As a 20-year veteran in mergers & acquisitions, Michelle Seiler Tucker has sold hundreds of businesses. 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. She closes nearly 98% of all written offers and, on average, obtains 20-40% above the asking price for her clients.
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The Business Power Hour With Deb Krier
In this episode, we’re going to be talking about something that every small business owner and entrepreneur should at least consider to some degree. That’s what happens when they want to leave their business. We’re going to have a great conversation with Michelle Seiler Tucker. Welcome to our program, Michelle.
Thank you for having me, Deb. It’s a pleasure to be here.
As a twenty-year veteran in mergers and acquisitions, Michelle Seiler Tucker has sold hundreds of businesses. 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. She closes nearly 98% of all written offers and, on average, obtains 20% to 40% above the asking price for her clients. I always like to get in the way back machine. Tell us how you got to where you are now and discovered that this is your passion in life.
I’ve always been an entrepreneur. I’ve always been interested in business. I’ve owned many different types of businesses. I didn’t end up getting stuck in Corporate America working for Xerox. I’d been working for Xerox for about six months. They nicknamed me The Closer because every time a salesperson couldn’t close a business, they would bring me in, and I will close a deal.
My manager came to me after I’d been there for six months and said, “Michelle, you should interview for the Regional Management position overseeing the South and overseeing 95 to 100 salespeople.” She says, “You’ll never get it, but you should interview for the experience.” I’m like, “Why would I interview for something I’m never going to get? It sounds like a colossal waste of time.” She says, “It’s not a waste of time because you’re going to learn so much during the process. You will want to advance up the Xerox ladder. This is a great stepping stone for you. It’s a great training ground.” I said, “Okay.”
I went ahead and threw my name in the hat. I was interviewing with several other Xerox sales reps that had been there for years and years, whereas I had only been there for six months. It was a grueling process. It was three months of demonstrating high-volume printers. It was doing presentations in front of executives, interviewing, asking them questions, and it was them asking us questions, asking me questions. It was a whole panel of people that were interviewing us. At the end of three months, I ended up getting it.
It was funny because I got it. Nobody thought I would, and all my friends at Xerox were now mad at me because I beat them. I’d only been there six months. I became a manager and was overseeing these 95 sales reps. I stopped doing what I love. What I love is working with people. I love clients, helping solve their problems, and coming up with solutions. I wasn’t doing that anymore. In Corporate America, you have to schedule a meeting to have a meeting.
You then have another meeting to follow up on that meeting.
It was a constant cycle of meetings. I’m like, “How long do I want to do this? I miss entrepreneurship and being in sales, but I didn’t want to go backward at Xerox.” I started looking for a franchise to buy. I stumbled across this company that has two locations. My husband knew them. I met with them. I said, “I want to buy a franchise. I’m going to keep my job at Xerox, making six figures with great benefits, and have somebody operate it.” They said, “No, Michelle. We know of you. We know of your reputation. We know you’re The Closer. We want you to become a partner with us. If you partner with us, we’ll give you a franchise.”
I said, “I appreciate the opportunity, but I’m not comfortable leaving a six-figure position with great benefits for a company that has two franchises. You’re not successful.” They said, “We know we’re not successful. We need you.” I said, “I’ll tell you what I’ll do. I’ll do it for six months and see how it goes. I’m going to keep my job. I’ll fly to places on the evenings and weekends and keep my day job.” I did that. I flew to Georgia and Atlanta. There are many franchises in Atlanta, Texas, Arizona, Mississippi, and Louisiana, which were the territories that I focused on. I made more money in those six months than an entire year at Xerox.
I went ahead and put my notice in with Xerox and laughed. I was a partner with this company. They did what most business owners do. They focus on the market and grow they never build a solid foundation to handle the growth. They started to crash and burn and were overpromising and underdelivering. I did the opposite. I underpromise and overdeliver. These franchisees are my friends. I would go to weddings and the hospital when they had their babies. I would stay at their house when I went into town.
It became a volatile relationship between the franchisor and the franchisee. Now I’m stuck in the middle. I kept taking up for the franchisee, and they’re like, “You’re our partner. We’re the boss. You got to take up for us.” I said, “No, I’m taking up for the client because we sold them a bill of goods, and we need to deliver.” It was a constant battle. I said, “We don’t see eye to eye. Our values are not aligned. I have ethics, and you have none.” I said, “You need to buy me out.” They didn’t want to buy me out. I had to get legal involved. They ended up buying me out, and I transitioned into selling businesses. I was selling franchises, so I thought, “What’s an easy transition? Selling businesses can’t be that much harder.”
I was wrong. Selling businesses is a lot more difficult than selling franchises. There are a lot more moving parts. I transitioned to selling small businesses at first and into selling large companies. Our purchase price is $10 million and up. I then transitioned into fixing and growing them and helping my business owners or clients with a Build To Sell program. I learned quickly, as Steve Forbes says, 8 out of 10 businesses will not sell for a multitude of reasons. If I don’t fix and grow them, I can’t sell them. That’s why I specialize in buying, fixing, growing, and selling. I buy businesses and flip them. I also partner with other business owners, invest my money, time, energy, effort, expertise, and core competencies, and help them build their businesses so it’s sellable. That’s my background.
