Selling Your Business: Learn How To Exit Rich With Michelle Seiler-Tucker
The time comes for every business owner to sell the business they worked so hard on. While many business owners don’t give this a second thought, many have been able to get out and exit rich. Mitch Russo’s guest in this episode will show you how. Mitch interviews Michelle Seiler-Tucker, the Founder and President of Seiler Tucker, Inc. and an expert on growing revenue streams and selling companies. Michelle discusses the need for an exit plan if you want to exit rich and talks about what you need to do if you plan on selling your company. Give this episode a go if you plan on selling your company and want to make sure you do things right.
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Selling Your Business: Learn How To Exit Rich With Michelle Seiler-Tucker
I have something special for all of my coaches in the audience. As a coach myself, I realized that I’ve been spending about 30 minutes per session on headman because they had five applications open all at the same time. One for note-taking, my calendar, my spreadsheet, my browser, Zoom and all past session history scattered over two huge screens. At the end of each session, combining all that into a single email to send my clients their homework and report, what a job. I decided to get myself a professional coaching platform, but they were all too complex and too expensive. I did what all great entrepreneurs do when they hit a problem that they can’t figure out how to solve, they solve it themselves. That’s what I did.
I created ClientFol.io. It’s $20 a month and you could try it for $1. Go to ClientFol.io, test drive it and tell me how you like it. Now, onto our guest and her incredible story. As a twenty-year veteran in the M&A industry, my guest is regarded as the leading authority on buying, selling, fixing and growing businesses. She and her firm have sold over 1,000 businesses in almost every vertical and have a remarkable track record of success. Welcome, Michelle Seiler Tucker, to the show.
Mitch, thank you for having me.
It’s my pleasure, Michelle. With 1,000 businesses that you sold, were any of them yours?
I have personally sold 500. I have not sold all 1,000. My company has. My team has. Yes, I have sold businesses. I bought and sold businesses. I partnered with business owners. I specialize in buying, selling, fixing and growing.
Let’s go back a little bit and tell us how this all started for you years ago.
That’s a long time ago. I’ve always been an entrepreneur. I’ve always been interested in small business. I’m on many different businesses in different verticals along the way. I went into franchise development, franchise consulting and franchise sales. I was a partner with some franchisors and buyers kept asking me for existing businesses. Not everybody wants to buy a franchise. After saying no, I’m like, “I should start saying yes.” I always say, “Listen to the clients, to the consumers, to what people are asking for.” I started listening to my clients and realized I need to build my mergers and acquisitions firm. That’s how I transitioned from franchise consulting and development into mergers and acquisitions.The number one reason that businesses are not sellable is that owners don't have a business. They have a job, and buyers aren't buying jobs. Click To Tweet
You were in the franchise business. Tell me a little bit about the franchise business. Why didn’t people want to buy a franchise?
Franchising is not for everybody. I didn’t just sell franchises. I work with franchisors and built out their franchise program. I helped them with their policy, procedure manuals and training manuals. I helped them build the cookie-cutter operation. That was my consulting piece of it and my differential development as well. Everything from finding territories to finding your franchisees to building out the location. My hand was in every one of those pots. A lot of business owners don’t want an existing franchise because they want to be their own boss. They don’t want someone to tell them what to do. Franchise is good for those individuals, first-time buyers leaving Corporate America that are not necessarily entrepreneurs. They want to be in business by their selves but not for themselves. A lot of business owners don’t want the franchise model because they do want to do their own thing and they don’t want someone telling them what to do.
There are the fees as well, which you’re going to pay a lot upfront. You’re then going to pay a monthly fee. You may have to buy all your supplies from your franchisor as well. I assume that’s part of why some people might not want a franchise. Is that right?
The big reason they didn’t want a franchise is because they want to be able to make their own decisions. If they want to add congruent profit centers, they don’t want to be told no by the franchisor. They want to be able to build their business as they see fit. The fees are not that exorbitant but I always tell prospective franchisees to look at buying an existing franchise versus a new franchise. It’s less expensive to buy an existing one because the existing franchise is based upon the numbers, whereas a new franchise is based upon the franchise fee. The build-out always costs more than they say what it’s going to cost, the inventory, the assets and all the deposits. Most of the time, you can buy an existing franchise for half the price that you can buy a new franchise for.
Let’s pivot into existing businesses. Would you say that your business is 50/50? People wanting to buy a business and people wanting to sell a business or is it more weighted one way or the other?
