Ready to Sell? Here is How to Maximize Your Profits

Speaker 1: Welcome to the Process Breakdown Podcast, where we talk about streamlining and scaling operations of your company, getting rid of bottlenecks, and giving your employees all the information they need to be successful at their jobs. Now let’s get started with the show.

John Corcoran: All right, John Corcoran here, host of the Process Breakdown Podcast, where we talk about streamlining and scaling operations of your company, getting rid of bottlenecks, and giving your staff everything they need to be successful at their job. Some of our past guests include David Allen of Getting Things Done and Michael Gerber of the E Myth and many more.

John Corcoran: And before I get into today’s guest, just a quick sponsor message, this is brought to you by SweetProcess. Have you ever had [inaudible 00:00:51] ask you the same question over and over again and this is the 10th time you spent explaining it? Well, there’s a better way and a solution, SweetProcess is a software that makes it drop dead easy to train and onboard new staff and save time with existing staff. Not only do universities, banks, hospitals, and software companies use them, but first responder government agencies use them as well. You can use SweetProcess to document all the repetitive tasks saving up your precious time, so you can focus on growing your team and empowering them to do their best work. You can sign up for a free 14 day trial, no credit card required go to sweetprocess.com, sweet like candy, S-W-E-E-T process.com.

John Corcoran: All right, so I’m excited today. We have Michelle Seiler Tucker, she is the founder and CEO of Seiler Tucker Incorporated. She holds the mergers and acquisitions master intermediary title as well as certified mergers and acquisitions professional, and certified senior business analyst. Michelle also owns many other businesses in several different industries. As a 20 year veteran in the M and A industry, she is regarded as the leading authority on buying, selling, fixing, and growing businesses. Her and her firm has sold over a thousand businesses in almost every vertical, have a remarkable track record of success.

John Corcoran: Her forthcoming book with her co-author, Sharon Lechter is, Exit Rich: The 6 P Method for Selling Your Business for a Huge Profit. She also has a foreword with Kevin Harrington of Shark Tank, which is really cool. So we’re going to dive into that book, but Michelle give people a brief overview of who you are and what you do, but give us a little bit more context about what you’re focused on these days and what you do.

Michelle Seiler Tucker: Sure, so I specialize in mergers and acquisitions, been in this industry for a little bit, about 20 years. My firm has sold over a thousand businesses. We specialize in buying, selling, fixing, and growing companies. What I’m working on right now is my book launch, which is the launch of my book, Exit Rich.

John Corcoran: Yeah. And so there are six Ps perfectly fit. It starts with people. So break that down for us. How you think about that dimension?

Michelle Seiler Tucker: Sure. So every business, before I break it down, let me give you a little history, because I think it’s important to know what business’s biggest mistakes are and what the biggest issues are. When I wrote my first book in 2013 called Sell Your Business for More Than It’s Worth. I did the research and learned that about 95% of all startups would fail, right? We all know that, so that’s nothing new. However, when I wrote Exit Rich in 2019 and 2020, I did this exact same research and was flabbergasted to learn that the business landscape has actually flip-flopped. So now it’s only 30% of startups, so it’s one through five years will fail, only 30%. So this is a good time for startups. However, out of 27.6 million companies, those businesses have been in business for 10 years or longer. 70% of them will go out of business, 70. Now you’ve probably heard about the big public companies like Toys R Us and business 75 years goes out of business, Kmart, Stein Mart, Pier 1, [inaudible 00:03:56] is closing down 1500 locations.

Michelle Seiler Tucker: But what you’re not hearing about all the businesses, private businesses on every street corner, in every town and every state across our great nation, these businesses, unfortunately are actually poor. They’re having to sell their business for pennies on the dollar. They’re having to close a business straight or worse file bankruptcy. So that’s really the reason why I wrote Exit Rich to begin with. And also what Steve Forbes says is very true. Eight out of 10 businesses don’t sell, that’s 80%. So 70% of businesses going out of business and eight out of 10 businesses don’t sell.

