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Michelle Seiler Tucker is a #1 bestselling author and leading authority on buying, selling, fixing, and growing businesses. Michelle joined forces on her new book, Exit Rich, with Sharon Lechter, finance expert and co-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 starting to build out their company – to sell for huge profits in the future.
We explore tons of solid lessons in buidling and growing a successful business, the reasons the market data you think you know are wrong, and so much that is needed as real truths in business for startups and major organizations everywhere. Thank you Michelle for sharing so much great info!
You can get a preview of the book at https://exitrichbook.com which also gets you the hardcover copy to you when it launches in June. That gets you access to Club CEO and much more as well.
Follow Michell on Twitter here: https://twitter.com/MSeilerTucker
Check out Michelle’s website for more info here: https://seilertucker.com
TRANSCRIPT – Powered by HappyScribe
You’ve brought a lot of great information to the market. You’ve got a recent book called Exit Rich. We got a lot of stuff we’ll talk about. So with that, Michelle, do you want to give yourself a quick a quick bio to folks that are brand new to you? And then we’ll talk about the book and in your background, what brought you to write it?
All right, so I’m not sure what you want me to say on my M&A mergers and acquisitions, Michelle Seiler-Tucker been in business for best selling companies a little over 20 years. I personally sell 500 businesses. My team has.
So my myself and my team have sort of a thousand companies and we’ve done thousands upon thousands of valuations. I also specialize in buying, selling, fixing, growing companies. So I’ll buy businesses, flip them. I partner with business owners, investing my time, energy effort and capital and resources to put business owners on a bill to sell program. And like I said, what we really specialize in doing is fixing businesses because eight out of 10 businesses will sell, according to Steve Forbes.
And so we fix businesses, we grow them. We put them on a bill to sell model and we merge businesses and sell businesses.
So that’s what we do at any given time. On five to 10 businesses, I’m actually building to sell.
Now, that obviously has come from you’ve effectively built a strong system around what it is you need to do to be successful in this.
I’m curious, Michelle, what was the background that brought you to to taking this on as a as a task in your first time show? And I forgot to mention, I’m an author of three books.
That’s right. Yeah. Not just one book. Of course, it’s a rich the most is one we’ll talk about, but we’ll talk about the others as well. You’ve got it. You’re very prolific. What brought you into being in the business of buying business and mergers and acquisitions? Michelle.
So I’ve always been an entrepreneur of all many different companies, even from a very young age. And I did go into franchise sales, franchise development and franchise consulting and sold hundreds and hundreds of franchises.
But I kept having lots of buyers ask me for existing businesses and how many existing businesses, because I was selling new franchises and I was actually partners in different franchise laws and equity partner. Then I decided, you know, there’s so many buyers out here for good existing businesses versus new startup franchises that I should start my mergers and acquisitions firm. And that’s really how I got started.
Now, the you talked about being an early entrepreneur, what actually gave you the the entrepreneurial bug? Was it because I’m imagining you? Probably that’s something we we develop, but we learn about often quite early in our lives.
Yeah. I don’t say there’s anything that gave me I didn’t really grow up in a family of entrepreneurs. My dad had a couple of businesses. He wasn’t really I wouldn’t say he was very successful, but he had a few businesses. Other than that, I didn’t really grow up with entrepreneurs.
I just knew from early on that I didn’t like to be told what to do and I want to do my own thing, march to the beat of my own drum. And I just knew I always knew I wanted to be my own boss, I guess.
Yeah. My favorite thing is founders often described themselves as unemployable just because it’s like they they know what they want to achieve and they certainly are. They can’t take direction in order to get to it. So, yeah, I mean, we still got to be employed by our clients, right? Our clients. Employers don’t we don’t listen to our clients and don’t follow our client’s instructions. Sometimes we can become unemployed very easily. So rather, you want to be employed or be told what to do.
Even if you own your own boss, you still are answering to somebody.
Now, when you were working through in the franchise area, you know, which is developed on the idea of using a systematic approach. When did when did you sort of see that as an opportunity to go outside and bring that systematic approach than to, as you said, like existing businesses? And I’m curious that that first one or the first few that you you decided to take on.
What I’m sorry, what systematic approach are you referring to, or just like when do you when did you see how you could take the practices that you had learned from working in the franchise and then bring this that sort of those methodologies to an existing business?
Yeah, so it’s extremely different. And if you’re not familiar with it or most people aren’t, it’s very different. I mean, becoming a partner with a new franchise or a franchise or and doing a franchise sales franchise development, franchise consulting is extremely different than selling existing businesses and fixing and growing and going to sell existing businesses. There’s really very little similarity. The only similarity is maybe in the existing franchises or because existing franchises are really has to operate on what I call the six P’s, the six P’s that we talk about in my book, Exit Reg, if they don’t build a vault, a solid foundation of solid infrastructure on the six PS, they’re not going to they’re not going to be sustainable.
They’re not going to be able to scale. They’re not going to be able to stay in business for very long. So there are some similarities there. As far as the main franchise corporation, as far as selling new franchises, new franchises is completely different than selling existing businesses is really zero similarities because for a new franchise, for new franchise, we’re looking for the franchisee or qualifying the franchisee in a financial capacity and our skill sets. We need to do that with existing businesses.