I don’t look at how many people are looking to buy a business versus how many are looking to sell a business. What Steve Forbes says is 80% of businesses on the market will never sell. That should be a pretty strong statistic for business owners because that means only 20%. You have only a 20% chance of selling your business when you put it on the market. To answer your question, there are more buyers for good businesses than there are in good businesses to buy. What I mean by that is when companies can get the EBITDA of over $1 million, your Earnings Before Interest, Taxes, Depreciation, and Amortization, then there are a lot more buyers for that because there are five different types of buyers. There are a lot of private equity groups, contingents, competitors and sophisticated entrepreneurs. They’re always looking for those high cashflow, high EBITDA businesses, and there’s not that many of them. That’s why I always say there are more buyers for good businesses.
Why don’t we get down to brass tacks here and talk about how a business owner can prepare their company to be sold? What do you see normally when you walk into a business, somebody’s brought you in or hired you and said, “Let’s get this business sold?”
It depends upon the business owner and the industry. What I typically see is an owner that’s not prepared and hasn’t planned their exit. They haven’t thought about selling. The reason they’re calling me is something happened to them like health issues, partner disputes, divorce, the business is not doing well, loss of market share, death, unfortunately, or this pandemic. When they call me, it’s not because they planned their exit and they figured everything out. It’s because they need to sell for whatever reason it might be. Typically, it’s some type of catastrophic event. The business is not sellable. It’s certainly not sellable for the price that they need. I always ask my clients, “What is your desired sales price?” Even though that I know their numbers are probably going to be unrealistic, I want to take their temperature and see how realistic they are.
A lot of times I’ll get, “I want $15 million for my company.” I’m like, “How did you base that number? How did you come up with that?” “This is how many years I’ve worked in it. This is everything I’ve put into my business. This is what we have. That’s the money I need to retire on. That’s the money I need to travel the world.” A lot of times, business owners when they think about selling, have this unrealistic value attached to the sales price because it’s based upon what they need, not what the business is worth. It’s based on what they feel their sweat equity is worth.
How would a business owner start out before they picked up the phone and called you trying to get a handle on what their business is worth? What metrics do you use?
There’s a lot of metrics we use. Number one is the 6 P’s. We take all of our clients through what I call the Seiler-Tucker 6 P’s. That is huge because those are synergies. Buyers buy businesses and they buy synergies. One of the biggest Ps is the first P, which is People. Most business owners have created a glorified job and want you to go to work every day versus a business that works for them. The number one reason that businesses are not sellable is because owners don’t have a business. They have a job. Buyers aren’t buying jobs. People is number one. What we do is we take them through the six P processes. We make sure we help them get the financials straight, get their financials in order and then we do the valuation. Valuation is more of an art rather than a science.
We use six different methods. One of them is being the six P method. The reason why it’s more of art versus a science is because you’ve got to figure out what those synergies are worth. What are those contracts worth that they have, those patents and those trademarks? We’ve got some clients that have celebrity endorsements. We have some clients that have top positions on the internet and have huge branding. We want to look at that business and go, “What buyers are going to pay top dollar for these synergies? Who’s going to outbid the other buyer? Who can take advantage of economies of scale? What buyers can cut the infrastructure and roll this business into theirs, which decreases overhead and increases EBITDA?” That’s why I always say valuations are more of an art rather than a science.
It takes time to evaluate the business synergies. It takes time to get the financials in working order, plus we got to recast the financials because most business owners don’t even know what they’re making in their business. Most business owners get this wrong. I’ll ask them what their gross revenue is and they can usually answer that but then when you ask them what the cashflow is, what their EBITDA is, they don’t know. It’s because they’ve been living out of the business, running personal nonrecurring expenses and they don’t keep good track of it. We have to normalize the financials and try to figure out what the business’ real cashflow is. It’s hard to do that if they don’t remember.Valuations are more of an art rather than a science. Click To Tweet
I built a software company and it grew pretty rapidly. It got to the point where we were ready to sell it but we had a great CFO. What the CFO did for us is basically, we did a monthly financial statement roll-up and then a quarterly audit. We would take this to the bank every quarter, sit down with the people at the bank and review it with them. What that did for us is it gave the bank enormous confidence that we knew how to run our business. When it came to sell it, we had audited financials. It didn’t mean that we had enough profits at the time to attract the buyer that we wanted. We went back to the table and we engineered profits back into the business. A reason we had to do it is because we are running the business for ourselves. We are running it so that we didn’t have to pay a lot of taxes and instead we wanted to plow that back into marketing and sales expenses. In fact, we were buying ads a year in advance just to get the cash off of our balance sheets so we wouldn’t have to pay taxes on it. Do you see that happening a lot as well?
