Wallstreet Journal Bestseller & USA Today Bestseller
2022 IBPA Benjamin Franklin Award Silver Medalist in Business & Career
Too many entrepreneurs push off planning for the sale of their business until the last moment. But for a business to sell for what it’s really worth―or even more―owners need to prepare for the sale from the very start.
In Exit Rich, author and mergers and acquisitions authority Michelle Seiler Tucker joins forces with Sharon Lechter, finance expert and author of Rich Dad Poor Dad, to create a must-have guide for all business owners―whether they’re gearing up to sell a business now or just getting started building out their company into something to sell for a profit in the future.
Seiler Tucker’s twofold approach to selling your business for a maximum profit combines two of the most powerful elements of her mergers and acquisitions toolkit: the “ST GPS Exit Model” to help business owners set goals for the sale before their business hit the market, and the “6 P Method” to help them objectively evaluate their business’s worth, before their potential buyers do. Combined, these tools provide invaluable insight into the process of preparing a business for sale, finding the right buyers, and staging the sale itself.
Throughout the book, Sharon Lechter’s wisdom peppers each chapter in the “Mentoring Corner” section, providing forward-thinking entrepreneurs with the perspective that they need to take control of their business’s future and exit rich.
This book is a rich resource for any business owner looking to:
- Objectively evaluate their business before a sale
- improve their chances of finding the right buyer
- Sell their business for maximum profit
Listen to the podcast here
The Chris Voss Show Podcast – Exit Rich: The 6 P Method To Sell Your Business For Huge Profit By Michelle Seiler Tucker
We certainly appreciate you folks reading and thanks for being here. Be sure to share this with your family, friends, and relatives. Go to GoodReads.com/ChrisVoss and see everything we’re reading and reviewing over there. Go to YouTube.com/ChrisVoss. Hit the bell notification buttons. You can do that as well. Go to all groups on Facebook, LinkedIn and Twitter, just search the Chris Voss or Chris Voss Show. We’re everywhere.
Also, go to our LinkedIn Newsletter. Sign up for that thing and it goes out almost every day and has some of our hottest authors on it. You’re going to see the freshest book authors on there. Go to our 122,000 LinkedIn group as well. Search for the Chris Voss Show and all that good stuff. Anyway, folks, we have a returning guest. She’s been on before and it’s after Coronavirus. It seems like it’s been 50 million years but she was on in 2020. I’m losing my mind. I’m not sure I’m still back from the COVID lockdown. She is the author of the book, Exit Rich: The 6 P Method to Sell Your Business for Huge Profit.
Michelle Seiler Tucker is on the show with us. She’s going to be talking to us about her book. A brilliant mind. I learned a lot from her when she was on the show and I think you’re going to learn a lot from her. Once again, we’ll get to talk to her about what’s going on in today’s world. Her team has sold 8,000 businesses to date. She currently owns and operates several successful businesses and holds the following professional designations and certifications, Merger & Acquisition Master Intermediary, Certified Senior Business Analyst, Certified Mergers and Acquisitions Professional, bestselling author, and panelist for M&A source.
Over the past decade, Michelle has sold several hundred businesses in franchises. What makes Michelle a formal force in her industry? It is that she closes nearly 98% of all offers she writes. On average, she obtains a 20% to 40% and sometimes 60% higher selling price for her clients. Their remarkable track record proves her dedication and persistence and here she is in the flesh.
Welcome to the show, Michelle.
Chris, it’s good to be back with you.
It’s good to be back and I’m glad we all survived the whole COVID thing or that crisis. Whatever that was going on there.
We’re still surviving.
Give me your plugs, your dot-coms, wherever you want people to check you out and to order your books and stuff, etc.
We launched Exit Rich in June of 2021 and I’m proud to say it’s a Wall Street Journal bestseller and USA Today bestseller. You can get that at any of your favorite bookstores or on Amazon. You can also go to ExitRichBook.com. We’re so excited that we’re launching the audio version, Chris. You’re asking for the longest time, “Where’s the audio?” Everybody says, “I don’t read.”
Everybody tells me they don’t read and they only listen to Audiobooks. We finally get out the Audiobook. It came out on May 1st, 2022. It’s available for the month of May only for the promotion of $2.99. That’s less than a cup of coffee, a quarter-pounder with cheese, and a Happy Meal. I could go on and on. You also become a lifetime member of the Exit Rich Book Club where you will have access to video training where we’re discussing techniques and strategies for me being in the trenches for many years.