You qualify buyers on their financial capacity and their skill sets. But with a new franchise, we’re also really strongly looking at demographics and what we should place. This new franchise, you know, where they want strip mall location, we should put it in, you know, and then we’re helping them hire their people and we’re hiring. We’re helping them really based our business and start their business on what I call the Steve six PS with an existing business that we have the location already have the people in place.
Right. They already have and are operating on many of the six figures, maybe not all, but some of them. So there are some similarities, like I said, in a franchise or type of it. But as far as our new franchises, compared to existing businesses, it’s completely different.
When you saw the and the opportunity to affect somebodies growth and, you know, help, as you said, like to build towards sale, you know what what was what’s exciting to you about seeing that? You know, obviously there’s a there’s both a business and a people impact. I mean, I’d love to hear, you know, what what drew you to be able to bring people through that journey to prepare them for sale?
You mean for existing or for different existing? What prepared me, I think it’s already many different companies in many different verticals sitting behind a desk knowing what works, what doesn’t, you know, really figuring out. Doesn’t matter what industry you’re in, the six PS or the six PS and they they you know, it’s a foundation that you really need in every vertical regardless. And I think that’s kind of what prepared me to seeing what works, what doesn’t work.
And, you know, most business owners, a lot of business owners are not sellable. Like I said before, 80 percent of businesses don’t sell. And the reasons for those are all similar. It’s not necessarily make the same mistakes over and over and over again.
And so that’s, you know, spending 20, 20 plus years in the trenches is selling franchises and then selling businesses.
I think all of that is what prepared me, not to mention my own company is that I’ve done I’ve operated.
And that’s the the interesting thing. As you said, a lot of it’s repeatable things that you see.
And but for those business builders and owners, I think the tough part is they’re so they’re they’re very sort of myopic in their view. They can’t see outside of their own set of of running the organization. It’s probably and this is why they need, you know, you to come in and say, look, I’m I’m looking into what you’re doing and I’ve seen this play out and it’s not going to play out well. Right.
What’s the what’s the reception when you begin to consult through that process and have to kind of show people the works of the challenges that they’re facing?
So some are open to change and some are not. I always say you can only grow the business as much as you can grow the owner. I don’t know if you’ve ever watched the show. Marcus Lemonis The profits on CNBC, but he gives them clear instructions of what to do and what to change, and they all push back. I don’t think anybody just takes it and does it. Nobody really follows his lead and his instructions, even though he’s really clearly the expert.
And same thing with me. I’m clearly an expert at what I do, you know. So, yeah, we get a lot of pushback because, again, they’re entrepreneurs. They don’t want to be told what to do. They don’t want to answer to anybody and, you know, like us. And it’s tough because you’re right. I mean, they don’t see things when you’re in your fog, it’s foggy and you really need an outsider’s perspective, you know, to to help really read the warning signs and keep you out of the danger zone.
But business owners have to be willing to listen. They have to be willing to, you know, get advice from experts, somebody who’s been on the road before.
And they have to be willing to to change and make change. And some are. Some aren’t. You know, I’ve I’ve sat in meetings and told business owners, don’t tell your employees that you’re selling your business, and the next thing to do is turn around, tell their employees. And then I wonder why 50 percent of the workforce quit sooner.
So it’s just.
Is it just business owners want to do things their own way, so it’s really our job to to try to get the business owners to understand that this is for your own good. This is for your protection. This is to help protect your company and help maximize your value. And that’s what we do. You know, we we don’t go in and force things. We do it from a educational perspective versus just trying to slam something down their throat.
And luckily, you’ve got the believability because you’ve got proof in execution, right, and I think that will hope that that helps those those founders to at least trust.
But like you said, there’s a there’s the psychology of the founder.
They’re pretty sure they’ve got the right idea in the market.
Just isn’t ready versus.
Yeah, maybe you need to meet in the middle with the markets. Right?
I mean, put yourself in their shoes. You know, if you’re running your business and the day to day doing all this stuff and somebody comes out and says, you’re doing everything wrong, the first thing you’re going to do is push back. That’s right.
So you don’t want to go in there pushing because then you’re going to automatically get pushed back.
So you want to really go in there and and look at all the things that they’re doing. Right. And highlight all the things that they’re doing right. And then come in and bring in the areas of opportunity to where they can really affect change and growth.
When you raised it earlier already, you talked about it like we have to listen to our clients and ultimately our customers, right. And it’s that is something that quite often it’s also it’s a dichotomy of the founder that they have to be very like they have to be aiming towards a vision that strong, you know, a mission that’s that’s big quite often. And it’s a weird thing of like they have to listen to the market, but they also have to create a market sometimes.
So when when you’re working with founders, like, how do you kind of merge the reality of the market that they’re facing and yet help them to make maintain their original vision? Is and or is it possible? I’m just curious in in how that’s played out in some of the examples you’ve gone through.
How do I help? I’m trying to understand your question.
So like when because like a founders vision is often built on like we are preparing the world for what it doesn’t know it needs, like they did when he came back to Apple.
Right. But it’s a tough thing when you have to they have to survive in order to execute that vision. And how do you bring the reality of market economics and survival to still staying on the path to executing those big visions?