Do I see what is happening a lot?
A lot of people are trying to run the business to minimize taxes.
That’s why they run many nonrecurring expenses through their business. They’ll buy inventory right before at year’s end so that they can decrease their tax liability. They own multiple corporations. One might be an equipment leasing company. The other one’s a real estate company. The other one’s a management company. They’ll run money through these different LLCs to decrease tax liability. That’s always been everyone’s gain that they try to play to decrease the tax liability. I always say you’re going to pay one. That is a big part of what we do. The biggest issue is that most business owners forget what they did. They forget what personal expenses they ran through the business. They forget what nonrecurring they had in those specific years. There’s a lot of nonrecurring that we normalize but we don’t have a crystal ball. Business owners have to do a better job of keeping an Excel spreadsheet month to month and year to year because that would make all of our lives much easier.
At this point, you’re probably referring to the mom-and-pop type of business.
That’s not true. We’re selling a business for $70 million. I have over 350 employees. They operate in every state. They have about $3 million that they’re running through their business. We sold a company for about $15 million and they were running about $1.5 million through their business. It’s not just mom-and-pop. I will tell you what you said. It’s audited financials. Many business owners are not getting audited financials and they need to. They should be doing that.
We had to do something that you’re very familiar with, that I was very unfamiliar with. Once we got to the point where we thought we might have a buyer, we had to go through a due diligence cycle. That’s like going to the proctologist on a good day. Due diligence took us six weeks. It was so painful. We were chasing Russian contract programmers all over the countryside trying to get them to sign off on a release in the middle of the night at the last minute at the lawyer’s office. It was amazing what they put us through and what we had to go through to get the due diligence done. Let’s go back a step. I’m sure people are reading this blog. Michelle has an amazing gift for everybody reading. Michelle, let’s go over what the typical small business who’s reading this show would have to do as maybe the first step or two to get ready to start thinking about selling their business. What should they do first?
That’s a tough question because it depends upon what stage they’re at. I’ve been doing this for years with 1,000 transactions. The biggest mistake that we see business owners make is what I talked about. It’s not planning their exit. You’ve got to stop waiting for a catastrophic event to occur. You’re never going to maximize value. If you want to exit rich, the only way to exit rich is to plan to exit rich. I tell everybody to follow the GPS Exit Model that we talk about in my book, Exit Rich. Number one is you need to have a destination. You need to have a desire to engage. You need to know what you want to sell your business for. You can’t come to me when somebody’s dying and say, “I want to sell my business for $20 million,” because by then, it’s too late.
If you want to sell your business for $20 million, plan a $20 million business. I always say it’s the GPS Exit Model. If you want to drive somewhere, the first thing you do is pull out your GPS and plug in your destination. Your destination in business is your desired end game, your desired sales price. As Stephen Covey always says, “Start with the end of mind.” Business owners don’t plan to fail. They fail to plan. Pick a number. Let’s say you want to sell for $20 million. The next big step is what is your business worth now? I don’t know if you know this, Mitch but most business owners never get a business evaluation. They have no idea what their business is worth and they don’t think about getting an evaluation until they think about selling. The problem with that is how do you gauge what your business is worth or how close you are to your end game. You don’t. Your business is your most valuable asset so you need an annual valuation checkup. You need to know what your business is worth every single year because there are events that increase valuation or events that decrease valuation.
The one thing you said before was don’t wait for a catastrophic event. Many people find themselves in that position. We planned on selling the business from probably year one forward. We were monitoring the marketplace to see where we stood competitively and what we could do to increase the value of the company but we didn’t do it from a metrics standpoint. We did it from a marketing and positioning standpoint. We left the metrics to the CFO. He would tell us, “You’re spending too much on marketing and sales. We need to increase the profits.” We then could tweak the numbers very quickly because we were making a lot of money. We were in a good position. We had an eight-figure business and it wasn’t hard, but a lot of people would find that difficult. Wouldn’t you agree?
Yeah, and you’re a rarity. Most business owners don’t plan their exit from year one. What we’re trying to get them to do is plan their exit, determine who their buyers are going to be so they can exit when they’re on top, not during a catastrophic event.
I understand that you have a new book coming out. What is the name of that book?The only way to exit rich is to plan to exit rich. Click To Tweet
It’s Exit Rich.