I love it. We’ll talk about pre-pandemic, during a pandemic, and post-pandemic because a lot of businesses have changed. You’ve written a great new book. It’s called Exit Rich: The 6P Method to Sell Your Business for Huge Profit. I read a pre-copy before. The thing that struck me is your core principle of when you start a business, be planning how you’re going to exit that business. When I was reading it, what I was thinking is, even if you don’t plan to sell for whatever reason, every principle you talk about in the book is the way you should be doing business.
That was the thing that struck me about it. You don’t have to be reading it and thinking, “On X date or when I reach X age or whatever, I’m going to sell my business.” It’s a good core business philosophy. The entire concept is that when you have a good, sound business that has been that way for many years, you will sell at a good price. I enjoyed the book. It was where I was thinking, “People should be doing this all the time.” The problem is they’re not, which is why you have to go in and fix things. What are the big things that you see people making mistakes?
There are a lot of mistakes. The first mistake is business owners don’t plan their exit. That’s number one. 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 learned quickly that 85% to 95% of startups would go out of business. At 1 to 5 years, you’re at risk of going out of business. That’s common knowledge. However, when I wrote Exit Rich in 2019 and did the same research, I learned as the business landscape had changed dramatically. In fact, it changed so much that I didn’t believe the research. I had my team go back and check it over and over again. I still have my team check it because it’s unbelievable to me.
Even before COVID, the landscape has changed. Now it’s only 30% of startups will go out of business. Those startups, individuals, and entrepreneurs are like, “I want to start a business.” I used to say, “No, don’t start a business.” Now I’m like, “Start a business.” However, out of 27.6 million business owners that have been in business for ten years or longer, 70% of those business owners are at risk of going out of business. That’s a huge number.
There are only 30.2 million businesses in the United States. All those 30.2 million employ over half the US workforce. Small business is the backbone of our economy. You lose small business, we lose jobs. We lose jobs, we lose spending power. It’s a trickle-down effect. People can’t afford to go out to eat because restaurants close. People can’t afford to shop because retail closes. Discretional spending is done. Small business is huge. If you think about it, 27.6 million businesses, 70% of those are going out of business. That is scary. Now, you hear about public stores all the time, the public businesses like Toys R Us went out of business, Kmart, Stein Mart, and Pier 1 went out of business. GNC is closing down 900 locations. Even Starbucks is in trouble. What you’re not hearing about is the private company.
It’s the little mom-and-pop type of place.
Not even little mom-and-pop. You might have a $10 million company doing gross $10 million in revenue, and they’re going out of business. It’s not all just mom-and-pop. It’s the private companies. These private companies on every street corner, every town, and every state across our great nation are dropping like flies. The problem is most of these business owners are faced with having to sell the pennies on a dollar, close their business down, or, even worse, file bankruptcy. The problem with bankruptcy is when you file a bankruptcy, most business owners don’t just lose business assets. They lose our personal assets too.
Maybe they didn’t set things up right.
They set things up right. They do, but here’s the mistake they make. They take out a personal guarantee or mortgage their home.
They do a HELOC.
They take a mortgage out against their home to support their business.
Especially if things got tight, they started using their personal credit cards, all of those various things.
You just pierced the corporate veil. When you do that, they can go after your personal assets. They don’t care. That’s a big mistake, not planning your exit and piercing that corporate veil. The other reason that business owners are going out of business, the main mistake is that business owners become complacent. They stop innovating, and I call it AIM, Always Innovate and Market. They stop innovating and marketing. Let me tell you something. If you’ve been in business for 10, 15, 20, or 25 years, you can’t do business the way you’ve always done it.AIM = Always Innovate and Market Click To Tweet
The consumer buying habits have changed, and you can thank Amazon for that. Consumers do not buy products and services the same way. Amazon is the main reason that we have changed our buying habits. Online technology has changed our buying habits. Amazon made it easy to order anything and have it shipped to your house on Prime in two days.
That was before COVID. After COVID, COVID also changed our buying habits. Yes, you would order stuff online, but you would still go to the grocery store, go to the meat market, and go to the farmer’s market. You would still do all that stuff, go out to eat. Now you don’t even have to go to the grocery store because Amazon bought Whole Foods, and Whole Foods will deliver groceries to you. Walmart is doing the same thing now. They’re delivering groceries to you too.
If you are in business and don’t look at your clients and ask your clients, “What do you need? What do you want? How can I make it easier for you to do business with our company?” then you’re going to end up going out of business. You have to innovate. What business owners are not doing is innovating. Whoever makes it easiest for the consumer to do business with them is a company that’s going to win.