Michelle Seiler Tucker: And two reasons for that. Well, probably a lot more reasons for that. But the biggest reason is that business owners don’t plan or exit, I call this their exit strategy. They should plan or exit really from day one of starting or buying a business believe it or not, because most business owners never think about selling a business. And so internal or external catastrophic event occurs. So internal meaning health issues, divorce, partners disputes, et cetera. External is this pandemic, and that’s always the worst time to sell your business.

Michelle Seiler Tucker: The other big mistake that business owners make is they are the business. They have created a glorified job which they go to work at every day, rather than a business that actually works for them. So we help business owners plan their ST GPS exit model. And then we help them build the infrastructure on a six piece, the first P being people, because that’s one of the biggest problems. If a business is tied to the owner, it’s very difficult to sell, not impossible, but extremely difficult. And you will never maximize value. But a dentist that came to us, it wants to sell this business, been in business 45 years, one dentist, three dental hygienist. And I told him, I said, "We can sell your business, but you’re going to have to stay on for two to three years." And he’s like, "I’m not staying, I’m burned out, I’m ready to leave." And I said, "Well, if you leave, your patients leave."

Michelle Seiler Tucker: So you really want to build a business that is sustainable, scalable can run without you. So the first P is people, you don’t build a business, you build people and people build the business. So you have to have the right people in the right seats. And you have to ask the who question, who opens the door, who does what? Clients, marketing, accounting, legal, manufacturing, transportation, environmental, the clue here, John is you, John should never be next to the who because you really want the business to run without you. Does that make sense?

John Corcoran: Yeah, absolutely. Yeah.

Michelle Seiler Tucker: So, so many businesses are tied to the owners, and when you take the owner out of that business there is no business.

John Corcoran: So you have someone who comes to you who has that problem, it’s too tied to them. And how do you get them to change that? Or is it sometimes too late?

Michelle Seiler Tucker: Well, it’s never too late. The only time it’s too late is if an owner is burnout exhausted, tired, and can’t do it anymore. And people do reach their burnout phase, right? We’re like, "Oh my gosh, I can’t do this another day." And that does happen, and at that point it’s too late. But other than burnout, is really not too late. There’s always things that you can do. The number one thing you need to do is get people. Entrepreneurs need to focus on the strengths and hire their weaknesses.

John Corcoran: Yeah. So people is number one, and the next one is product. Take us through that one.

Michelle Seiler Tucker: Sure. So product is your industry, your service. And you really have to look at your product and ask yourself, are you on the way up, are you on the way out? Or is your product or service your industry? Is that thriving or is it dying? Do you have an Amazon or do you have a blockbuster? And unfortunately, because of the pandemic there are a lot of industries out there that are a bust right now. And so that doesn’t mean though, that you just close up your business and go home. That means you really got to align yourself with a mentor, with an expert to help you figure it out.

Michelle Seiler Tucker: And I always tell my clients, you really should ask yourself these three transformational questions. Amazon did this back in the nineties, and Amazon asked themselves, what business are we in? And it said, "Oh, we’re in the business of selling books." Well, business owners should be asking themselves, what business are we in? Then the second question is what do you do really well better than everyone else better than your competitors? And Amazon said "We’re the best at fulfillment, that’s what we do better than everybody else." And so the third question, the most obvious question is what business should we be in? And Amazon said, "Oh my gosh, we need to be in a fulfillment business, and not just fulfilling book sales, but fulfilling everybody’s products." And as simple as it sounds, those three transformational questions is what really transitioned, transformed Amazon from a small bookseller to a multi-billion dollar worldwide conglomerate that they are today.

John Corcoran: That’s so great those three questions. All right. So people, number one, product, number two. And then-

Michelle Seiler Tucker: And then you got process.

John Corcoran: Process okay.

