a distribution company and a seller. It’s one of my best friends, and I sold his business back in 2006 for several million. He had two people that he wanted to take care of and he gave them a big lump sum at the sell. I don’t remember what it was but it was a percentage of the sell.
Two of them had to stay with a new owner for so many years. He didn’t do it for that reason. He did it out of the goodness of his heart because he said, “I would’ve never got here without you.” I’ve got another company that we’re selling for about $70 million. It’s the same thing. They’ve got key people that they’re going to give a big fat check to when they’re done. A lot of business owners, not all, but many of them care about their employees.
Those people become part of their family over a long period of time.
They do. You don’t build a business, you build people and people build a business so you should take care of your people. I’m all for it. There have been situations where our buyers had to pay employees to sign a two-year non-compete and stay. Very seldom because a lot of times, they’ll say, “Why am I signing a non-compete? What do I get for it?” “You get to keep your job.”
That’s going to be a fiscally conservative approach.
I see it more on the sell side than ever on the buy side.
Which side do you work on more?
Mostly always on the sell side?
Do you have a securities license that you work on? How does it work in your business?
No, because I belong to M&A source and every association you can think of. If you’re doing broker-type deals like security-type or stock-type deals, I’m not doing those.
The only people that have to be licensed are the ones that are transacting private stock transactions, which is an SCC-regulated activity.
Correct. If that happens, then I’ll turn it over.
I never thought about it that way, but that makes sense about who has to be licensed and who doesn’t. Good to know. You were going to say these 6 P’s. I think you said one of them was people. What other P’s do we need to pay attention to?
When buyers look at buying businesses and your owners are trying to plan or exit, as I said, many owners never think about planning their exit. Exit Rich is all about not just selling but building a sustainable and scalable company when you’re ready to sellable. This is what buyers look for and the buyer’s criteria. Number one, people. They don’t want to buy a business without people.
You need to make sure you have the right people in the right seats, and everybody should ask the who question. Who in your business handles banking and client service issues? Who in your business handles environmental and tax issues? It goes on and on and on. The key to the who is it should never be you.
That makes a lot of sense to me because if it’s me, it’s not a business.
If it’s you, it’s not a business, and then it’s harder to sell because if I take you out of business, what do I have? It’s like selling a chiropractor’s office. You got a chiropractor. If you take the chiropractor out, you have no business. I got a client for who I’m selling a $70 million company. They go, “Can you sell my friend’s dental practice?” I go, “How many dentists?” “One.”
That’s the difference between a practice and a business.
They have a glorified job. You want to build a business and not a job. You want to build a business that works for you and not you working for it. You want to have the right people in the right seat and ask the who. Who does everything in your business? It should never be you.
I think of businesses as machines that generate money. The accounting, selling and manufacturing departments do some stuff. All the different gears are spinning and the wheels are going. In the end, out pops and profit. The truth is the best owner is watching the machine run but is not running the machine.
I think the same way but there are a lot of different things that go in between that machine.
I try to simplify but needless to say, yes, very complex.
People is number 1, and number 2 is Product. You can’t be in a business unless you have the right product. You need to ask yourself, is your business thriving or dying? Do you have an Amazon on your hand, or do you have a Blockbuster? If you have a Blockbuster, it’s time to pivot, think, and ask yourself this question, what business are you in? What business should you be in?
You’re about to go down a rabbit hole. You’re about to go out of business. It happens time and time again. It used to be when I wrote, Sell Your Business for More Than It’s Worth in 2013 and I did the research. Back then, it used to be 85% to 95% of businesses startups will go out of business. In 1 to 5 years, startups were at a huge risk of going out of business. Do you remember those statistics?
When I wrote Exit Rich in 2019 and did the same research, I was shocked. I had to do the research ten different times because I didn’t believe it. The business landscape has flipped. Now, it’s only 30% of startups will go out of business in 1 to 5 years. Out of 27.6 million businesses that have been in business 10 years or longer, 70% of those businesses will go out of business.
I know you might not believe me, and I’ll send you the research. Think about the public companies. You can’t turn on the TV or open up a newspaper without hearing about another business failure. Toys R’ Us, Kmart, Montgomery Ward, JCPenney, and Stein Mart went out of business. GNC closed down 900 locations. Starbucks is at risk. You’re hearing about public companies. What about all the private businesses?
The startup part, not so much, but the older companies going out of business makes a lot of sense because older companies get set in their ways. They get legacy expenses and ideas and, on top of things, not adapting to disruption and innovation.
You said the big thing. I always say AIM. All business owners should AIM, Always Innovate and Market. These business owners stopped innovating. Look at Blockbuster. Blockbuster sold Netflix. They did nothing to innovate. They sat back fat and happy and went out of business. That’s what’s happening with these business owners. They stop innovating and stop asking our clients, what do you need? What do you want? How can I make it easier to do business with us?