Michelle, how would somebody benefit by working through the exercises in the book and reading the book? What would they get out of having your book?
The biggest thing that they’ll get out of Exit Rich is how to build a sustainable business that they can scale. Most business owners have built themselves a job. Even the business that we’re selling for $70 million, the business is 1,000% dependent on that owner, even though they have over 350 employees. That owner has a relationship with the clients. The data is on the owner’s head. How they do things, everything is proprietary and unique to them in the owner’s head.
Exit Rich is not just about selling your business. It’s about planning your exit from the beginning because most business owners never do that. It’s about going through some of the exercises and implementing some of those strategies to help you determine when you should sell, what’s the best time and what are your priorities. Some business owners are like, “What I walk away with is number one.” Some business owners are like, “No, I have to make sure my employees are taken care of. I’m not going to sell unless I know they’re protected.” Some are like, “I’ve got to make sure my clients and my legacy is taken care of.”
We walked through those exercises in Exit Rich. We also go into the five different types of buyers. What are their negotiables? What are their non-negotiables? We also go into the 6 P’s, the infrastructure. Infrastructure is huge. If you don’t have a solid foundation, if you don’t have the infrastructure on what I call the 6 P’s, your business is not going to be sustainable. It’s probably not going to be very profitable. It’s not going to be sellable for maximum value. After we go into each 6 P, we then go into valuations. We go into how valuations work with different buyers.
A lot of times when we go to market, Mitch, we go to market without a price. When we have EBITDA of over $3 million, $5 million, $10 million or $15 million, some of the company we’re working with has $17 million EBITDA. We’re going to go to market without a price. We’re going to run a controlled auction and/or uncontrolled auction depending upon our client’s needs. It talks about auctions, bidding, valuations, packaging the business for sale, negotiations, due diligence, closing and all of that. Plus, it has content in there that if you’re not quite ready to sell, how do you get ready to sell? What is the road to sell? What does that highway look like for you? How do you go down that highway?
It sounds like the book called Exit Rich is the end of the book. The beginning of the book is how to build a business worth selling and all the steps required to, in fact, make your business more valuable. That is very valuable. That by itself is a lot of great information. I understand that you also have some stuff that you are “giving away” that apparently has a lot of value. We’re going to get to that but we’re going to transition to a different part of the interview. This is the part where we get to know a little bit more about you, Michelle. It starts with a silly question. It’s the same silly couple of questions I’ve been asking every one of my guests for years. If you haven’t thought about it, even better but if you did, you might already know the answer. Here’s the question. Who, in all of space and time, would you like to have a one-hour conversation, a walk in the park, a quick lunch or another intense conversation with?
I love to have a conversation with Steve Jobs but the people who are alive, it would be between Richard Branson, Warren Buffett and Elon Musk.
Let’s go back to Steve Jobs. A lot of people say Steve Jobs but not everybody has the same reason for wanting to have that one-hour conversation. What would you talk about?
I would talk about the number one thing that’s missing in businesses. The business landscape has shifted and changed dramatically. It used to be that 95% of startups will go out of business. It’s not anymore. Only 30% of startups go out of business. At a $27.6 million companies, those businesses have been in business for ten years or longer. Seventy percent of them are going out of business. You hear about the big public companies in the media all the time like Toys”R”Us. The business lasted five years and they’re out of business. Kmart, Stein Mart, GNC is closing down 900 locations, Godiva Chocolate and Disney stores.
The number one reason for that is the lack of AIM. AIM means Always Innovate and Market. I will talk to Steve Jobs about innovation. Steve Jobs is probably one of the leaders of innovation, the king of innovation. It wasn’t about finding out what people want or what people need. It’s about creating what they’re going to want and what they can’t live without. I remember the first time I saw the iPad. I’m like, “That’s the most stupid thing I’ve ever heard of,” and I have twelve of them. It was about being preeminent. I don’t think nobody innovated better than Steve Jobs.
The interesting thing is with that innovation comes intense creativity and a little bit of wackiness too. I love the story about him forcing the manufacturing company to paint all of the production equipment white so it will match his vision of what Apple was supposed to be, even though the equipment is never seen by anybody. He’s that way. It’s a great choice by the way.
Thank you. It’s not seen by anybody else, but it is seen by the people who are buying into that mission, living that mission and helping fulfill that vision every single day.
Here’s the grand finale. We call this the change the world question. What is it that you are doing or would like to do that truly has the potential to change the world?