We have documents to operate your business such as employee handbooks, positive procedure manuals, non-compete, and documents to sell your company. Most business owners have never seen these documents. What does an evaluation look like, a prospectus, letter of intent, purchase agreement, due diligence checklist, and closing documents? All these documents together cost over $50,000 to create over the last many years. They’re there for your upload for $2.99, so go order now. You can order on Amazon and Apple. You can order where you get your paper and Audiobook. That is a heck of a deal.
It is and to get that deal where they get access to your group there, do they need to order that through Amazon and somehow they have a way to make that connection work?
What they need to do is order through Amazon, Apple, and Barnes and Noble, then shoot us an email to Marketing@SeilerTucker.com with the receipt then we’ll send you access to SeilerTuckerAcademy.com. Our main website is SeilerTucker.com.
I feel less guilty now. I still have to do the Audiobook of my book that I put out in October 2021. I tried to get it done when we were editing the book. I’m glad you got that out because I’m a big Audiobook fan. I read a lot of Audiobooks. I go to the gym. Usually, when I’m driving to the gym back and forth or driving anywhere, I’ve got Audiobooks playing. That’s great that you have that available now. Let’s talk a little bit about you. Maybe some background on you. What got you in the business and up and coming? An origin story, if you would please.
I’ve always been interested in entrepreneurship even as a little girl. I would always tell my mom, “I’m never getting a job. I’m going to be my own boss. I don’t like to be told what to do so stop telling me what to do.” What did I do? I go into business. I open up many different businesses and who tells me what to do? My clients and my business partners.
Anyway, I’ve always been an entrepreneur of all many different businesses and different verticals. I got recruited by a Fortune 500 company called Xerox. I worked for them for about six months as a high-volume manager. My nickname became The Closer. Anytime somebody couldn’t close a deal, they’re like, “Call Michelle. She can close it. She closes everything.” They asked me to interview for the regional vice president position, which I did.
I got the position. I was in charge of the entire South region with over 100 salespeople. Chris, I realized how much I didn’t want a job. Be careful what you wish for because it was horrible. I was okay with the selling piece because I like selling. I like solving problems. I’m solution-oriented. I love building relationships that lasted a lifetime. What I don’t like doing is managing a bunch of kids. They call themselves salespeople but they’re toddlers. That’s what I didn’t like.
I ended up transitioning out of Xerox. As I said, I’ve owned different businesses along the way but I transitioned out of Xerox into my own franchise development, franchise consulting, and franchise sales company. In this company, I had equity at different franchise orgs. I specialized in area development, building out the franchise, and taking somebody who has 3 locations to 50 locations. I have so many buyers that kept asking me for existing businesses because franchising is not for everyone. I kept saying no and I’m like, “I’m a Big Bob Proctor fan.” In fact, I’ve spoken with him on stage numerous times and I’m like, “I need to listen to the universe. I need to go out there and start my M&A practice.” I did that many years ago.
You folks have been doing that ever since. You’ve sold thousands of businesses, if I recall right, through your company. There is one thing I remember talking about with you that is stuck in my head. I built all my companies to build an empire. I ran into all sorts of different issues like getting wiped out during the recession and all that good stuff.
Do you mean even the legendary Chris Voss runs into problems?
I hadn’t read your book yet. I didn’t learn from you that you’re supposed to build a business to sell it. Let’s talk about the title of your book, Exit Rich. Why did you title it that and what is the 6 P Method?
To back it up a little bit, as I said, I entered this industry many years ago. I realized pretty quickly that most businesses are not sellable. What Steve Forbes says is true. Steve Forbes endorse Exit Rich. Steve Forbes says, “Eighty percent of businesses of the market will never sell.” M&A source says 90%. That means you have less than a 10% to 20% chance of success when you put your business on the market.80% of businesses in the market will never sell. You have less than a 20% chance of success when you put your business on the market. Click To Tweet
I said to myself back then, “If I don’t fix these businesses, if I don’t grow these businesses, I’m going to start to death.” We specialize in buying and selling and fixing and growing companies. I partner with business owners, investing my money, core competencies, and resources to get their businesses back on track so that we can sell them for their desired sales price. Why did I name the book Exit Rich? The publishing company came up with lots of names like Exit on Top, Exit on Your Terms, Exit This, and Exit that. They’re like, “What about just Exit Rich?” I’m like, “Great idea.” That’s how we came up with the name Exit Rich.