I don’t know if it’s so much that we’re lazy. People are busy, but they’re also like, “I would rather go to the park with my kids than go grocery shopping.” Instead of going to the mall and buying a wedding gift that’s for an upcoming wedding, I would rather take my daughter horseback riding. We would rather enjoy experiences. The Millennials are that way too. Millennials are all about the experience. Business owners have to innovate. They have to adapt. Those are some of the biggest mistakes that business owners make. The other big one I talk about in Exit Rich is that businesses still operate on all six cylinders. They don’t operate on all 6Ps.
Tell us what those 6Ps are.
I’m going to go a bit into depth on each Ps so that the audience understands them. The first P and the most important P is People. You don’t build a business, you build people, and people build the business. People is number one. You got to have the right people in the right seat. A lot of times, business owners have the right people, but they don’t have them in the right position. You then have to ask yourself who, “Who in my business opens the door? Who in my business deals with sales, marketing, and customer acquisition cost? Who in my business deals with manufacturing? Who in my business deals with distribution? Who in my business deals with logistics? Who in my business deals with customer service issues, accounting, environmental issues, tax issues, and trademark infringement?”
It’s who. The clue is never to put you next to the who. You want your business to operate without you. The problem with most entrepreneurs is that their name is next to all who’s. Entrepreneurs are wearing all these different hats and are stuck working in the business, not on the business. Never put your name next to who. You got to have the right people in the right seats. You also got to have a management team in place. You want to create a business that works for you rather than you working for it. I don’t want to insult anybody, but a lot of business owners have created a job they go to every day versus a business that works for them. They’re working for it.
You should have a management team in place because buyers do not want to buy a job. Buyers want to buy a business that works for them. The second P, which we’ve already talked about a little, is important. Why many businesses are going out of business is because of this P right here, Product. Ask yourself. Is your product thriving or dying? Is it on the way up or on the way out? Do you have an Amazon on your hands or a Blockbuster? If you have a Blockbuster, you better get ready to pivot. You need to align yourself with a mentor and an advisor, somebody who can help you see things differently. When you’re stuck or in your fog, sometimes, it’s hard to see things right in front of you.
I always tell business owners to ask themselves this question, “What business are you in? What are you good at? What business should you be in?” That is a transformational question. Business owners get stuck in a transactional, and they stop being transformational. I’ll give you a couple of examples of this. Amazon asks themselves, “What business are we in?” What business did Amazon use to be in? What business did they start? Do you remember?
Originally it was selling books.
They ask themself, “What business are we in? We sell books. What are we good at?” they said, “We’re great at fulfillment. What business should we be in? We shouldn’t be selling books.”
“It’s anything that we can do fulfillment.”
“We should sell anything that we can fulfill.” Those three questions transformed Amazon into the multibillion-dollar conglomerate it is now. I’ll give you another example. Have you ever watched the movie, The Founder?
No, I haven’t.
It’s a great movie for all of our audience members to watch. It’s based on the McDonald’s story. It’s about McDonald’s brothers who started McDonald’s and then the Kroc story, which came in and blew up McDonald’s.
We always forget that Kroc was not the Founder.
Correct. Everybody thinks that Kroc was the Founder. He was not the Founder. Here he is in the bank. He has pierced his corporate veil. He took a loan out against his home for the franchise. He wasn’t making any money because the franchisees were not compliant and weren’t paying the royalty. He was trying to borrow more money. The banker said, “I can’t lend you any more money. You already overextended.”
He walks out of the bank. This gentleman sitting in a cubicle next to him follows him outside and says, “I’m sorry. I didn’t mean to eavesdrop. I heard your whole conversation.” He says, “I can help you, but I have a question for you. What business are you in?” Ray Kroc says, “I’m in the restaurant business.” He said, “No, that’s not the business you’re in. What business are you in?” He goes, “I’m in a restaurant business.”
“I make burgers.”
He’s like, “I don’t have time for this. I need money.” The gentleman said, “What business should you be in?” Ray looked at him and went, “I have no idea.” He goes, “You should be in the real estate business. You need to be buying up the ground. You need to be building the buildings. You need to be leasing them. You own it as a separate corporation. You lease it to the franchisees. When the franchisees are not compliant, you get rid of their contract and bring another franchisee in.” That one question alone is what changed Ray Kroc and McDonald’s world forever.
McDonald’s now, because of that, is the largest real estate holding company in the world. McDonald’s is not in the fast-food business. They’re in the real estate business. That’s what everybody should be asking themselves. Even if you have a successful business, what business are we in? What are we good at? What business should we be in? That’s product. You have to pivot. Especially with Coronavirus now, there are industries that were thriving that are now dying, and there were industries that were dying that are now thriving. You have to ask these transformational questions and pivot. The third P is a P that is always overlooked, and I never thought of it until something bad in the business happens, like a catastrophic event. That’s Processes. The owners never think about, “What should our process be?”