If you stop and think about Blockbuster, that’s a great example. Our great fault is we do this confirmation bias thing. We look for things that support our idea. Blockbuster couldn’t even imagine that there would be another way that people would watch videos except for their own way. They convinced themselves that but new people come from a new company, and they say, “We have a new idea and we think that people will like something different.” It’s very difficult for an older company to imagine the world being different than the world they service because it’s what happens and those companies fall apart. Plus, younger companies have the benefit if they don’t have all these legacy expenses, infrastructure, contracts and things they have to honor.
If they don’t innovate and market, they will go out of business. That’s why we say ask yourself this question, what business am I in? What business should I be in? What do I do very well? I’ll give you a couple of examples. Amazon ask themselves, what business are we I in? We’re in the book business. They asked themselves, what did we do well? Do you know what they said? Fulfillment. What are they in now?
That’s a hard question. It’s a great question because it’s a theoretical question. Smaller businesses, not the largest ones that can hire McKinsey and other great companies, like $20 million, $30 million, $50 million or $100 million companies, need to do a better job of investing in advisory services. Consultants that can help them. I work with a lot of companies on these disruption issues. I predict the future in a lot of different capacities. Companies don’t invest in getting outside assistance. Even if they get some, they may not even listen. This is a brilliant discussion.
I’ll give you a legacy story because you’re about legacy. Steve Jobs came back to Apple. Apple was failing. Remember when Steve Jobs came back? What question did Steve Jobs ask? What business are we in? Do you know what the answer was?
What do you think the answer was?
At that time? It wasn’t computers.
Wasn’t it? What was it?
They were doing computers at that time. That’s what Apple started as but I don’t know what they thought it might have been.
They were doing computers when he came back.
They were in the computer.
He asked, “What business are we in?” They said, “We’re in the computer business.” He said, “What do we do well?” “We do technology well. What business should we be in?” He said, “Everyone around the world should have one of these smartphones. We should be in the connecting and communications business.” When Steve Jobs came back, it was the start of the iPhone, iPad and iPod.
When you’re in the eye of the storm, it is so hard to do that. You can’t do it yourself. Your team, the people sitting in your boardroom, can’t do this themselves. I’ve facilitated one retreat after the next, and the people sitting in the room need some outside stimulation. They cannot do this by themselves.
I agree with you 1,000%. I always say, “You can’t read the label from the inside of the bottle. You need the outsider’s perspective to read the warning signs and keep you out of the danger zone.”
You got people and product. What’s the next P?
It’s Processes. Process is typically overlooked. Most business owners don’t think about the process until they have to out of necessity because somebody got injured or a client got upset. Processes should be designed with the customer experience in mind. Let me give you a story about that quickly. Did you ever watch a movie, The Founder?Processes should be designed with the customer experience in mind. Click To Tweet
The McDonald’s? Yes, I love that.
McDonald’s started back in the 1940s. Back then, for restaurants, what did you have? You had the sonic-type restaurants where you would drive up. They come out on roller skates. They served your food, and it was always wrong, and it took forever. McDonald’s objective, their mission statement, was to provide quality, great-tasting food in under two minutes.
They took their employees to an empty tennis court. They drew up the entire process on the tennis court. They erased it, drew it, and re-erased it. They did this for hours, and then they designed who was going to take the order. Who’s going to toast the buns? Who’s going to cook the burger? Who’s going to put the pickles on the buns, and who’s going to give them to the client in two minutes or less?
They designed the processes of what the customer experience in mind. That’s why no matter what McDonald’s you go to, decades later, whether it’s Russia, Singapore or America, the experience is the same because they designed it with a customer experience in mind. It’s productive, efficient, and well-documented, and all employees are trained on it. Processes are huge.
That’s a brilliant thing. The process is that machine. They do it the same way every time, over and over again, and they do it well.
I want to say one more thing since you watched The Founder. One more example for the question. What business are you in? What business should you be in? Do you remember when Ray Kroc came in and he was in the bank? He was over-leverage. He already took out a loan against his house. His wife was so mad at him. The franchisees weren’t paying and were non-stop compliant and all this stuff. Remember, the loan officer said, “No, I can’t lend you any more money. You already overleveraged.” There was a gentleman that followed him out of the bank, and he asked him, “What business were you in?” “I’m in the restaurant business.”
Ray’s answer was, “I’m in the restaurant business,” and that gentleman said, “No, you’re not in the restaurant business. What business are you in?” Ray was like, “I’m in the restaurant business.” He goes, “What business should you be in?” Ray was like, “I don’t know.” He goes, “You need to be in the real estate business.”
That’s when Ray started to buy up all the properties, build the building, and lease to the franchisees. If he didn’t have those two questions from that outsider’s perspective, he would’ve never grown McDonald’s to what it is now. McDonald’s is still the largest real estate holding company in the world because of that question.
I know this because I’ve done business with McDonald’s. We built a shopping center next door to McDonald’s. I am quite familiar with it. When I learned this years ago about McDonald’s that they were in the real estate business, I never perceived it that way because I was young at that time. It was a shock to learn. Sometimes companies are in a business different than what you think. Let’s keep going. What’s next?