Michelle Seiler Tucker: So processes John, are kind of like exit strategy. Business owners don’t think about their processes until something happens, and are like, "Oh my gosh, somebody just got hurt on the manufacturing floor. We need a process for that." No, you needed a process before that, but you really got to look at your processes. But the thing that you should really determine, is what do you want your customer experience to be? What do you want your customers to get when they come to your business? How do you want them to feel? McDonald’s did this back in the forties. I don’t know if you’ve ever watched a movie, The Founder.

John Corcoran: Yeah. Great movie, yeah.

Michelle Seiler Tucker: Yeah, great movie right?

John Corcoran: Yeah.

Michelle Seiler Tucker: So back in the forties, McDonald’s said we want to create a, because back then it was like the Sonic type vibe ops and the food was always cold, it was always wrong, it took too long.

John Corcoran: [crosstalk 00:09:21].

Michelle Seiler Tucker: That McDonald’s said, "Let’s create a fast food restaurant around the customer experience. We want to create the processes around the customer experience. We want the customer to experience great tasting food, hot, fast." So remember they went out to the tennis court, they took the chalk and they drew it all out.

John Corcoran: I remember that was a great scene. yeah. They’re running around figuring out the most efficient way to do it. Yeah.

Michelle Seiler Tucker: They figured out who takes the order, who toasts the buns, who cooks the burgers, who puts the pickles on the buns, that gets it to the client in two minutes or less.

Michelle Seiler Tucker: So those processes is why you can eat at a McDonald’s anywhere in the world. Those processes is why you can lose somebody at the register at the front and replace them like that, because it has the processes in place designed with the customer experience in mind. How many businesses have you done business with and you’re like, "Oh my God, I would never do business with them again. This is the worst experience ever, right?

John Corcoran: Right, because they have [crosstalk 00:10:12].

Michelle Seiler Tucker: I can name a really big bank and I can name a social media company.

John Corcoran: Exactly.

Michelle Seiler Tucker: And so their processes are based upon our own agenda. Same thing with like chiropractors and doctors and things like that. What do they do? Chiropractors and the doctors will say, "Oh, I’m open Monday, Wednesday, Friday from nine to one or nine to 12, close from 12 to three, opening it at three to five." Who can ever remember that?

John Corcoran: Yeah.

Michelle Seiler Tucker: So you really want to design your processes around a customer experience need to be productive, efficient, and they need to be documented. I mean, you got to have policy and procedure manuals. You got to have the SOP checklist. You have to have those employee handbooks and those employee non -competes.

John Corcoran: Right. And living, breathing documents that you can use as well. So process and then proprietary, so explain that one.

Michelle Seiler Tucker: Yeah. So proprietary is a highest value driver. So this is… If you’re not listening to anything else I said, listen to this. Proprietary is the most highest value driver. So companies that have under a million dollars in EBITDA, EBITDA is earnings before interest taxes, depreciation, amortization. Under a million dollars in EBITDA, those businesses typically trade for anywhere from one to four times multiple. Businesses of over a million dollars in EBITDA typically go for five and up multiple. Now, if you want a six to seven, eight, 10 multiple, then you need to build these proprietary assets. Number one is branding, the more well-branded. These are synergies, the more well branded you are, the more I can sell your company for, as long as your brand is relevant in the mind of the consumer. Is anybody buying blockbusters? They’re making them buy that brand? Absolutely not. The most valuable brand in the world is… Do you know?

John Corcoran: Amazon? Disney?

Michelle Seiler Tucker: Apple.

John Corcoran: Apple. That’s a good one.

Michelle Seiler Tucker: Amazon is in the top 10. Apple is worth $249 billion, that’s just a brand. That’s not cashflow, inventory assets, real estate accounts, receivables, anything else, that’s just a brand. So go to brand. Trademarks are huge, buyers will pay a lot more money for trademarks. The mistake that most business owners make though is they go and they set up their business in their state and then they get a state trademark, but they never check the federal database to make sure that that company name is available so they can be in business for years and years and years and all of a sudden receive a cease and desist letter, and they have to stop using that company name. So you don’t want to go through that process and rebrand all over again, so make sure you spend the $1,500 to $2,000 and get the federal trademark. You should trademark your company name, your slogan, your logo, your podcast John, is your podcast federally trademarked.