Well, you know, I tell you, I don’t know how much research you’ve done on the business landscape in the United States, and I think I’m going to take a few minutes to educate. But when I wrote my very first book, Sell Your Business, for what it’s worth in 2013 and did the research back then. Ninety five percent of all startups from one to five years will go out of business. Right. Right. So when I wrote Exit Rich in twenty nineteen, twenty twenty before the pandemic occurred and did the exact same research, I learned the business landscape has actually flip flopped.
It’s only 30 percent now of startups that will go out of business. Those one to five years are not at great risk anymore. Only 30 percent, which is good news to Startup Nation. However. On a twenty seven point six million companies, those businesses have been in business ten years or longer. Seventy seven zero percent will go out of business.
It used to be, if you’re in business five, 10, 15, 20 years, you’re in business for the long haul. Not anymore.
The longer you’re in business, the more you’re at risk of going out of business. Now, you’ve heard about the big public companies, Toys R US being in business. Seventy five years goes out of business.
Steinmark, been in business forever, goes out of business. Pier one, Montgomery Wards is in trouble. J.C. Penney’s is in trouble. Jeanne-Marie goes out of business. Godiva chocolate closes down fifteen hundred locations. GNC closes down nine hundred locations. You know, Blockbuster went out of business because I saw Netflix. I saw the writing on the wall that opportunity by Netflix. And they did nothing, nothing at all and end up going out of business.
That’s the big public companies.
What you’re not hearing about, all because the media doesn’t talk about it. All the private companies on every street corner, in every town, in every state across our great nation, these business owners are all going out of business. They’re exiting poor, not rich. Like my book says, they’re selling for pennies on the dollar. They’re closing our business and many of them are filing bankruptcy. And they’re losing not just our business assets, but the person wants us to because most business owners pierce that corporate bell.
So why is that? Why is that? Well, I’ll tell you why that is the number one reason why the business landscape has changed and flip flopped before the pandemic is because business owners stopped doing one thing. They stopped doing a lot of things.
But the biggest thing is lack of aim.
Aim is always innovate and market, always innovate and market. And many of these business owners get stuck and their ideas of the way they started their business. And they want to do things the way they’ve always done them. You’re either growing or dying. There is no in between growing or dying like Blockbuster did nothing different. Toys R US did nothing different in seventy five years. So business owners have to continue to innovate. If you don’t innovate, you will die.
If you don’t innovate and market, you will die. So to answer your question, I educate business owners on, OK, this is how you started your business. This is the basis of your innovation, but you haven’t done anything new in 20 years.
And here’s the bottom line.
Consumers don’t purchase products and services the way they used to. Whoever makes it easier for the consumer to do business with is a company that’s going to win.
Amazon is winning because Amazon.
Amazon doesn’t really innovate. Think about it, what does Amazon do they make it so easy for the consumer to purchase products, you can practically buy anything, including a horse, and have it delivered to your house in two days.
So not only do you have to innovate, you have to go back to the consumer and ask the consumer, what do you need? What do you want? How can I make it easier for you to do business with our company? Business owners stop innovating, they stop marketing, and most importantly, they stop asking the customer, the client, the consumer, what do you need? What do you want? Or be preemptive and figure out what they want, what they need, like Steve Jobs did.
Here’s the other thing. If you’ve been in business 20, 30, 40 years, your customers are probably aging out, right? You’ve done nothing new and nothing innovative in which to keep those consumers doing business with you.
But more importantly than that, going after the other generations, Generation X millennials.
Right, yeah, now this is interesting and like the statistics you talked about, like there’s a definite a total inversion and unfortunately people are still hung on the metrics they remember they know the stats of yet 95 percent plus of startups will fail. We still quote those numbers.
So it’s it’s wrong, right?
This is this is the horrifying thing about, you know, in the same way people always say you never get fired for buying IBM. I know 11 people that have been fired for buying IBM. It’s because in the end, the week we take this kind of like withI sort of stat that we can have and it outlives its reality, so. What’s missing, Michelle, because you’re you’re in front of the stuff all the time, like how is the how is the market and definitely the media, you know, not grabbing on to this story and talking about it because it’s a huge opportunity for folks to get started.
And that’s what’s so shocking to me, too. I’ve had this conversation with my publicist. Why isn’t the media talking about this job? And he’s like, because it’s not big news. Toys R US is big news.
Kmart goes out of business.
Big news, Godiva closing everything on location is big news. But the private company now has one location that’s been in business for 20 years. Who cares? Media doesn’t care. It’s not big news for them. And so nobody’s really talking about this stuff. That’s why I wrote Exit Rich. That’s why I wanted to start the conversation.
That’s why I wanted to really help as many people as I can. You know, I’ve been on over to on a podcast in the last month or two so that I can get the message out there that so many businesses are failing. And these are the reasons are valid. I mean, small businesses, the backbone of our economy. There’s thirty point two million businesses in the United States employing over half the US workforce. If we lose small business in the United States, we lose jobs, we lose jobs, lose spending power.
You’re spending power. More businesses shut down. It’s a domino effect. You lose even more jobs.
So if we don’t get behind small business, help small business owners, help entrepreneurs, stay successful, build a sustainable business that’s scalable, that is sellable, one day you’re going to have more and more and more bankruptcies, I mean, over more bankruptcies and twenty nineteen even before the pandemic than in any other year.
