Most entrepreneurs assume they will eventually be able to sell their business, but the reality is that 8 out of 10 businesses never sell, something Michelle Seiler Tucker breaks down through years of experience buying, selling, and scaling companies. She explains how burnout, health issues, and unexpected life events often force owners into selling too late, when their business is already too dependent on them to command strong value. Through her GPS Exit Model, she emphasizes the importance of starting with the end in mind by understanding your desired price, current valuation, timeframe, and the strategic buyers who are most likely to acquire your company.
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Why 8 Out of 10 Businesses Never Sell (And How To Avoid It)
Welcome to another episode. Typically, we interview short-term guests, but I’m going to do a solo. I’m Michelle Seiler Tucker. I’ve been in this industry for over 26 years. I specialize in buying, selling, fixing, and growing companies. I love what I do. I’m an entrepreneur. I’m like a kid in a candy store. They can’t wait to hear your story. I can’t wait to hear how you started your multimillion-dollar company out of your kitchen, out of the garage, or out of your pickup truck. I love entrepreneurship. I live it. I breathe it every single day of my life. It breaks my heart that entrepreneurs spend so much time, energy, and effort in their company, running their business.
One day, they wake up and say, “I need to sell this. I’m tired. A catastrophic event has occurred or I’m getting a divorce. There are health issues in the family.” They think, “I should sell this.” Plus, the other thing that sets in is true burnout, my friends. Business owners get tired. They’re exhausted from running the everyday day-to-day business. Whether you’re working in it or on it, you can experience burnout. When that day comes, it’s typically too late, my friends.
The reason it’s too late is that you’re going to look at your business, you’re going to look at your life, and you’re going to say, “What do I need to sell this business for? How much do I need to make on a monthly basis or on a yearly basis? How can I set my family up for success? How can I make sure that there’s enough money coming in to support our lifestyle, to maybe start something new? Maybe start another business, or maybe create your next masterpiece. When you go, “Today is the day,” I look at business owners. Most business owners will say, “Michelle, I’m ready. I’m done. I got to get out of this business.”
The Buyer Sanity Check: Value Vs. Need
When I ask them, “What do you want for your company?” They’re like, “What I need is about $20 million.” What you need is important. It is called the buyer sanity check. It is part of the buyer sanity check. What you need and what buyers are willing to pay are typically two different things. Buyers might love your business, but they’re not going to pay you what you want or what you need. They’re going to pay you based on the value that your business provides for their lifestyle, or the value that your business could perhaps create a lot of value add for their current company, and catapult their current business to the next level.
Think about that. When you wake up one day because of a health issue or a catastrophic event, or burnout, or you’re sick and tired of employees. You start to look at what you want and what you feel you need to exit your business. It’s probably not going to be what you get at the closing table. This does break my heart because entrepreneurs work harder than anybody else. We go into business to be our own boss, create that financial freedom, and do what we want to do when we do it. Many of us have created a job that we go to work at every day, versus a business that works for us.
When they go to sell it, they’re not cashing out for the true value that they feel that they’ve poured into their business because entrepreneurs spend time and energy. They sometimes spend their entire life building their masterpiece. One day, you just wake up and want to sell it. Buyers will not pay what you want. They’ll pay for value. The reason this breaks my heart is that I see so many business owners closing down their companies. They’ve been operational for 10, 15, 20, or 30 years. I see so many business owners selling for pennies on the dollar. I see business owners file for bankruptcy.
You really need to start thinking about your business before you wake up one day and decide you must get out. Share on XThe GPS Exit Model: Planning From The Beginning
That’s what breaks my heart because entrepreneurship is alive and well. There are more buyers now looking to buy good businesses than there have ever been in my 26-year career. Buyers are looking for sustainable businesses that are scalable. When the owner is involved with every hand in the pot, every hand in the pie, making all the decisions, then the business is not always sellable. In my book, Exit Rich, endorsed by Steve Forbes, we talk about planning your exit and starting with the end in mind. For your newbies who are starting the business, pay attention to this. As Stephen Covey always says, “Start with the end in mind.”
A sustainable, scalable, and sellable business is built with the end in mind. Share on XWhat does that mean? That means that you need to start thinking about your business before you wake up one day and decide you must get out because of burnout, health issues, or a catastrophic event. It means you’ve already built a sustainable, scalable, and sellable business. That’s what the Seiler Tucker GPS Exit Model is all about. It’s planning your end for the beginning. It’s okay if you haven’t done that, but you can’t wait any longer. You need to follow the GPS Exit Model. What is that? What is your destination? What do you want to sell your business for?
I have people who come to me all the time and say, “Michelle, I want to sell my business for $20 million.” Even our earnings before interest, taxes, depreciation, and amortization might be $1 million. They’re thinking they’re going to get a twenty multiple. That’s not going to happen in most cases. I would say 99.9% unless you have a SaaS model. That’s not going to happen. You have to think, “What is my destination? What is my desired outcome?” It’s like when you get in your car and drive somewhere. The first thing we do isn’t to pull out those old maps. We don’t do that anymore. We go to our GPS, and we plug in our destination.
If we don’t plug in our destination, guess what? We don’t know where we’re going. Neither does the vehicle. What do you need to know after you know your destination? You need to know your current location. Where are you starting from? What is your business worth? The GPS model, when you get in your car, can’t take you to point A if they don’t know point B of where you’re starting from. The same thing with selling a company. Where do you want to end up? What is your valuation?