They never think about it until a customer complaints or they have an injury that occurs because there weren’t safety processes put in place. It’s an unfortunate occurrence that happens to make the owner think about processes, but processes are one of the important things in your company. It can make or break a business. Processes should always be designed with the customer experience in mind. Let me give you one more example from the same movie, The Founder. I know you’re going to watch this movie later.Processes are one of the most important things in your company, and it can make or break a business. It should always be designed with the customer experience in mind. Click To Tweet
This is the McDonald brothers. When they started the company in the 40s or 50s, it was always a drive-in restaurant like Sonic. The problem with that back then is the order was always wrong, the food was always cold, and it took forever. When they started McDonald’s, the McDonald brothers said, “This is our objective. This is our mission statement. We’re going to create quality food that tastes great in two minutes or less.” When they designed their process, they said, “We want to design our process with the customer experience in mind. What do we want the customer to get? It’s great quality food for two minutes or less.” They then went out to an empty tennis court.
I remember seeing pictures. They laid it out.
They took all their employees, laid it out, and kept changing it because it wasn’t right. They spent all day there. They designed, “Who takes the order? Who toasts the buns? Who cooks the burgers? Who puts three pickles on the bun? Who packages it? Who gives it to the client, making sure it’s done in two minutes or less?”
They designed their processes with the customer experience in mind to make sure the customers got good quality tasting food in two minutes or less. Business owners don’t do that, Deb. Let me tell you. You’re going to have a lot less customer service issues if you design the process with the customer experience in mind. Your processes should be productive, effective, efficient, and, most importantly, and here’s where a lot of businesses mess up, is they need to be documented. You need policy and procedure manuals. You need SOP checklists and make sure all your employees are trained.
One of the tricky things is that process is not Michelle’s job, part A, B or whatever it is. What ends up happening with many companies is you’ve got an employee who has done the widget. She’s done that same thing forever and ever. Nobody knows how she does it. She just does it. She goes on vacation, gets sick, quits, and your process comes to a screeching halt. It’s tricky when you’re dealing with your employees because some of them are protective of their jobs, which they should be. They don’t want you to know how they do every little detail, but you still need to do that.
I worked for a while doing crisis management planning for companies, and one of the things we said was processes were the big things. That is one of the first things that you have to deal with, especially if you have to relocate. How can you replicate that business? It wasn’t that X person did this. It was what was this that was being done. When we would find a situation where it was so person specific, we knew we had a problem. Many times that might be a department of one that something had to pass through legal, and you only had one attorney. That attorney better has a backup or, as you said, have things written down so that somebody else can step in. The process is important. All of these are important, but the process is something that many people forget.
They do. They don’t think about it until a catastrophe happens. They’re like, “We need a process for this.”
We would ask people, “If Bob were, all of a sudden, not able to come to work, what would happen?” Most of the time, people went, “We didn’t know because we’re not quite sure what Bob does.” That was the wrong answer. There were so many times when people didn’t realize what it was being done was critical. Sometimes if X didn’t get done by a certain day every month, like a report filed, the whole company would stop. Let’s say you have somebody complaining about customer service, back to McDonald’s. The hamburgers were cold. Where in that process were the burgers getting cold? Maybe it was at the final thing where somebody handed the bag out to somebody, and it had sat there for five minutes. That’s the problem.
You’re going to have a poor customer experience. Back in the ’40s, nobody put it on the internet. I can’t stress enough that you must design your process with the customer experience in mind. I’m going to give you one more example. It’s a small studio in New Orleans. I don’t want to say too much here. My daughter attends the classes. Their process is when a hurricane hits or something happens, they send an email and put it on a private Facebook group. Here’s a problem with that process. When they are busy entrepreneurs with children who are not stay-at-home parents, they might not be checking email. I get over 500 emails a day. My husband doesn’t check his email. I promise you, I never check your private Facebook group.
I suggested, “Why don’t you tweak that process and send out a text group to all the parents?” The response was well, “This is our process. This is how we do things. That’s not in the plans this 2022.” They said it’s not an option. I said, “It’s an option to inconvenience your customers.” What happened was my nanny missed a math tutoring to get that class when that class got canceled at 4:00 in the afternoon for a 5:30 class. By the way, you’re supposed to check the Facebook group or your email. I said, “It’s an option to inconvenience your clients.” I then said, “I got an IT guy that could do this for you.”
She goes, “We are way too big for that.” I said, “Schools do it.” I said, “I have an IT guy that could do it for you in a matter of minutes. I’ll offer his service and pay for it.” Do you know what she said? “It’s not that we don’t know how to do it. We just are not going to this 2022.” I said, “Maybe I’m not going to continue my child.” Your processes are so inconsiderate and designed to piss off the client, not to ensure client satisfaction, but to aggravate your client. People then wonder why they go out of business.