John Corcoran: I don’t want to answer that.

Michelle Seiler Tucker: Trademarks are huge. Also products, if you have some exclusive products, then get a trademark for those. We’re selling a company that has… Their clients are grocery store chains and they have a different product for each grocery store chain and they are exclusive to that grocery store spread trade and each one has a federal trademark.

Michelle Seiler Tucker: Patents are another big one. Every shark on Shark Tank always asks the same question. Do you have a patent on that? Do you have a patent pending? And a lot of times our offers are contingent upon the patent. And we once sold a company for $18 million. It was not making that much money, but they had 18 patents.

John Corcoran: Wow.

Michelle Seiler Tucker: And then the other big thing is contracts, manufacturing contracts, franchise contracts, vending contracts, need to have a vendor contracts, exclusivity contracts. Client contracts are the most valuable of them all.

Michelle Seiler Tucker: But the problem with client contracts is most business owners forget the [inaudible 00:13:41] transferability clause and 99.9% of all sales are asset sales. So if a buyer is not going to agree to do a stock sale and the client won’t sign a consent to transfer, then your deal could stop dead in its tracks. So also if you have a recurring revenue model or subscription model, that’s extremely valuable too and we’ll get you to a much higher multiple. Celebrity endorsements or big radio personality endorsements, like Glenn Beck, Oprah Winfrey. And they can only endorse one vertical at a time. They can only do one skincare at a time. If they do anything more than that, they lose credibility. Online presence is huge, if you got any of those top positions on Amazon, Wayfair, Etsy, those are huge positions that strategics and competitors will pay more money for.

John Corcoran: All right. So proprietary then patrons.

Michelle Seiler Tucker: Patrons is our customer base. So most businesses follow the 80 20 rule, right? 80% of their revenue comes from 20% of their clients. What happens when you lose a client? A lot of businesses have customer concentration. We were once selling a media advertising business that had five clients, only five John, but they catered to casinos. And we were selling it in a $10 million range. So during the process, out of the five, they lost two clients.

John Corcoran: Oh wow.

Michelle Seiler Tucker: The revenue dropped and they’re EBITDA dropped. So they weren’t sellable anymore. We ended up having to merge them with another media company.

John Corcoran: Wow. Yeah. So-

Michelle Seiler Tucker: And then profits is last.

John Corcoran: Profits, last but not least of course.

Michelle Seiler Tucker: Well, the reason I put it on last is because profits, lack of profits is never the problem, it’s never the issue. Lack of profits are not the problem, it’s a symptom of not having one or the other five five Ps. Clients come to me all the time and say, "Michelle, I have a profit problem." I’m like, "No, you have a people problem, you have a process problem."

John Corcoran: Hmm. So it was one of those other ones that leads to it. All right. So that’s-

Michelle Seiler Tucker: Absolutely.

John Corcoran: That’s great. And then, is that the whole, the ST GPS exit model, or is there a different element to that term?

Michelle Seiler Tucker: No, that’s the six P. So the ST GPS exit model. Would you like me to go over that?

John Corcoran: I’d love to.

Michelle Seiler Tucker: I always tell my clients, listen, you got to have a plan. Business owners don’t plan to fail. They don’t plan to fail and say, "Oh my gosh, I’m going to become one of 70% of business that’s going out of business and exiting war." They fail plan. When you want to drive somewhere, the first thing you do is you pull out your phone, you go to Google maps and what do you plug in?

John Corcoran: Address of where you want to go?

Michelle Seiler Tucker: That’s right. Your destination, right?

John Corcoran: Yeah.