The other important thing in the GPS Exit Model is this. What’s my time frame? Is your time frame a year? Is it two years? Is it five years? It’s important to start your GPS Exit Model, no matter where you’re starting from. If you’re one of my fellow Baby Boomers and you’re like, “It’s time to sell,” it’s okay if you haven’t planned. You start today. What’s your destination? What do you want to sell your business for? What’s your current valuation? What is your business worth? What is your time frame?
It’s important to know who the buyers are. Who are those strategic buyers that will pay more money for your company than anyone else? What is the buyer looking for when they go to purchase your business, your company? What are those KPIs? What are the revenue numbers? What are the profit numbers? I have buyers who say, “Michelle, don’t bring me any businesses that are less than $300,000 seller discretion earnings.” I have buyers who say, “Don’t bring me any businesses that are under $2 million in EBITDA, earnings before interest, taxes, depreciation, and amortization.” We need to know who those buyers are.
The Control Freak Trap: Letting Go To Grow
Let’s say you want to sell your business for $5 million. Let’s say you’re worth $1 million. Your time frame is three years. We already identified who those strategic buyers are that will pay you more money. We need to build your business based on your GPS Exit Model. There’s the destination, current evaluation, time frame, who will be those strategic buyers, and what are their KPIs? What does a buyer want to see as far as financials? Revenue and EBITDA. There’s this thing called the foundation. They want to know if the business can run without you.
Let’s face it. We’re entrepreneurs. I’m there right there with you. I’m an entrepreneur just like you. I have multiple different businesses. We business owners are control freaks. Ask my team. They’ll tell you. We’re control freaks. We feel that if you want it done right, you do it yourself, but that can’t be further from the truth. If you want it done right and you want to grow, you have to let go of control. The number one thing buyers look for, other than revenue, seller’s discretion earnings, or earnings before interest, taxes, depreciation, and amortization, is whether the business can run without you.
The number one thing buyers look for is: can the business run without you? Share on XThe Cost of Waiting For A Crisis
Can the business sustain without you? Are you in every aspect of the business? Are you delegating, and you have team leaders who all report back to you, the business owner? Can you leave for 30 days and not be involved in your business, and your business still run like a fine, well-oiled machine? Can it, or if you leave for a week, everything falls apart? Have you ever wondered why some businesses sell for pennies on the dollar and other businesses sell for millions? Have you ever wondered why businesses closed their door or filed for bankruptcy? Have you ever wondered why 8 out of 10 businesses never sell, especially good businesses?
Exit Rich: Don’t Become A Statistic
The reason is that business owners don’t think about selling until a catastrophic event has occurred. They don’t think about selling until a health issue, COVID, or something completely out of their control happens, or they’re completely burned out. That’s when they think about selling. Most business owners never plan for their exit. They never think about selling until a catastrophic event has occurred. Usually, by then, it’s too late. I hear stories all the time about business owners who had great businesses with good cash flow, but the owner got completely burned out.
I’ve got a story. Here’s a story for you. I had a lady who called me up. Her father owned a pharmacy. He owned a popular pharmacy in a very small town. They’ve been in business for decades. They’ve been in business for over 40 years. She called me up and said, “The business is dying. Walgreens and CVS open up across the street and around the corner. He’s losing money left and right. He keeps putting money into his business. Can you sell the company?” I said, “I don’t know. Let me take a look.” I looked at the business. I studied the business. It’s so sad to say, and it breaks my heart, that it was too late.
I couldn’t do anything. It was too late. Owners wait too long to sell their business. They are so busy running their business and their personal life that they don’t stop to think about what’s going on around them. New competition is opening up across the street. Market trends are changing. They stop doing what I call aim, which is always innovate and market. Once you start growing, you’re dying. He stopped innovating and marketing. He didn’t see the writing on the wall. After a thorough evaluation, there was nothing I could do. It was too late. Employees quit. Customers stopped going. The inventory was obsolete in many cases.
The business died a natural death. I don’t want that to happen to you. I don’t want that to be your story. I don’t want that to be your ending. I want you to be able to sell your business at your desired sales price, so you can exit rich, too. Don’t become a statistic. According to Steve Forbes, 8 out of 10 businesses will never sell. Don’t become a statistic. Become one of the businesses that plan their exit ahead of time so they can exit rich. I hate this to be your story, my friends. Those are the things that I want you to think about.
Don’t become a statistic—become a business that actually plans its exit ahead of time. Share on XNext time, I’m going to talk about the foundation that you must build to grow a sustainable, scalable, and sellable business, so you, too can exit rich, my friends. Let’s go through this one more time. No matter what stage you are in, whether you’re in the beginning stage, in the middle of your journey, or at the end. You’re like, “I want to retire. I want to move on. There’s more to life than this,” plan your plan.
Start today. How much do you want to sell your company for? What is it worth? What’s your time frame? Those are the things I want you to think about. Can a business run with you or without you? On our next episode, we’ll discuss how to build that foundation into a sellable dream machine that you can exit for your desired sales price, and opinions of people who have never sold companies before, to influence your biggest decision. Share this with your network. Make sure you subscribe to Exit Rich. I’ll see you next time.
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