Processes are huge. You did make a good point. There are a lot of companies that have one person, like, “I don’t know graphics company. We have one person doing collections. If we lose that one person, we’re in big trouble. What we’re doing is we have an integrator going around to each department and making sure that that one person writes down in a PP manual everything they do, and integrates it, goes back and makes sure it sounds good, makes sure it’s language correct, and everything else.” You got to have those PPs, those Policy and Procedure Manuals, and SOPs. Even if you have one person, that one person could leave, and you’re in big trouble.
All of a sudden, everybody has to work from home.
It’s because you have no policies and procedure manual.
What has been a big problem for many companies is things got done, and they don’t know how they got done. Now that they can’t see everybody, they’re having to figure out, “How the heck did things get done?”
Number four P is Proprietary. Proprietary is the highest value driver, meaning that you’ll get a higher value or a higher multiple if you have proprietary. There are six pillar pillars for proprietary. Number one is branding. The more well-branded your business is, the more money you’re going to get for your company as long as your brand is still relevant in the mind of the consumer. Toys R Us brand is not worth as much as it used to be.The more well branded your business is, the more money you're going to get for your company, as long as your brand is still relevant in the mind of the consumer. Click To Tweet
It’s because people are like, “I’m going to order online.”
The most valuable brand in the world is, what do you think?
Coca-Cola? I’m in Atlanta.
I thought it was Coca-Cola too, but it’s not. The Coca-Cola brand is worth about $89 billion. That’s without assets, cashflow, EBITDA, real estate, inventory, or anything. It’s Apple. Apple was worth over $389 billion. That’s without cashflow and inventory.
You see the logo, and you know that’s Apple.
Apple’s number one. Build your brand, and you’ll build your exit and be able to exit rich. Number two, a big mistake the business owners make is when they start their business, they don’t get a federal trademark. They get a local trademark on their company. Years will go by, and all of a sudden, you’re hit with a cease and desist letter. Guess what? You have had that company for fifteen years, and this other company just got a federal trademark a year ago and sent you a cease-and-desist letter. Most business owners are going to try to fight it. They’re going to spend thousands upon thousands of dollars, and they’re going to lose. They’re going to have to change the name of their business, which costs hundreds of thousands of dollars. Go out there and spend the $1,500 and get a federal trademark.
I did that with the name of this program. It’s the exact same thing. I had a local trademark in the state where we’re incorporated. I thought, “Who’s going to care?” I did get a cease and desist that didn’t pertain in any way. I spent five minutes on Google and figured out how to tell this guy to go away. That did make me think. I spent the money, and it was not inexpensive, but it was far worth it.
Was it $1,500 or $1,700?
It was far around there. Part of that was simply because I could not do it myself. I started the process and got the letter back from the trademark people and was like, “I don’t know how to do this.” We did that. What I realized during this process was if someone else trademarked the name and came after me, I would have to go back through all 600 programs and remove all references to The Business Power Hour. It would have been, “No, we’re not going to do this.”
It’s not worth it, and everybody should do that. Even before you get a domain name, you should check to make sure the federal trademark is available. You should also trademark not just companies but podcasts. I have the Exit Rich Podcast and Exit Rich book.
It’s anything that has value.
I am getting a federal trademark on Exit Rich. I’ll also get a federal trademark on the ST GPS Exit Model, how you should exit your business and also the ST 6Ps. Anything that has value goes for the money, and get it trademarked. Otherwise, you’re going to find yourself in a situation where you might not be able to use it. That’s important. Also, patents are a huge value driver. We once sold a company for $18 million and had eighteen patents.
You hear about Shark Tank. Every time, the investor asks the same question, “Do you have a patent on this?” The other valuable thing in IP is contracts. Contracts are huge, like vendor contracts, manufacturing contracts, distributor contracts, and exclusive contracts. The most valuable of all contracts are client contracts. If you have client agreements or MSAs Master Service Agreements, those are valuable. Buyers will pay more money for that because they know this business is sustainable because it has reoccurring revenue coming in.
The number one mistake that business owners make is that they do not have that transferability language. 99.9% of all business owners do not have it, and 99.9% of all sales are asset sales, not stock sales. If you don’t have the two sentences in there, your deal could stop dead in its tracks and not close. Go and get that two-sentence transferability clause and stick it in your contracts. We’re selling a $70 million company now that has 150 contracts. Only two of them are transferable. Why only two? It’s because I gave them the language, and they started inserting that. You got to make sure they’re transferable.
The other valuable thing in IP is databases. These are typically overlooked and undervalued. If you have a database that’s large, active, and can be repurposed or retargeted, then it’s worth a lot of money. Facebook paid $19 billion for WhatsApp. WhatsApp was hemorrhaging money. It’s not making a profit. WhatsApp had a billion users, and Facebook knew they could ROI. They knew they could monetize those billion users. Databases are profitable, and they’re a huge value driver. The other big thing is I call it business real estate, not commercial buildings. This is called business real estate.