Well, and that’s that’s always the the interesting thing, and of course, through the course of the pandemic, the world has been shaken up and and it’s hard for us to measure, you know, when the effects will be felt. But this is an, again, interesting that you brought up. Right. Like the bankruptcy said, ridden, but had risen to incredible levels, pre pandemic. So this was already in play.
And people don’t see that.
They just look and say, oh, well, of course, bankruptcy went up.
We’ve been in a global pandemic like, no, no.
This was the the writing was already on the wall.
Yeah. All these statistics have, according to you, is right before a pandemic is even more gloom and doom now. But I mean, you do have more and more businesses have started up in twenty, twenty than any year before.
And some of these startups are really doing well. And like I said, startups only have a 30 percent risk of going out of business. Now, the big difference between startups now and startups before the pandemic are a lot of these entrepreneurs are solving problems.
And they’re not just opening up another coffee shop on a block where you already got six coffee shops or another ice cream ice cream store on a street when you already got 10 other ice cream stores.
They’re actually solving problems or doing online, you know, open up e-commerce businesses, manufacturing, online businesses.
You know, they’re really solving problems. And that’s what entrepreneurship is all about. It’s not just about over another ice cream store and cannibalize in the marketplace. It’s about going out and figuring out what the problem is and then coming up with a solution. That’s what entrepreneurial ism is all about.
It if you look at today, you know, the the the the needs to build a start up and sort of the the capital impact of so different than than they were when, like a 10 year old business, even especially 20 year old business. Right. To to build a company today is, you know, an online process. And, you know, it’s you know, how exciting is it to like what we’ve got ahead of us right now, Michelle?
Like, you can just you can come up with an idea, you can build a business and you can be online before the day is done. Yeah, it’s so exciting because, you know, when I started, gosh, when an online bubble start, what year was that?
The first one. Right. The two thousand and one dotcom one.
Yeah. Yeah. Nowadays is so much easier to start a business. I was talking to a gentleman in Australia yesterday. I was actually on his podcast and he’s like, oh, it’s so easy to start a business. I think he’s got like one hundred online businesses and it really costs you nothing.
And you don’t necessarily have to have employees or assets or inventory. I mean, you can pretty much start an online business without investing too much and be really successful. Now, turning around and trying to sell that online business might be another thing. If you don’t have the solid infrastructure and you don’t have the business built on what I call the six PS, then you might not be able to maximize value. But anybody really. There’s not anybody. Let me not say anybody any you know, somebody who has that entrepreneurial spirit, really, it’s much easier now to start a business than it’s ever been before.
And I think, you know, again, the bottom line is look around us, figure there’s opportunity everywhere, you know? But unfortunately, there’s also people walking around like zombies that they’re not really, you know, conscious and not really looking at things and and thinking about things about what can I do, how can I solve this problem?
And some of the best entrepreneurs in the world are the ones who solve the biggest problems.
And entrepreneurship breeds entrepreneurship, like, you know, I have a coffee shop store, right leg, an online coffee company that I built on Shopify. So because you.
Yeah, because so because the people who built Shopify solved a problem that needed to be solved. And as a result, it allows me to solve a problem that needs to be solved. Right. And and like I somebody wrote a tweet the other day and it was it’s it was unfortunate the way that the response was. They said, look, you can start a business today for under 500 dollars like that. And it’s a wondrous time to be able to do this.
And a lot of people like replied back in a really negative sort of sense of like, this is not true. You know, I’m like and I I didn’t even want to get in the conversation like, no, I legitimately started a business for seventy dollars and it has immediately become profitable. So it’s and it is totally possible to do this stuff, which is why I’m excited. But I’m curious on your thought, Michelle. Where do we need to bring this, like, is this something that we’re missing in education, like in like getting people to recognize that this is a new way of building society and, like, opportunity?
Yeah, I want to address up to two ways. I’ve had many of these online companies come to me.
One was a coffee company and not yours.
And now they’re not for sale yet.
But the problem is with some of these online, a lot of these online businesses is they don’t have any infrastructure.
They don’t have any people, you know, and if you go to my six PS, which I think we should, that’s in my book and to educate your listeners, you know, the number one is people.
And this this coffee company and people that have subcontractors and they didn’t want to let their subcontractors, independent contractors, I’m sorry, independent contractors go along with the business because I want to keep those independent contractors for the next on line business.
So that’s a problem when you’re building a business, any business, whether it’s online sales, business, brick and mortar, you got to have an infrastructure if you don’t build it with an infrastructure. Number one, how sustainable are you really going to be? And can you scale? And more importantly, can you sell and maximize value?
Yes, maybe you can sell to somebody else who wants an online business and are going to work that business as their job. But you’re never really going to be able to maximize value because you don’t have people you don’t really have the infrastructure of what a business really operates upon. And so you’re really never going to maximize value. So all businesses SACE online, brick and mortar, all businesses need to really follow the infrastructure that I talk about in my book, Rich.
That, to answer your question is where do we educate these people?
I think it starts in school.