I like the idea that you had of when you design your business and you build it from the very beginning. You start structuring it in an aspect of the way that you could eventually sell it. That’s one of the problems I have with the Chris Voss Show. It’s a little hard to sell because it’s got my name on it. I’ve often thought, “What if I could sell this thing?” You’d have to change it to something else but I’ve thought about that.
There’s a new company that we’ve launched called the Chris Voss Leadership Institute surrounding my book. I’ve bought both ChrisVossLeadershipInstitute.com and I think it’s CVLI.com as well. We have it so that when I sell it, somebody can take it to CVLI as the initials. You made me think about this stuff and use it for future business deals.
It’s very hard to sell a company that’s tied to your brand. Tony Robbins had to do an ESOP to sell to his employees years ago. If you ever read the book, The Millionaire Mindset by T. Harv Eker, he had to completely rebrand and get away from T. Harv Eker. He started Peak Potentials. You have to look at your business and say, “How much of it is tied to you? In the leadership program, how many coaches and consultants are you going to have, which is going to be tied to you?”
If it’s tied to you, if it’s still based upon you and your brand, it’s very difficult to sell. That brings me back to why 80% of businesses don’t sell for many reasons. First and foremost, business owners don’t plan their exit like you said. Stephen Covey always said, “Start with the end of mine.” Michelle Seiler Tucker says, “You need to start your exit strategy for the minute you begin you start or buy a business,” because business owners are so busy working in their business. They’re not thinking about exit strategy until a catastrophic event occurs.
That catastrophic event could be health issues, partner disputes, divorce, or death. This crazy pandemic that we’ve been living in for a couple of years is an example of a catastrophic event. You never want to sell your business during a catastrophe. What happens is these business owners will call me and I always ask them, “What’s your desired sales price? What do you want to sell your business for?” They’re laughing because you know the answer.
They always come to me and say, “I want to sell for $20 million.” They’re even $100,000. I said, “How much are your appreciation and amortization?” They’re like, “How do you come up with $20 million? You’re even $100,000?” They said, “Michelle, I need that to retire on. I need that to put 5 girls to college and pay for 5 weddings. I need that to buy another business.” Buyers don’t care about what you need or what you want. They care about the value that your business brings to them and what they’re willing to pay for that.
Do you mean 50 times multiples isn’t revenue and what you can sell for?
Unless you have a SaaS business. If it’s taken off and it’s a unicorn, then maybe you’ll get 50 multiple revenues.
What if I get Elon Musk to buy it?
Maybe. He bought Twitter. What’s the reason why he bought Twitter, Chris?
I think he was high on the Joe Rogan show if you saw the smoking pot on it.
Anyway, that’s the number one why businesses don’t sell. It is because they don’t plan their exit. On Exit Rich, we talk about planning your exit from the beginning. Start with the 6 Ps in line meaning come up with your destination, know your current value, and know your timeframe. There are five different types of buyers. Know which buyers are right for your business then reverse engineer your plan, know your numbers, and know the characteristics that these buyers are wanting to buy and will pay top dollar for.
That’s how you create a bidding war and how you maximize value. One of the biggest reasons too that businesses don’t sell is like what you said earlier. The business is you. A lot of business owners have created themselves a glorified job that they go to work every day versus a business that works for them. If you are the business, it’s not sellable. It’s not just in a podcaster. There are so many businesses. We’re selling an agricultural business now for $55 million.
They’ve got 350 employees and the business is still dependent upon the owner. The owner has his hands on everything. The owner has all the client relationships and knows everything about growing. It’s all in his head and as I said, the client relationship. In that case, the owner has to retain equity because otherwise, the buyer is not going to buy it. They need to buy a smaller portion and keep the owner on in which to mitigate the risk.
If you’re a smart person, you start grooming your replacements and you start looking, “Who’s going to replace me? Who’s going to move up the food chain and everything else?” In the book, you talk about the 6 P Method. Do you want to tease some of that out to us?
The first P is what we’re talking about now and that’s People. I start with people because without people, you’re not getting anything done. You’re never going to build a scalable, sustainable business without people. I only say you don’t build a business, Chris. You get people or people build a business. Most entrepreneurs are control freaks. Not you, of course.You're never going to build a scalable and sustainable business without people. Click To Tweet
I’ve been known.