Let’s say you have a skincare line and celebrity endorsements like Rush Limbaugh, Glenn Beck, The Kidd Kraddick show, or Oprah Winfrey. She has it in her hundred favorite things or her most favorite things. You cannot pay for that. That is huge real estate. They can only endorse one skincare company. That’s valuable. Any type of synergistic buyer is going to be willing to pay a lot of money for that. Let’s say that you make pillows and are number one on Wayfair. That’s prime real estate you cannot pay for. It’s the same thing with Amazon. Let’s say that you have a unique vacuum, and it’s a robotic vacuum.
It comes up first in every search.
Correct. You pretty much have cornered Amazon. That’s huge real estate. These are all value drivers that will get companies. Business owners are like, “Michelle, how do I get a 10x?” That’s how you get a 10x by creating that IP and that proprietary stuff, your agreements, your patents, and all that. The fifth P is Patrons. This is customer based. You need customer diversification, not customer concentration. Does your business follow the golden rule where 80% of your revenue comes from 20% of your clients? If it does, you’re in big trouble because if 80% of your revenue comes from a few clients and you lose 1 or 2 clients, you could be practically out of business.You really need customer diversification, not customer concentration. Click To Tweet
You always want to make sure you have customer diversification. Also, you need to ask your clients, “What do you need? What do you want? How can I make it easier for you to do business with me?” The client’s shopping patterns have changed. Their wants and needs have changed. Whoever makes it easier for them to do business with is the one that’s going to win their business. If your business has been in business for 20, 30, or 40 years, your customers might be aging out.
Are you replacing them?
You got to replace them. Guess what? Millennials don’t care about what Baby Boomers care about. The way Millennials buy things is not the same way that Baby Boomers buy things. You got to be reinventing yourself and ask these customer service questions and conduct these customer surveys so you get a better handle on what the consumer wants so you can provide it to them. The sixth P, last but not least, which is important as well, is Profit. Profit is huge. Everybody always asks me, “Michelle, why do you say profit last?” Here’s why I say profit last. If you don’t do all those other things, you’re not going to have profit.
You’re not going to have the six P. It’s funny that people think, “I have to have customers. I have to have a product,” but they don’t think about them in the right way.
I always say profits are never the problem. Clients come to me and say, “I’m not making any money. I don’t know what the problem is.” There’s your first problem. You think profits are the problem. Profits are not the problems.
Somewhere there’s something broken.
They’re a symptom of not having the right employees in the right seat, you being all the who, or not having the right product. Your product is failing, dying, and not thriving, or not having the right processes in place. If they’re not efficient and productive, they can cause you to lose money. If they’re not designed with the customer experience in mind, like that studio I was telling about with my daughter, you will lose clients, which means you’re going to lose money. If you haven’t protected IP, you’re going to be spending money and may have to spend even more money if you have to change your company name. If your clients are not diversified and have customer concentration, you’re going to lose profits. Profit is never the problem. It’s always a symptom of not operating on one of the five Ps.
As I said at the start, these are all in your book with the goal of eventually selling your business, but we should be doing these all the time.
We should be doing these all the time. Let’s talk about the ST GPS Exit Model because we didn’t talk about that. You said this at the beginning of your show. Business owners should always plan their exit from day one of starting or buying a business. They never do that. It’s puzzling me. Do you have children?
I have a daughter, and I know other parents. We plan out their entire life. We plan where they’re going to go in preschool, elementary school, middle-grade school, high school, and college.
It’s every tiny detail in between.
We like to plan who they’re going to marry and all that. We’re planning out our children’s lives, but we won’t plan for our most valuable asset, which is our business. What business owners need to do from day one of starting or buying a business is they need to follow the GPS Exit. The GPS Exit is Seiler Tucker GPS Exit. It’s this. Start your business with your end game in mind. Determine what you want to sell your business for. If you say, “I want to sell my business for $10 million. That’s my destination.” at GPS, you always need to know the destination.
It’s how you are going to get there.
When you plug in your destination, the GPS knows where you’re starting from. It knows your current location. With the GPS Exit Model to exit your business, know your destination, $10 million, and know where you’re starting from, what your current valuation is. Most people will get a health checkup once a year. They’ll get their car checked up once a year. They never get their business checked up. They never know what their business is for. You have to know where you’re starting from.
If you want to sell for $10 million, and let’s say you’re at $3 million, then you need to determine the timeframe. Let’s say your timeframe is five years, and you’re at $3 million. You want to sell for $10 million in 5 years. You now need to determine who your buyers are going to be. There are five different types of buyers. Let’s say you have a healthcare staffing business and want to sell it for $10 million. You can rule out first-time buyers because most first-time buyers are not going to afford it.
That’s way too complicated.
A Private Equity Group, a PEG, could afford it. PEGs buy based on platforms or add-ons. If they’re going to get into the healthcare space staffing and are not in it now, you better have a $3 million in EBITDA. You don’t need to know who your buyers are, but you need to know what your buyers’ criteria are. There are private equity groups, and there are strategics and competitors. Strategics and competitors, if they’re already in that space, and let’s say they have medical transcriptionists and want to get into medical staffing, then they’re willing to maybe outbid other buyers for that particular business.