Michelle Seiler Tucker: Otherwise you’re driving aimlessly around ending up nowhere. Well, that’s what business owners do, they drive around in circles, they drive up and down the financial hills to wind up nowhere because they don’t have a destination. You need an end game, you need your desired sales price. I always tell my clients pick a number, and I always get stuck on a number John. Always like, "Oh, I don’t know. I don’t know what number." And I’m like, "Just pick a number, it doesn’t matter." So let’s say 20 million. Let’s say you want to start a company for 20 million, great.

Michelle Seiler Tucker: Now, what does the GPS need to know other than destination? It needs to know where you’re starting from. What is your current valuation? Most business owners have never had a business evaluation done on their business. They have no idea what their business is worth. It’s crazy, its financial suicide. We go to the doctor and make sure our hearts still ticking and we’re still kicking. We take our cars to the mechanic to make sure it’s in good shape, but we don’t get an annual business valuation checkup. Its financial suicide because there are events John, that increase valuation and events that decrease valuation. So this is imperative to get a financial checkup every year. Evaluation check up.

Michelle Seiler Tucker: So let’s say you’re starting from 5 million. You want to sell for 20 million, you’re starting at 5 million. Now you need to know timeframe. Let’s say you want to do it in 15 years, great. Now you have a plan. Now you need to figure out reverse engineering and say, okay, well who’s my buyers going to be. Now notice I say buyers not buyer, because I have clients that come to me all the time and say, "Michelle, I’ve already got the buyer. I just need you to represent it, represent me." And then I’m like, "Let’s put it on the market because I guarantee you that buyer’s going to fall apart, and then you have no backup buyers. Plus how can I maximize value if I have one buyer, not creating any competition?"

John Corcoran: Yeah. how important is that?

Michelle Seiler Tucker: [crosstalk 00:17:57].

John Corcoran: How important is that? Having multiple buyers?

Michelle Seiler Tucker: It’s extremely important. It’s extremely important for a lot of reasons. If you have one buyer and that buyer falls apart doing due diligence, and I will tell you in all likelihood, it will probably fall apart. Then you have no backup buyers. Plus if I’m bring multiple buyers who are very interested and they see the value of the synergies, then we can create a bidding war and get a higher price.

John Corcoran: Yeah. And how do you do that without offending one of the buyers or making them feel like you’re playing them?

Michelle Seiler Tucker: Well, there’s different ways, there’s a structured auction. In a structured auction, all the buyers know the rules. They know that there’s a timeframe, that’s 30 days. Typically 30 days, I have to give the best and final bid. Along with the terms, the seller might come back and tweak something, that maybe they like this bid, but there’s a couple of little minor things they don’t like about it, but that’s a structured auction. The other ones that I do unstructured, is where we get a lot of buyers that are giving us LOIs, and I let them know upfront that my seller or my client’s going to go through each LOI and decide what they think is best for them. It’s not always about price.

John Corcoran: Other factors.

Michelle Seiler Tucker: There’s other factors, absolutely. So back to that GPS exit model. So you know the price, $20 million, you look you’re worth 5 million. You want to do it in 15 years, now you need to know who your buyers are going to be. There’s five different types of buyers. So who your buyers are not going to be is a first time buyer, because they buy small businesses. Turnaround specialists buy distressed assets, they’re not going to be a buyer. So it will probably be a PEG, which is a private equity group or a strategic slash competitor. They typically pay the highest multiple because they’re buying synergies to take an advantage of economies of scale, and a lot of time because they have the infrastructure’s already in place. They can reduce overhead if they want to buy in the company.

Michelle Seiler Tucker: And then you have your sophisticated serial entrepreneurs that are industry agnostic and they chase EBITDA. So those are five types of buyers. So you need to know, well, where’s the numbers got to be. If I want to sell my company for $20 million, what’s my gross revenues have to be, my profit margins. Most importantly, what does the EBITDA need to be. The EBITDA, is going to have to be between 3 million to 5 million to sell for 20 million.

John Corcoran: Right. Now-

Michelle Seiler Tucker: And then-

John Corcoran: Some businesses that have… Are reinvesting their profits for a few years in order to grow correct, and so that might affect what their EBITDA is.