They want to have their fingers in every pie and then they like, “If I want it done right, I have to do it myself.” You’ll never grow unless you let go of the control. You have to make sure you have the right people in the right seats and you have to ask the who question. Who handles customer service, quality control, accounting, legal, manufacturing, distribution, etc.? The list goes on and on.
The clue here is you should never be next to who. I’ll give you a perfect example. A dental practice called me and wanted to sell. He’s been in business for 50 years. He’s a great clientele. One dentist, the owner, and three dental hygienists. His employees are his daughters. I said, “I can sell your business but I can’t maximize value because you and your daughters are the business. The buyer is going to want you to retain equity and stay on for 2 to 3 years.” He said, “We’re not staying.” I said, “You’re not selling.”
In a business like that, a lot of the customers are attached to the owner after he has been there for that long. When he leaves, the book will probably lose some revenue and customers. They’ll be like, “We like Joe and Joe is gone now. We don’t like the new guys, so we’ll go someplace else.”
That’s service-type businesses. Almost every service type business, that’s where they built themselves to blow by job than the actual business that works for them. As I said, even in larger companies like the agriculture company, business owners want to maintain that control and they do that. Now, we have an electrical company we’re selling in the $50 million range. Choose the opposite, Chris. He works ten hours a week. He’s got two facilities and got a project manager in each location and the business can roll without him.
I like that model. Ten hours a week? I want to buy that business.
They have $7 million in EBITDA.
Will he take a check? I think we covered what two of the Ps?
No, we covered one. The second P is Product. When you’re in business, you have a product. The service in an industry. You’re in the podcasting business so you got to look at your industry and say, “Is it on the way up? Is on the way out?” Newspapers are on the way out. Print is on the way out. Restaurants, during this pandemic, were on the way out. You want to sell when you’re in your prime. You can ask yourself, “Are you an Amazon or a Blockbuster?”
You always want to sell when your business is doing well. Here’s another big caveat to that. The reason why so many businesses, especially restaurants went out of business service during the pandemic, is because they have one profit center. You have one way they get paid. Restaurants get paid if you go dine or if you take food out but they all have an eCommerce business. They are private labels and not doing cooking shows. They don’t have any additional congruent revenue streams.
You can’t put all of your eggs in one basket. You always need to have those congruent revenue streams and additional profit centers. Like me, how many different businesses? M&A was terrible in 2020. I haven’t met up with legal marketing companies and most are clinics. I have a graphics company that specializes in first responders. I always have different profit centers. For restaurants and other business owners, don’t diversify. Make sure it’s congruent.
When you say restaurant congruency, do you mean a restaurant chain?
They can add multiple locations but during a pandemic, that’s not going to help you because they can all close. What if you have some specialty items that you’re the chef or your chef creates? They’re unique and start an eCommerce business. I have a restaurant chain that’s private labeling some of their dressing and other sauces and things like that. They end up selling in Whole Foods and other grocery stores.
I got another restaurant that does wine and cheese. We have Zoom calls every week and they pocket money from doing that because they charge you from $150 to $300 for the wine and cheeses and they deliver it to your house. Think outside the box and say, “How, as a restaurant owner, can I add congruent streams about it?”
The other thing I like too when I interviewed you last time, and I know we’re interrupting the 6 Ps, is the documents you were talking about that people can have access to by ordering your Audiobook. Those are important to lay that foundation to where the business can be sellable instead of doing a sole proprietorship. You’ve got an LLC or something along those lines as a recommendation for you. People don’t think about that from the get-go.
No, they don’t think about that like they don’t think about processes, employee handbook, not going to for upper management, and things of that nature. Product is the second P. Let me tell you. If you don’t have the right product, if you’re not in the right industry or right service, you’re going to go out of business quickly. I always encourage clients to ask three questions, what business are you in? Like Mcdonald’s, what business is McDonald’s in?If you don't have the right product or if you are not in the right industry, you're going to go out of business really quickly. Click To Tweet
McDonald’s is in a franchising business, isn’t it?
No. They’re in the real estate business. In the 1980s, Amazon asked these questions, “What business are we in?” They said, “We’re in a book business. We fulfill book orders.” Two, “What’s your superpower?” Amazon said, “Our superpower is fulfillment. We do that better than everybody.” Question number three and the most important question, “What business should you be at?”