You know, it needs to start in school. I’m educating my daughter. You know that you want to make money. You don’t just go work for money. Let’s get creative. Let’s get entrepreneurial. That entrepreneurial spirit. What can you do? Well, you got all these toys sitting in the attic. Why don’t we box up those toys and sell them?
Yeah, we can sell them or, you know, we can donate them. But anyway, we really got to get our kids thinking about entrepreneurship early on. And I’m not sure if I’m answering your question, but, you know, I’m actually interviewing Indoctrinated Cobain later today. And he is president of Lazy Boy, I think Panera Bread Company and about a bunch of other companies. And he’s also president, my high point university. And the Virginia campaign has probably got one of the only schools that I feel really teaches entrepreneurship, has business, has classes where they teach you how to go out there and start a business by business.
You know, what business ownership, what business entrepreneurship is all about how to go out and solve problems. And I think it just starts as our kids are little to start teaching them. Kind of like Richard I bought out by Robert Kazuki, you know, just really teaching our kids to think differently. It’s all about really thinking differently.
Well, and even the the opportunity today, like you talked about before, like this is this is an incredible world that we can do things in a different way, even if we look at some of the sort of the even rich dad, poor dad as example, effectively needs a new addition because the world has adjusted. Right. There’s other folks that are, like we call it, the new rich writers. Yeah, it’s we didn’t hear there was no Bitcoin back there.
That’s right. Russia for Florida was right. And, you know, I’m so fortunate that Sharon Lechter, who coauthored which Jeb fought out with Robert Kiyosaki as my coauthor for my book, Exit Rich, because Sharon Lectors, a New York Times best selling author, five times from a shepherd, plus a CPA financial literacy expert and adviser to many different presidents.
And she teaches financial literacy as well. But, yeah, they need another version because there’s there was no online back then. Know there was no Bitcoin back then.
There there were there were not a lot of things. It’s so much easier now, I believe, to become an entrepreneur than ever before.
And even if we look at it like great books, like Built to Last, which were used as effectively like a tome of describing the potential for for taking on a blue ocean strategy in an opportunity. Well, if you look at almost every one of those stories effectively turned over and they’ve actually shed that portion of the business in order to survive. So that built to last wasn’t built to last because the world adjusted, you know, no offense to course, Jim Collins and the folks that did it, it was at a point in time, if you take the context, it was right.
But we have to adjust context to availability of the world today. Right. Right.
So let’s you talked about the the the peace, right, so having six method people is number one, if you don’t mind, Michel, let’s kind of brush through what the what the six message.
And I spent a little bit of time on people because this is where a lot of e commerce businesses, online companies, are getting it wrong. You know, and you got to you don’t look, you don’t build a business, you build people and people build a business. Right.
If you want a business that’s going to be sustainable, scalable and one day sellable, you do have to have the people in your organization. And a lot of online businesses have independent contractors, but they love their independent contractors, so they want to keep up its makeup. So the next new, you know, business that they’re building.
So you really have to have that people component. You always say that entrepreneurs. And that’s one reason, you know, that that coffee shop, they wanted a lot of money and the coffee business, not coffee shop, coffee business, they wanted a lot of money for it, but they had no solid infrastructure. And it’s only been in business for a few years. So there really wasn’t much history there. Does that make sense? Yeah, no.
We’re talking about how an exit, which is all about business as a sustainable business, as scalable so people is huge. You know, a lot of entrepreneurs, they want to do everything themselves. They want to control everything. And I always say you can’t grow unless you let go of the control. So entrepreneurs really need to focus on their strengths, how the weaknesses. But the biggest thing is put the right people in the right seats. And if you are building a business to sell and not just run your business to pocket as much money as you possibly can, then build that solid infrastructure and then the people you really need to ask the question who you know, who handles customer service, marketing, legal, accounting, manufacturing, distribution, environmental, etc.
. The list goes on and on.
The clue, Eric, is that you should never be next to the WHO because you really want to build the business without you. A lot of these online these online businesses, e-commerce businesses, they don’t have any people, right? They don’t. And that makes it very, very, very difficult. A harder to sell because the buyers who are going to pay the money that these e-commerce businesses want because they want a multiple of their EBITA, which is understandable, but but the buyers are not going to run that business.
So you have to have the people in place that been running the business are going to continue to run the business and you can’t just take your people with you and leave the business people because now you have no business. Does that make sense? Absolutely.
And it’s it’s I’m very close to this as I look at like, how do I build this for scale? And you can see how the trap is easy to fall into of like, look, I can just do more stuff and subcontract it out and I can hire people off up work. I can do whatever. Yeah, but that doesn’t build sustainability and it ultimately doesn’t build long term value in what like measurable, you know, sellable value even as measurable growth value.
It’s it’s it may look like it’s working because the graph seems to be going up into the right. But the moment you break the system, the moment you slow down or change. Everything can go in the wrong direction, right, and then let’s say you have independent contractors and subcontractors, Eric, and you’re paying them this, but then the buyer says, I really like the business. I like what you do, but we need to have employees.
Employees are going to cause this.
So that’s going to automatically subtract from Ebola, which is already differential taxes, depreciation and amortization. And that’s going to lower your sales price immediately because buyers pay a multiple of EBITA. So you really got I don’t care if it’s an online business. I don’t care what kind of business it is. You got to build the infrastructure, you know, and that’s why so many of these e-commerce businesses are not selling. Or if they are selling, we’re not selling for maximum value.