You got people, product, and processes. Next is Proprietary, and it’s the highest value driver there is. There are six pillars to proprietary. Number one is brand. The bigger the brand, the bigger the sales price as long as you’re still relevant to your clients. Toys ‘R Us is not worth anything because they’re out of business. Talk about a company that never innovated. There’s a company that never innovated over 60 years of being in business. They never changed anything. Branding is huge. What brand do you think is the biggest?The bigger the brand, the bigger the sales price. Click To Tweet
I think it’s Apple or one of those.
You’re right. It’s Apple. It’s $389 billion. That’s just for the brand. That’s not assets, EBITDA, inventory or real estate. The Coca-Cola brand is worth $89 billion, so branding is huge. The better branded you are, the more money you’ll get for your company. The other big thing is trademarks. One of the big mistakes that owners make is when they start their company or buy a company. They only get a state trademark. They don’t get a federal trademark. Yours can go by and you can get a cease and desist letter. Now you have to spend money to fight that because you never protect your name federally.
Not only that, but you invested enormously in your brand, which may be taken away from you. Again, we have to speak through a few more of these things here, but that goes back to the point where if you don’t get the right outside assistance and attorneys. There are attorneys that specialize in intellectual property. You don’t go to your neighborhood garden to hire an attorney to do your intellectual property. You go to that person for what they’re good at but you got to get the right people doing the right things. Let’s go through a few more things.
I need to go through the whole proprietary. Branding, trademarks, and patents are huge. Also, contracts, like vendor contracts, distributor contracts and manufacturing contracts, but client contracts are most valuable. Buyers look at that as guaranteed income and as residual. In some cases, we’re selling a $70 million commercial real estate company that has 300 contracts, but if they don’t have that transferability clause, then that deal is probably not going to happen because it’s going to be an asset sale.
All business owners need to add that transferability clause. 99.9% of business owners don’t have that in their contracts. The other big thing and proprietary databases, Facebook paid $19 billion for WhatsApp. They were losing money and hemorrhaging but they had a billion users so WhatsApp knew that they could monetize and ROI that. Buyers buy synergies.
If you have the right synergies, you can get a high multiple if you have the right buyer. The other thing is what we call prime real estate in business. Let’s say that you sell pillows and you have the number one spot on Wayfair. Do you know what other home companies would pay for that spot? Let’s say that you developed a unique vacuum cleaner. You have a patent on that and you corner the market on Amazon. Let’s say that you have a skincare product. You have Rush Limbaugh, Glenn Beck, and other celebrity endorsements. That is huge and companies will pay big bucks for that. That is prime real estate in business.
We’re running out of time. You are a consummate expert. It is rare to hear somebody with the level of background that you have, and I think that’s the inside track. To me, if they could have your assistance, they would have the inside track no matter what. I’ve met a lot of different people. It’s rare that somebody does it. I know you wrote a book and I hope that a lot of this stuff is documented in that book. Is it?
Most of it is. Not all of it. I got to have come out with a sequel.
I’m sure that everything is in your brain. They can’t be in a single book. There wouldn’t be enough pages to print that somebody could carry. It would be like yellow pages, but could you tell us where we can get that book and what the book is?
Can I tell the other two Ps?
Patrons is number five. Patrons, that’s customers. You need to have customer diversification, not customer concentration. If you’ve been in business for 30 or 40 years, your customers are probably aging out. You need to make sure you innovate and get new customers. The last P is Profit. Somebody asked me, “Michelle, why do you put profits last?” It’s because profits will never be big if you don’t get the other five things right. Profits is never the problem. It’s the symptom of not having the right people, product, and process, and it’s not protecting your IP.
Michelle, you’re a superstar. You do know what you’re doing.
I would encourage people to be in touch with you because you’re a wonderful resource.
Can I tell them how to get the book?
If everybody goes to ExitRichBook.com, we’re in pre-sales now. You can buy it less expensive here than at Amazon, Hudson, or Books-A-Million. It’s $24.79 including shipping. If you buy it at ExitRichBook.com, you get the download immediately. You don’t have to wait until the book comes out. You get the download now, plus you get a lifetime book membership into Exit Rich Book Club, where you have me doing all this training and stuff.
Also, all your documents are there. If you’ve never seen a due diligence checklist or closing docs, it’s there. Everything is there that you need. You also get 30 days into Club CEOs where we do hot seats, Masterminds and Q&As to try to help business owners ask those transformational questions, then the book will be shipped to your doorstep when it comes out.
You’re an encyclopedia. Not only that, but you’re quite a nice person. I enjoyed this conversation. Thank you for sharing the inside track on how to monetize the business that business owners have had for years. We appreciate you being on the show.
Thank you for having me.
We’ll stay in touch.
Let’s stay in touch. Probably, we can do some business together.
Let’s do it.
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