The name of the game is pivoting. The seventh P is Pivot. You got to pivot, adjust, and be flexible. You are either going or dying. There’s no in-between. Amazon asks those three questions. Those three questions literally transformed Amazon from a small book fulfillment center to a multibillion-dollar corporation.
How do you feel about franchising? Do you think people should start their own companies or franchise if they’re looking to exit rich?
That’s my background, franchising. I did that before I got into M&A. There are different aspects of franchising. If you’ve never owned a business before and you’re not an entrepreneur and you’re leaving Corporate America because you have this dream of being your own boss, franchising is a good partner because you’re in business for yourself but not by yourself.
You have the training, procedures, policies, and processes. They usually assign a mentor to make sure that you’re up to speed on everything. Good franchisees will research good locations and do due diligence. They’ll help you with due diligence, make sure you’re getting in the right demographics area, etc. That works great for corporate people that want to leave Corporate America but not so great for entrepreneurs.
Entrepreneurs want to make their own decisions like me. They want to have control. They want to be able to control things. They don’t want to be told what to do all the time. The franchise is not right for them, which is why I had so many buyers asking me for existing businesses when I was specializing in selling franchises. Now, if you have a good concept and you want to franchise that, it’s the best way to leverage other people’s money and draw on your footprint exponentially. I highly recommend it if it is successful. You should have 3 or 4 locations first before you decide to go franchise that out.
Is it easier to sell franchises than a normal business?
I’m glad you asked that question because here’s another good solid point. Franchisers hate me when I say this but I tell the truth. If you’re looking at buying a franchise, don’t buy a new franchise because they’re going to tell you it’s going to cost you $250,000 to $400,000 maybe for Baskin-Robbins or $300,000 to $500,000. They’re always low than their estimates. Build out always.
If you’ve ever built anything commercial-wise, it will always cost more than they tell you it’s going to cost. It always pays twice as long as what they tell you it’s going to take then you got to order new equipment and inventory. You got to build out that space, furniture, fixtures, or equipment. You got to hire people, etc., and you’re spending money based upon what it costs to build that new franchise. In an existing franchise, your pay is based upon what the 3 or 4-month of what its average is.
You’re based on the actual numbers. Years ago, my firm sold a Baskin-Robbins. They have been in business for 30 years for $190,000. Even if this was for 30 years, they had a dynamite location, employees in place, employee tenure, a great client base, and a fabulous location and they’re making $90,000 a year. Sometimes more. We sold that for $190,000 because it was based on the cashflow.
A brand new one would cost you $400,000 to $500,000 with no cashflow. Why would you ever go buy a new franchise? Always buy an existing franchise. Franchises are not good in my opinion for attorneys and doctors and things like that because they buy like a smoothie. They’ll buy a Smoothie King, an ice cream franchise, or something like that. What happens when employees don’t show up?
They’re a lawyer or a doctor. I have one lawyer say, “Michelle, I invested over $600,000 in the startup franchise. People are still in front of me. They’re not showing up. They’re not doing this or that. I find myself now running this business. I’m still in my law practice, which I make $350 an hour.” If you’re looking to make an investment as a professional, you want to make sure you buy an existing franchise or buy something that doesn’t need so many people to operate it.
How has COVID changed or what’s going on now? You bring up a good point with that story. Everybody here in Utah, there are signs up going, “We need employees, please come.” I’ve been wondering. Sometimes I go into the business and I’m like, “Am I going to find the owner by the counter trying to keep the thing going?” In fact, I know one IHOP here in Utah where the owner is working. She’s running the whole thing and her daughter is one of the waitresses because they can’t get enough people.
It boggles my mind because you want to work for two years. Where’s the money coming from? I think the government shut off all the pay. How are they making money? How are they succeeding in their lifestyle? It’s very difficult in all industries now. The company I told you about we’re selling for $55 million, they had three people walk out. The M&A fund that we’re working with and the law firm we’ve been working with for many years had three attorneys walk out one day. It’s pretty much tough in every single industry. You got to get creative and think outside the box. You got to change your interviewing style or your high methods and start to do things differently.
Are there any maybe preferred businesses you should look at? Ones that aren’t as employee intensive that have a manufacturing or something that doesn’t have automation things?