I could sell them for a lot more if I had a solid infrastructure in place.
That makes sense.
Absolutely now and this is a good lesson for folks, and I’m always amazed, too, when you look at the like you look at these different sized companies and different e-commerce businesses, you have to very much use that lens to look at how they grew to the point where they’re at today.
Because, you know, look, Facebook has grown with independent contractors and subcontractors actually giving Google has gone with independent contractors and subcontractors. You know, Facebook does have companies that they contract with that have the employees employ the employees, but they still have people, you know what I mean? And I still have a bunch of subcontractors and independent contractors that come and go. So any of these businesses you look at, they have a foundation, they have an infrastructure.
So people is number one.
Number two, because here’s the bottom line, too. If it’s just the owner, like in this coffee business that really was just the owner, they wanted to take everybody else with them, you know, and buyers and buyers don’t want a job. And so really, that really is a job. And many business owners, instead of creating a business, they’ve created a glorified job and wants to go to work at every day versus a business actually works for them.
So people’s number one product is number two.
So product is your industry, your product. It is your service. You have to ask, is my industry product service on the way up all the way out?
Meaning to. Do you have an Amazon at the prime of your game or do you have a blockbuster and you’re about to go bust? And so product is huge. You know, there’s a lot of industries that were dying before covid that are now crushing and vice versa, those industries before Kova that were killing it and dying.
So I always tell my clients to ask these three transformational questions during product because remember, 70 percent of businesses are going out of business, have to be in business 10 years because they stop innovating. In order to innovate under product, ask yourself these three questions from a one. What business are you in this in the 90s, is that some sense, what business, what we had and I said, what?
Booksellers will fulfill book orders. And then Amazon said, this is a question your own or your listeners, not your owners. Your listeners are asking, what is your core competency? What do we do really, really well, better than everybody else. What is there a USB or unique selling proposition? And Amazon said. We do fulfillment better than everybody else. So then the third obvious question is, what business should we be in? Should an Amazon said we need to be in a government business, not just for selling boats, were selling everything for everybody.
Now, Amazon is not really a huge, innovative company, are they? What have they made? What have they innovated?
It’s it’s there are things, but in effect, they’ve basically they just they took on processes that nobody else wanted to take on, processes that nobody else took took on. They figured out what they were really good at, which was fullfillment. They’re not out there making the widgets. They’re not manufacturing and widgets. They’re not creating, you know, the next the next best cell phone. They’re not out there creating.
They’re out there fulfilling what everybody else creates. Yes or no.
You know, those transformational questions is really what transformed Amazon from a small bookseller to a multibillion dollar worldwide conglomerate that they are today. You know, my good friend Jeff Hoffman was standing in the airport line to try to to get his boarding pass so he could board his plane. This was decades ago. And he said he waited almost two hours to get to the agent to hand in this little, teeny thin piece of paper so he could get on the plane and just said, I just missed my plane, has handed me a piece of paper and Jeff went out and created the airport kiosk.
The kiosks approach your boarding passes so you don’t have to wait in line and miss your plane. That’s innovation. But as in the case of Amazon, you don’t always have to be the creator. You and now Amazon is the creative fulfillment, right, because they do it better than everybody else, but that’s what that’s what the essence is back in the 90s. What do we do so well is that we do that and that’s how they got so big.
So all business owners really should go back and ask themselves three questions. I don’t care what vertical you’re in, e-commerce businesses. You know, ask yourself, what business am I in, what I do really well, better than everybody else on my business, should we be? In some sense?
It does. It does. And then it’s interesting that they’re there. It always sounds simple, but it’s a very difficult, introspective thing for a business owner to do to really evaluate what’s the actual business where we’re in and what’s the thing that we can do. Right. And it really it really is. And a lot of times, Eric, you have to have an outsider’s perspective, because, like I said, when you’re in your fog, it’s foggy.
And a lot of business owners are transactional versus transformational. They’re are working in the business in the day to day, putting out fires constantly that they don’t really have time to sit there and think about what this is. I am what I do really, really well. And did you ever watch your movie, The Founder, based upon the McDonald’s?
Yes. Yeah, yeah. It was Michael. Michael Keaton was the star that we had. Really, really good. Good movie.
You remember when Michael Caine and Ray Kroc was in the bank trying to borrow money? Because he had already taken a mortgage out on his personal house, right?
He wasn’t making any money.
And it makes you like I’m like a legend. More money. He walks out and then a gentleman that followed him out of his name, he said, What business are you in?
And I said, I’m in the restaurant business right now. All right. What business are you? And he finally said, you need to be in the real estate business. You are not in the restaurant business, not in a hamburger business. You have to be in a real estate business. You have to buy the land, build the buildings, listen to the franchisees or franchisees are not compliant. You avoid our franchise agreement and you get another franchisee in there.
And then these franchisees are paying you rent. Those questions right there is what got Ray Kroc to have the leverage over the McDonald brothers to basically take the company away from them. But is the reason why McDonald’s is the largest holding company, real estate holding company in the world? So a lot of times you get a very a very valid point, Eric, is that. It’s hard for a business owner to have the infrastructure to do that themselves. You’ve got to have an outsider’s perspective like Ray Kroc that require would have never figure that out on his own.