You need to know their gross revenues requirement, cost of goods requirement, and their EBITDA, Earnings Before Interest, Taxes, Depreciation and Amortization requirement. You need to know all of those details. There are first-time buyers, private equity buyers, strategic slash competitors, and then you have sophisticated serial entrepreneurs. They’ll buy you. You need to know what their buying criteria are. The last type of buyer is a turnaround specialist. If you’re a $2 million company and your EBITDA is probably around $2 million, they’re not going to buy you.
Know who your buyers are, what their buying criteria are, and what synergies they’re willing to pay more for. Most importantly, know your why. Nobody does anything without a powerful why. If it were easy to sell a $10 million company, everybody would be doing that. It’s not, and you’re going to have all kinds of catastrophic events occur. You’re going to have different financial storms that occur. In order to keep your financial boat afloat, you better have a powerful why. That’s the ST GPS Exit Model to get you from point A to point B.Nobody does anything without a powerful ‘Why.’ Click To Tweet
Even If you don’t plan to sell your business, you should have all of this in mind. If you start your business, what is your goal to be worth in 5 years and 10 years? That would be what it would also sell for. If you want to be a six-figure company, how are you going to get there? It’s all of those various things. There are a lot of businesses. I would be a good example. My business is me. Nobody’s going to want to buy it because the product and service is me.
You don’t have people.
I still should have those goals. I should be doing all of those things. It doesn’t have to be an employee. It’s the other thing. I have a producer for this program. I have an attorney, a CPA, and all of those various things we have. As you said, we shouldn’t be wearing those hats ourselves. One of the fascinating things with the pandemic is watching the companies that pivot, that used to do this and then do that. Restaurants would be one of the biggest examples of that. People can’t go into your restaurant any longer, or they’re at least limited.
I don’t think anybody is back to 100% in the United States. It could be that in Wyoming, you can be back up to 100% capacity. In most restaurants, you are limited. Did you pivot to doing takeout and delivery? There’s a restaurant here by us. That’s a Mexican restaurant, and they built a drive-through. I’m assuming it is a much more limited menu than what they offer inside because it’s one of those restaurants that has a twenty-page menu. You can’t do that in a drive-through. They put in a drive-through, and there’s a line. Every time I go by, there is a line.
We have Popeyes. On the way home every day, the line is out to the street straight and is going to cause a wreck.
Down here, one of the biggest things to see is how Chick-fil-A is doing it. I’ve been to Chick-fil-A’s, where there are five lines in the drive-through. Plus, you can drive all the way around and do curbside pickup. They figured that out quickly. The key was that they had it down pretty good, to start with. It was, “How do we expand it?” These are things that you need to be doing no matter what. Like I said, that was what I loved about reading your book. The other important thing that you talked about in the book and the other things that you do is the fact that we might have started our business with the goal that, at some point, we’re going to sell it.
Never ever try to do this yourself. There are many moving pieces and things like that. One of the things that you talked about in your book is you should work with a company like yours. There are questions in your book. Here are the things you go through to ask these folks because they can’t say, “I want to do this now.” They need to be experts in it. That’s where it’s going to pay off too. Tell us a bit more about what it is that you do for businesses.
I’m not your typical M&A advisor. I’m a Mergers and Acquisitions Master Intermediary, Senior Business Analyst, and a bunch of other stuff. I’m not your typical M&A advisor because, first of all, I own companies. I’ve given time to own 5 to 10 businesses I built to sell. I’m not your typical advisor. I get to know my clients and help them figure out what their seller sanity check is, “Is this the best time for them to sell? Is this not the best time for them to sell? What money do they need?” It’s not about what I sell your business for. It’s about what you walk away with, and we’ll let it afford your lifestyle. I help them determine how much money they need and for how long.
Do they need $500,000 a year? What do they need monthly? What do they need annually? I narrow it down to find out, “What’s most important to you? Is it the money? Is it somebody that takes care of your employees? Is it somebody that’s taking care of your clients? Is it somebody that carries your legacy and grows your legacy beyond what you grew at? What’s the most important thing to you?” I then help them plan their beginning because if I don’t help clients plan their beginning or next, they’ll never exit. They’ll find a way to self-sabotage and kill the deal every time. I go through this process with them. In some cases, I’ll tell a client, “Your business is not sellable.” I did that with a graphics company.
The owner called me. He’s a wonderful man. We had about a twenty minutes conversation with him. He said, “Michelle, I can’t do this anymore. It’s me, my wife, and we have one employee. We’re working out of a garage. My wife and I are about to kill each other. We’re probably going to get a divorce. We’re working fourteen hours a day.” He goes, “How can I grow this company to the next level?” Guess what? The business is not sellable. If I took it out of business, there would be no business. He says to me, “I love the business, and we’re turning down 6,000 clients a year that we can’t get to.”