There are but you’ve got SaaS companies, eCommerce companies, or things of that nature but you got to be very careful with that. A lot of Millennials and Generation X are solution-oriented. They have started SaaS businesses, eCommerce businesses, and everything else. I got a guy who started a coffee business. A manufacturing coffee pots selling like crazy out of Amazon.
Ninety percent of his business was through Amazon but he was restructuring that. He was getting his stuff because he also did coffee. He was private labeling and getting things in the hands of medical providers and things like that. He was going to the grocery store so he was diversifying but the problem is he had no infrastructure. He had no employees.
He had one employee for $10.99. We got another guy that has an app company. It’s him and his wife. Their EBITDA is about $2 million a year but it’s just them two. We got another online education business where it’s him and his wife. You have to be careful on the flip side of that because when you go to sell that and you don’t have the infrastructure, buyers are typically going to walk away unless it’s a business that has infrastructure themselves and gets folded into their company and utilizes their resources.When you sell a business without infrastructure, a lot of buyers are going to walk away. Click To Tweet
Otherwise, most buyers will walk away. We’ve had so many buyers walk away from these different companies because they don’t have the infrastructure. You have to be very careful. You’ve got to find that happy mix between technology. Automation is the name of the game. You figure out a way you can automate everything to reduce employee costs.
Another thing is jobs are being lost in America too because employers have had it. They’re starting to go outside of America and do business in the Philippines and in India and different countries like that because you can get them for a fraction of the cost. They usually don’t complain or call in sick. They don’t bring up problems. America is going to lose jobs because of that too and then you’re going to lose even more jobs. Companies like McDonald’s, Burger King, and banks are all automating. You won’t even have somebody taking your order anymore. Look at all of the restaurants that are now automated, even bar attendants. When you go to a bar, there’s a computer taking your order and cracking a joke.
Isn’t that wild? If you go to McDonald’s or Taco Bell now, there’s a thing there. It’s hard to get used to it for me because I’m a people person. I think the younger generation like it more.
They’re more technology-driven than we are. They’re like, “I learned about their technology.” I remember when I was in airport, a kiosk came out. I’m like, “Where was that fire sign?”
“How do I get extra pickles on my burger? Which one of these buttons does that?” I’m interested in your input on this as well but it appears that we are in a recession. We’ve already passed the first quarter. All we need is the second quarter and we are officially in a recession. Clearly, the Fed is going to make 5 or 6 moves. They’re way behind the eight ball on making their moves. Do you see a coming recession? What’s the best way to either recession-proof your business or the companies that you’re looking for? Maybe the stuff that you’re looking to buy would be recession-proof.
Tony Robbin says this all the time. Tony Robbins always says, “Winter is coming. Prepare now.” What goes up must come down. We’re going to head into recession. You have already seen the writing of the law. The Feds are going to increase interest. It is going to be harder to get money. Private equity and strategic have been telling us and our sellers are like, “You want to sell this business, you better hurry up before July because once June or July comes, money is going to dry up. You’re not going to see as many transactions as you do now in M&A.” M&A had a record year for 2021 and it started in 2022. That’s predicted to dry up by July or August. In the housing market, you’re going to see more big boxes in Utah.
You’re going to see it collapse.
If you plan right in you’re strategic, you can take advantage. There are more millionaires created out of the Great Depression than ever before. Out of this pandemic, there were billionaires created. Out of this new recession, you’re going to see more billionaires created.
What else do we want to touch on in your book? I think we got a few remaining.
I thought we will buy another house now because I’m not going to take a double or quadruple buy. It’s about to come down.
Toronto has already dropped I think 20% to 22%. Lumber prices are on the way down. I own a mortgage company for many years and I’ve lived through all the recessions since 2008. I see what’s going on. I’m like, “You don’t want to be buying now because it’s going to pop.”
It’s going to pop if you’re in a stock market. Why? That’s when you buy. You don’t pull your money out of the stock market. You buy and buy.
What else do we want to cover in your book or tease out so that people will order that baby up?
We can go through the 6 Ps quickly. The third one is Processes. It’s the number one reason why businesses fail. Lack of working capital and lack of processes are the reasons why businesses fail. You got to button up your processes. You got to figure out what your clients want to experience because consumer buying habits have changed dramatically.