And the interesting thing, too, and we look like let’s take the the greater story out of it, but like in general, so the like that business effectively was became what McDonald’s was, not what it was built from because they couldn’t answer those three questions. I don’t think like they they didn’t have the vision to do this bigger thing versus now, Ray, through this also third party help was able to really see what the future of the growing business is, which is and it’s funny, like brothers, the two brothers did not want to let go of the control and will never grow without letting go of the control.
The reason is that they tried to have multiple locations, but they wanted to control everything and then they all fell apart. So they’re like, OK, we’re just going to focus on our one restaurant, but you got to let go of the control. You got to get good people. You got to get good integrators. You go back to the people. You don’t build the business. You know, people may the business right. Got the right people.
I can’t do it all by himself. Right. So the therapy is processes, and I can still use a founder movie based to illustrate processes, you know, because back in the 50s, most business owners get this wrong. Most business owners design the processes around their own agenda, not around the customer experience.
MacDonald brothers back in the 1950s said, We want to build a fast food restaurant. We want our processes to be centered around, be designed with the customer experience in mind. So do you remember when when the McDonald brothers went out to the empty tennis courts? That’s right. Employees to talk through it all on a tennis court. How their employees moving around, bumping into each other. One of the McDonald brothers was on a ladder, really orchestrating how they move and kept redesigning it until they really had a symphony of systems and processes designed with the customer experience in mind.
The customer experience the McDonald’s brothers came up with, as we want our customers to experience great tasting food.
That’s hot, fast, 30 seconds or less. Even of those processes were designed back in the 50s and tweaked along the way, you can eat at a McDonald’s anywhere in the world and really get the same experience. Yeah, right.
Have you ever dealt with a company? We have to talk to three people, four people, 10 people to tell them the exact same story of your problem to try to get some resolve. Banks are notorious for this. Pharmacies, retail, social media companies are notorious for this, that they are not designing the processes with the customer experience in mind. They’re designing customers to alienate US and business. And here’s the bottom line, if you don’t create raving fans, then your competition will.
And you’re not going to create raving fans by having broken processes not designed with the customer experience in mind, so processes must be designed with the customer experience in mind and must be productive, efficient. And they must be well documented policy and procedure menus, McDonald’s can fire somebody on the front line and hire somebody within 30 minutes, have them working because they have S.O.P checklist is easy to follow, understand and implement. So you’ve got to have this policy procedure manuals as a checklist, employee handbooks, non competes, you know, all the documentation.
You never sell the business with all this documentation. Plus you need it to scale. You’ve got to have these processes to scale. So the fafi and this is the highest value driver, Eric, so businesses have it even under a million dollars? Well, typically sell for one the four times multiple. Probably one to three, more like it, just as well over a million dollars in EBITA, which could go for four or five and up. However, the more proprietary assets you have, so the fourth is proprietary, the more proprietary assets you have, synergies you have, the more we can sell your company for a get you a much higher value.
There’s six pillars to proprietary. No one is branding the mobile brand and your company as and what I can sell it for as long as your brand is relevant in the mind of the consumers. Is Blockbuster relevant in the mind of consumers is anybody can pay money for blockbuster brand. Now, because they went bust, raising them, their most valuable brand in the world is, do you know, the biggest brand, the most valuable brand in the world is?
That’s a good question. I mean, it’s funny, I’m looking at a Nike square in the back, there’s an example of someone that jumps to mind. But I mean, they’re not wearing a top 10, but they’re not the most valuable. Yeah. Oh, boy, we’ve mentioned it several times on the show today.
Oh, my, it would be our friends at Amazon.
Apple. Yeah, yeah, yeah, yeah.
I look at a MacBook and an iPhone and they all surrounded by Apple devices. They’re actually such a part of it. I wouldn’t think of going outside, but it’s funny that is that is hugely a brand impact, right?
It is. I mean, the brand alone is worth two hundred fifty five billion dollars billion. That’s just a brand. That’s not the assets. Demitri Cash. Well, real estate receivables, that’s just the brand alone. So build your brand. And then the other thing is trademarks. Trademark your company name. You know, trademark your slogan, your trademarked exit, rich.
Yeah, you know, trademark your podcast.
But here’s the big mistake the business owners make when trademarking. They go and they get a trademark for the state that they’re setting up the business up there in California. They start a business in California and get a California trademark, but then they go to GoDaddy. They make sure they get that dotcom, but they never check the federal database to make sure that that name is available. Right. And I’ve seen clients in business for years and all of a sudden receive assistance, this letter, and they have to stop using that company name.
And, you know, I’ve seen clients hiring attorneys with lots of money and ended up losing. So go spend fifteen hundred to two thousand dollars and protect your proprietary stuff. You know, and even products are not just your name and slogans and what’s unique to you, even products and have clients. His business for selling the 50 to 60 million dollar range. They have 12 different products. Each one has a different federal trademark.