There’s a process that’s wrong here.
They have a people problem because they have no people. They had a great product but had a process problem. I said, “We’re not going to sell your business. If you would’ve got any other broker, you’d be in big trouble because they would’ve put your business on the market, and it would’ve never sold.” They told one employee they were selling or closing the door so that one employee went and got another job.
She thought she was going to lose her job.
He said, “What are we going to do?” I said, “Let me do my due diligence on you, but we’re going to partner.” I put up the money, took them out of the garage, put them in a 6,000-square-foot space, hired employees, hired a COO, and leased new vehicles and equipment. Now they have a business, and now they’re doing millions. Our exit plan is to sell for $15 million to $20 million. That’s what I do differently than anybody else. I’m an entrepreneur. I know what it’s like to run a business. I know what it’s like to have to pay the bills. I know what it’s like to build a company to run on all six cylinders. I’ve been there and done it, and that’s what makes me so unique, more so than anybody else.
I’ll be honest. I’ve interviewed several on the program. For brokers, it’s a transaction for them. They’re that middleman who matches the buyer and the seller, and that’s what they do. They want a good business. They want to sell it because if it’s not sellable, they’re not going to make anything.
They don’t know how to fix it. They don’t know how to grow it. They don’t know about the six Ps. They don’t know any of that stuff. My clients look at me not only as their M&A advisor and intermediary but as a problem solver on everything. I had a client call me whose business for selling in the $50 million to $60 million range. She calls away at 6:00 AM on a Saturday. She goes, “I got a problem. One of my employees tested positive. What do I do? I’m going to put a mask on and take him to urgent care.” I said, “No, you’re not. Call 911 and have the ambulance pick him up.” “Where do I get to test?” I said, “I got a resource,” and I sent her my resource. I’m more of their problem solver than I am their intermediary. That’s a big difference.
That’s why businesses sell for more. It’s because you fix the problems. Somebody else might go in and go, “We can sell this business for $5 million,” and it sells for $5 million. When you fix the problems, it sells for $20 million.
The other reason I sell for 20% to 40% more on average is because we also have the largest database. We have over 20,000 buyers. We know how to create a bidding war. We know what buyers are going to pay what for synergies. We know how to put a value on those synergies and know how to bring those certain buyers to the table to create a bidding war. A lot of times, without even fixing the business, we can get our clients more because we’re selling those patents or that BP contract that the other buyer wants. We find the synergies in that business that other buyers are willing to pay top dollar for.
Michelle, we are at the top of the hour, and we didn’t even talk about this. The one thing I wanted to talk about was there is this pandemic going on and if it is a good or a bad time to be doing all of this.
You can have me back on.
I’m going to say that. That means we need to do this again. Tell people about the book and how they find you if they want to work with you.
Go to ExitRichBook.com. For $24.79, you can purchase a book, which includes shipping. If you buy it on Amazon or anywhere else, it’s more expensive, plus shipping. ExitRichBook.com for $24.79 includes shipping. You get the immediate download now. You don’t have to wait until the book comes out. You get the book now, plus you get a lifetime membership to the Exit Rich Book Club. I do training videos, and I go into depth about all these different techniques and strategies.
Plus, most importantly, Deb, I have digital downloads. If you’ve never seen an LOI, a sample Letter Of Intent before, I have one, or a purchase agreement, due diligence checklist, or closing docs, all of the downloads you need to sell a business are there. Plus, you get a 30-day membership into Club CEOs where we do masterminds, Q&As, and a hot seat to ask those transformational questions like, “What business are you in? What business should you be in?” When a book comes out, we ship it to your doorstep. They can also go to SeilerTucker.com, and call my office at (504) 525-1717. I’m right here in New Orleans, where we do business all over.
This has been fabulous. We have to have you on again. We didn’t talk about the pandemic. By the time we get you scheduled again, it will be coming out of that. Will it be good? We’ll probably have a different president. It’s all of those changes in 2021. It’s fascinating to be talking about all this because it is going to affect so many things. I look forward to having you on again. Do you have any final thoughts that you want to leave everyone with?
The big thing is it’s hard to read the label from the inside of a bottle. You need an outsider’s perspective to read the warning signs and keep you out of the danger zone. When you’re in a fog, and it’s foggy, call me. I love to help. My passion and mission is to help save the economy by saving one business owner at a time.It's hard to read the label from the inside of a bottle. You really need an outsider's perspective to read the warning signs and keep you out of the danger zone. Click To Tweet
I’ve been having a delightful conversation with Michelle Seiler Tucker. We will have you on again. Until the next episode. Everyone, have a great day.
- Exit Rich: The 6P Method to Sell Your Business for Huge Profit
- Sell Your Business For More Than It’s Worth
- Exit Rich Podcast
- ST GPS Exit Model
- ST 6Ps
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