Whoever makes the easiest for the consumer to purchase like Amazon, they’re waiting. You got to go back to your clients and ask them, “What are the three things you want to experience?” Everyone should do that with their clients for now because whoever creates a wild experience is one that’s going to win their business. Otherwise, you’re going to lose market share.
You got to have processes, SOP checklist, employee handbooks, non-competes, etc., and design your processes around the customer experience. What an idea. Most businesses designed their processes around their own agenda. Look at doctor’s offices. They’re open Monday through Thursday, 9:00 to 5:00, and they’re usually closed on Fridays. My husband and I own medical clinics. That’s what we did. We said, “What do our patients want? They want flexible hours.” We’re open three nights a week until 7:30 at night and we’ll open Saturday half a day.
What did McDonald’s do in 1940 when they said, “We want to develop a fast food restaurant? We want to design it around the customer experience.” A customer experience is that food is hot, fast, 30 seconds or less. It’s why you can eat at McDonald’s anywhere in the world and get the same experience. The fourth P is the highest value driver. Let me give you a crash course in evaluations.
Businesses that have less than $1 million in EBITDA or if your franchise tax depreciation amortization will trade anywhere from $1.5 million to $3 million, maybe $3.5 million. If you’re a SaaS company, you’re going to trade at multiple revenues, not EBITDA. If your business is over $1 million, that’s your sweet spot. Your goal is to get your business over $1 million in EBITDA because that’s where all the buyers are.
There are five different types of buyers. Get your EBITDA over $1 million then your multiple starts at $4.5 million or $5 million. Proprietary is the next P. It is the highest value driver of any of the other Ps. Proprietary is branding. The more well-branded you are, the more we can sell your company for as long as your brand is relevant to the consumers. Nobody is buying Blockbuster or Toys “R” Us but Apple is the most valuable brand in the world.
Their brand is worth $289 billion. You want trademarks. Make sure you trademark. Don’t just get a state trademark. You need to get a federal trademark. Otherwise, you can receive a cease and desist letter in your mail that you have to stop using that company name. Get a federal trademark on your company name or your podcast show. Did you know, Chris, that the attorneys told me that I still have to federally trademark Seiler Tucker even though it’s my company name?
I was flabbergasted. This is a trademark attorney that’s big time and that’s all they do. I said, “Yes, we should get it.” they said, “If someone opens up Seiler M&A firm or Tucker M&A firm, there’s nothing you can do. You want to trademark your name so nobody can open up Tucker M&A firm or Seiler M&A firm.” You might want to think about trademarking your name, Voss Podcast.
Does anybody want to copy a guy who looks like this?
They’re not copying how you look. They’re copying about how successful you are.
Trademark your products. We have a company that has exclusive products to all of our TJ Maxx. Each product is the same product but they have different names. They have a bunch of trademarks. You want to have patents. Patents bring value. We sold a company for $18 million. They had eighteen patents and it wasn’t making that much money. There is contracts, like vendor contracts, manufacturing, and franchise. By the way, we never finish that question.
Franchises or businesses sell like hotcakes. If we get a franchise order that has 100, 200, and 500 franchisees, they sell like this because everyone wants to buy a business that has multiple profit centers. You have to have contracts like client contracts. A subscription model is where it’s at. You need to have as many people as you can on an accruing revenue stream. Chris, all business owners make this huge mistake.
They don’t have the transferability clause in our contract, so 98% of all sales are assets, not stock. If your buyer doesn’t agree to a stock sale, then you have to go to your clients and ask them to sign a consent to transfer. We have a media company that’s got 2,000 clients. If you go to your clients and they know you’re selling your business, your deal might fall apart.All business owners make this huge mistake: they don't have a transferability clause in their contracts. Click To Tweet
That’s true. They’re like, “We like the old management.”
Whoever you endorse is huge. We got a client working with Oprah. Competitors will pay. Strategics will pay a lot of money for that because they want their products in front of the queen of everything. The same thing with you, Chris. You could probably be an influencer at their doorstep. All of that drives value. Number five P is Patrons. That’s your client base. Most businesses follow the 80/20 rule where 80% of their revenues come from 20% of their clients. If you lose 1 or 2 clients, you’re in big trouble. A $55 million company we’re selling has 70% customer concentration in one retail chain and they lose that 70% of the revenue.