Michelle Seiler Tucker: Right.

John Corcoran: Right.

Michelle Seiler Tucker: Absolutely.

John Corcoran: So you take that into account, I imagine.

Michelle Seiler Tucker: I’m sorry, can you repeat that?

John Corcoran: So you take that into account then if their EBITDA is lower because they’ve been ploughing their profits back in, in order to grow faster.

Michelle Seiler Tucker: Well, when we look at EBITDA, we normalize the financials and we add back on personal expenses in a non-reoccurring. So we add back what we can, if it’s on the balance sheet, obviously it’s not an add-back, but it still has value because it’s on the balance sheets, an asset on the balance sheet, so will increase value by being an asset. And then in addition, a lot of people do put business owners’ stipend money back in, but some of those things we can add back, because it’s a non-reoccurring.

John Corcoran: Got it. Anything else to add on the ST GPS exit model?

Michelle Seiler Tucker: My last thing was, my two last things was once you to determine the buyers, and then what your financials have to be. Then you want to really do some research and figure out what synergies are they buying? What are they looking for? Or are they mostly interested in the team or are they mostly interested in my databases? That was another thing I forgot to tell you under proprietary, is databases. Facebook paid $19 billion for WhatsApp and WhatsApp was hemorrhaging, but they had a synergy, they had a billion users and they knew they could all lie and get a return on their investment and monetize on that purchase because of the billion users. So, knowing what those synergies are, that those buyers are willing to pay top dollar for.

Michelle Seiler Tucker: And then the last step in a GPS exit model is knowing your why. None of us really do anything in life without a powerful why. If it was easy to sell business for $20 million, everyone would be doing it, right. It’s not easy. So the why has to be strong enough, powerful enough to keep you in the game and keep you weathering the financial storms.

John Corcoran: Well, Michelle, this has been great. Exit Rich: The 6 P Method for Selling Your Business for a Huge Profit. Where can people go to learn more about you?

Michelle Seiler Tucker: Yeah. So I would encourage everyone to go get Exit Rich, and I can go to exitrichbook.com. The book launches in June, but you don’t have to wait till June. You can buy the book today and you can start reading it immediately. We are giving extra bonuses for anyone that buys a book before June. So if you go to exitrichbook.com, $24.79. We will email you the digital download immediately, we’ll send the hardcover to your doorstep, to anyone that lives in the United States, no additional costs.

Michelle Seiler Tucker: We will give you a lifetime membership into the Exit Rich book club, and it has video content. And we talk about different strategies and techniques plus documents. So all of the documents to run your business and documents to sell your business. So we have sample LOIs. Well, let’s start with running your business sample, policy and procedure books, organizational charts, employee handbooks, non-competes. To sell your business we have sample letter of intent, sample purchase agreements. [inaudible 00:23:22] checklists, closing docs, all these documents will cost you over 30 grand, maybe you had your attorney recreate them. And then we’re also giving you a 30 day free membership into club CEOs, which is our entrepreneurial mastermind, where we work with business owners to help them first and foremost, build a sustainable business on the six piece. So it’s scalable and when you’re ready, sellable.

John Corcoran: Wow. That’s a great deal, people ought to jump on that. Michelle, this has been wonderful. Thanks so much.

Michelle Seiler Tucker: Thank you. Can I also tell your listeners to text Michelle to (888) 526-5750, where all of my social media websites are. Follow me on social media connect with me on LinkedIn.

John Corcoran: Excellent. All right, great. Thanks so much Michelle.

Michelle Seiler Tucker: Thank you for having me.

Speaker 1: Thanks for listening to the Process Breakdown Podcast. Before you go, quick question. Do you want a tool that makes it easy to document processes, procedures, and or policies for your company so that your employees have all the information they need to be successful at their job? If yes, sign up for a free 14 day trial of SweetProcess. No credit card is required to sign up, go to SweetProcess.com. Sweet like candy and process like process.com go now to sweetprocess.com and sign up for your risk-free 14 day trial.

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