I’m doing one thing. I like to do it on a much bigger scale. I would like to add something to that. First and foremost, my mission, my passion is entrepreneurship. It breaks my heart that 70% of businesses that have been in business for ten years are exiting poor, selling for pennies on the dollar, closing their business or even worst, filing bankruptcy. These business owners have poured their hearts, soul and their energy. They’ve made huge investments and sacrifices along the way to end up with nothing at the end of the day. It is my passion and my mission to help save the American economy by saving one business at a time, and I need to duplicate those efforts.How do you gauge what your business is worth? You don't. Your business is your most valuable asset. Click To Tweet
My other big mission is Tucker Teens & Tots. It’s a nonprofit that my husband and I are starting. It focuses on neglected and abused children. What we want to accomplish is having successful mentors like Bill Gates, Richard Branson, Elon Musk and Steve Wozniak and providing entrepreneurship lessons, mentorship, skillsets, jobs, business partnerships, business ownerships to neglected and abused children. These children get lost in the system and they need a hero. There are different organizations like Big Brothers Big Sisters that know wonderful organizations, but we need those mentors that can help raise these children up.
How would you propose getting those mentors?
I’m friends with a lot of those influencers and they already buy into my vision.
If there’s somebody reading who might potentially be a mentor, do you have a message for them?
The message I have is I always feel like entrepreneurs solve problems. We solve all kinds of problems all around the world. One of the biggest problems that still need to be solved is taking these children that have been abused, abandoned, neglected and help grow them up. Help take them under our wing and helped provide a future for them. The more successful somebody is the more money, the more time, the more energy and effort they have to give back to others.
Do you have a structure in place like a nonprofit where a potential mentor can volunteer, that kind of thing?
We’re putting all that together. My husband and I are working on this. That’s my vision.
I would love to find out more myself and I know a lot of people reading the show potentially would be great mentors as well. Let’s share some of that if we can when we’re ready. Michelle, I understand you have an amazing gift for everybody who’s reading. Can you tell us a little bit about what that is and how they can get it?
Before I jumped right into that, can I tell you a little bit more about Exit Rich and who’s contributed to Exit Rich? Steve Forbes has endorsed Exit Rich saying that it’s a gold mine for entrepreneurs as they leave way too much money on the table when they sell their business. Sharon Lechter wrote Rich Dad Poor Dad with Robert Kiyosaki. She’s a New York Times Bestselling Author, CPA, financial literacy expert and advisor to different presidents and Kevin Harrington, the original shark on Shark Tank, wrote the foreword for Exit Rich. We have great testimonials from Jack Canfield, Mark Victor Hansen, Les Brown and Brad Sugars from Action COACH. Exit Rich will launch on June 22, 2021. The amazing gift we have is if you go to ExitRichBook.com, for $24.79, we’ll email the digital download or ship the hardcover to your doorstep for no additional shipping to anyone that lives in the United States.
Here are the amazing gifts. We’ll give you a lifetime membership into the Exit Rich Book Club. That club has video content of me teaching different techniques and strategies that I’ve been teaching for years in the trenches in the M&A, plus documents to operate and sell your business. We have sample employee handbooks, org charts, policy and procedure manuals, SOP checklist, sample LOIs, Letter of Intents, purchase agreements, due diligence checklist and closing documents. All the documents you need to sell your business and operate your business are there at the Exit Rich Book Club for your review and your immediate download.
These documents will probably cost a little over $40,000 to $50,000 if you want to recreate them with an attorney. We all know how expensive documentation is. I know because I spent money creating all of these documents. We’ll give a 30-day free membership in Club CEO, which is an entrepreneurship mastermind where we ask different transformational questions, how business owners pivot, how business owners build that sustainable, scalable, sellable business. All of that is on the website for $24.79.
It sounds like a bargain to me. I wish I would have had you and your book when I was in the process of selling my own business. Thank you so much for showing up. Even though we had some scheduling snafus, you came through. We had a great interview and you are now offering this incredible package to readers. If you are reading, I recommend you go over to ExitRichBook.com and check this out because it is a very valuable offer that Michelle has. I spent all that money on documentation. It would be great to have that in advance. Thank you very much, Michelle.
Thank you, Mitch.
I can’t wait until we get a chance to talk again soon.
- Michelle Seiler Tucker
- Exit Rich
- Tucker Teens & Tots
- Big Brothers Big Sisters
- Rich Dad Poor Dad
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