The last P is Profits. That’s why we’re all in business. It is to make money. I often say, “I want a business to help people.” I can retire but I want to take businesses to help people. Anyway, lack of profit is never the problem. It’s the symptom of not having the right people in place, being in a dying industry,.nNot having your processes buttoned up, not protecting your proprietary and your IP, and having to spend more money. Also, your IP should always be hard and separate corporation. What happens if you get sued and everything is in the same corporation? That’s the 6 Ps.
We used to always do C-corps on all of our businesses. People be like, “Why don’t you do that?” I’d be like, “I don’t know. We just did it for protection.” Once you start and got successful, the lawsuits come when you’re rich and successful.
They will not be after you when you’re small.
They will not sue you when you’re small but we learned what rich people warfare is. It’s courts and suits. We were assuming people too. We had a lot of salespeople and they would steal thousands of dollars of leads. We always had stuff going on and some shenanigans. The people who leased our buildings, we had issues with them. The C-corp was nice. It was nice to sleep well at night when you’re being sued over something. We hired employees once that had what you would call contracts where they couldn’t work for somebody else. All sorts of fun that you have. Anything more you want to touch on or tease out before we go?
A lot of times, the bigger you get, the more problems you have, as you mentioned. It’s not what you know that gets you in trouble. It’s what you dealt with now and what got you here won’t get you there. If you got a $1 million business and you’re trying to go to a $10 million business, you’re going to need a different coach, mentor, and team. You probably need a different CEO.
Big corporations change out their CEOs over time. The one thing that I always say get a mentor that spends down a path you want to travel because that will shorten your learning code dramatically. Learn from other people’s mistakes. Don’t learn from your own. I always say it’s hard to read the label from the inside of a bottle. You need an outsider’s perspective to read the warning signs to keep you out the danger zone.
I do that with vodka. I think I read from the inside of the label and the box.
It’s tequila for me.
At any rate, I encourage everybody to go get a copy of the Audiobook at Amazon, Apple, and Barnes and Noble for $2.99. Send us an email to Marketing@SeilerTucker.com. We’ll make sure you get access to Seiler Tucker Academy. Take the 6 P quiz at Seiler Tucker Academy. You can contact us at SeilerTucker.com and follow me on social media. It’s Michelle Seiler Tucker. Most importantly, listen to our podcast Exit Rich, where we interview million-dollar and billion-dollar access. We had Peter Taunton, the Founder of Snap Fitness, who sold twice. He sold the first Snap Fitness for $40 million retaining equity. The second time, we sold it for $30 million. $70 million on one business is not bad.
That is not bad at all. While we were chatting, I bought the Audiobook. We got to get your book on Audible now. Everyone order it up. All are good stuff because this is brilliant. As I said, I built my business totally wrong after finding out what is this about.
A lot of people have. It’s not just you. You’re not unique.
You have me thinking the new Chris Voss Leadership Institute is designed with not only dot-coms but so it can break down the name and be sellable. It’s going to have consultants and courses that will work for it for leadership, institute, consulting, and all that think tank crap. That sounds great. It’s designed to be sellable and it’s because I had you on the show before and fun is fun. People should learn this. It’s important.
Go out and get your Audiobook for $2.99. Do not buy your cup of coffee now.
It’s four times the amount of $2.99 for the coffee.
Get the print version. You can get that as well with Amazon.
Michelle, did we get all your final dot-coms and every place we want people to go check you out on the interwebs?
I think so but I could say it again. If you want to buy the printed booking, you can go to ExitRichBook.com. SeilerTucker.com is our main website. SeilerTuckerAcademy.com is where you could take the 6 P quiz to see how you score. What’s your strongest Ps and what’s your weakest Ps?
It was wonderful to have you on once again, Michelle. I certainly appreciate you coming on board and saying hello to us again.
Thanks, Chris. I appreciate the time. It’s always fun.
Thank you. Thanks, readers. Go to YouTube.com/ChrisVoss. Please share this show with your family, friends, and relatives. Put your arm around them and say, “If you listen to Chris Voss Show, it’s the family that loves you but doesn’t judge you. It’s the best family there is.” Go to you Goodreads.com/ChrisVoss. Go to all of our groups on Facebook, LinkedIn, and Twitter. Make sure you sign up for LinkedIn Newsletter. This will be on there. Also, go to our big LinkedIn group. Thanks for tuning in. We’ll see you folks next episode. Stay safe. Bye-bye.
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