Each one is exclusive to Wal-Mart, exclusive to Target, exclusive to different retail chains. So TJX will pay more money when buyers are five different types of buyers. When buyers look at buying businesses, they look at synergies. What synergies? It’s going to catapult my current business to the next level. They’re buying synergise. Patents are huge, if you’ve ever watched Shark Tank, every single shark always ask. Get a patent on that, do you have a patent pending?
Do you have a utility patent? In fact, offers are contingent upon patterns of business for 18 million dollars. And that business was was not really making money, but they had 18 hands on drugs or another one. That’s really big manufacturing contracts, distribution contracts. There’s another thing about e-commerce business.
It’s online businesses.
They don’t have people. Some of them have processes, it’s iffy. Most of them never, ever have contracts like coffee cup I was selling at a manufacturing company, no contracts as somebody else making their coffee. No contract.
You know, you really need those contracts. So you have protection. And the buyer buying the business knows that this manufacturing relationship can continue on. This distribution company can continue on. Does that make sense?
Drugs are huge. You know, vendor contracts, distribution, manufacturing, any type of exclusive contracts. Franchise owners who have franchise contracts are really valuable. Client contracts are extremely valuable because buyers want to make sure that there’s revenue coming into the business, especially the contracts. And e-commerce businesses are good at this, getting a subscription model for reoccurring revenue. And when you have reoccurring revenue, I will pay a higher multiple for subscription models. Here’s a caveat to contracts.
I have never met a business owner in over 20 years that actually has the transferability language in their contract that says this contract is transferable to the new entity.
And about ninety nine and about ninety ninety nine percent of all sales in the United States are asset sales, not stock sales. And so if your buyer refuses to do a stock sell and your and your clients refuse to do consent to transfer, your job can fall apart. So you need to make sure you have that transferability language. The other thing is database’s Facebook page, 19 billion dollars for WhatsApp and WhatsApp was hemorrhaging.
Yeah, they were not they were not profitable on that.
They are not profitable. And they were hemorrhaging, but they had a billion users. So they had a synergy that Facebook wanted to buy. Facebook knew they can monetize in order. Why that investment?
Celebrity endorsements are big. You know, if you look at rooms to go, who’s a celebrity there, Cindy Crawford. Have you ever seen her in any of the furniture company? No. And then we have a client who’s got products endorsed by Oprah. Well, Oprah is like the queen of everything.
So strategics, who have some more products, will pay more money for that Oprah relationship because, you know, it’s all about relationship capital because they want to get their products in front of Oprah. Same thing with radio personalities like Glenn Beck. Know the cake product show.
Yeah, these these celebrities and radio personalities can only endorse one vertical at a time. Otherwise they lose credibility. Jennifer Aniston’s face is all over Aveeno. You don’t see her face on any other skincare line, right? And then e-commerce businesses back to my e-commerce businesses, when they have the top positions on Wayfair, it’s Etsy, Amazon, eBay, Monan that shoots up in price because as prime real estate, the strategics want to get their products and those placements.
That makes sense.
Yeah, the new real estate is placement on page and in research results now instead of just physical location in the town.
Absolutely. Probably even more valuable than physical location in the town. That’s where that’s where consumers are shifting to, because most consumers, you know, because of Amazon, whoever makes it easier for the consumer to do business is it companies is going to want Amazon wins because they make it so easy. But the pandemic has also changed the way consumers purchase products and services now. Wal-Mart and Target did not have a membership in a program where you can order online and to deliver groceries to your doorstep is because Amazon acquired Whole Foods and Whole Foods has that program.
You know, the interesting thing, too, and like you talked about the you know this, every business is now a global business in effect. And what we try to be like those these brands are are no longer like the reach is not limited, but nor is the they have to effectively go beyond their streetcorner. You know, it’s it’s almost a responsibility as a business to be able to go, yeah, there is no limit anymore where you can do business.
The limit is right here in your mind.
FFP, I’m sorry, go ahead.
Yeah, no, sorry, I just realized I, I wanted to double check because I know we talked about so we’re five peas in.
And first of all, like I say, Michel, this is incredible.
Like, this is if anybody hasn’t already started writing this down, number one, they’re going to buy the book. And if they don’t, I’ll buy the bloody book for them. They need to write a fantastic book.
But like you are, you are sharing a ton of really, really strong lessons here. And I want to thank you as we’re going through this, because it’s it’s it’s a rare treat to have somebody that can really be, as you know, informed and share as much, even though, you know, obviously there’s a lot more that’s in the book than just simply listing out what we’re talking about here.
Right. Thank you, Eric. And so the fifth is patrons, patrons is your customer base. And most businesses follow the 80 20 rule where 80 percent of their business comes from 20 percent of their clients.
And you’ve got to be very careful on customer concentration. What you really want is customer diversification and e-commerce businesses get in trouble doing this as well on. Coffee company Dow is talking about ninety nine point nine percent of all the sales came from Amazon. What happens if the relationship with Amazon fails? Then they just lost their entire business, so it’s not just, you know, customers that you have customer concentration and it’s also the marketing channel that you’re using. And if all of your sales are through Amazon now, I know there’s a lot of Amazon sellers out there that only sell on Amazon.
And that’s OK, but it’s risky when I looks at that they’re going to want to mitigate the risk because what happens if Amazon decides? Not to do business with you, right, or Amazon decides to get in the business you’re in and effectively evacuate that channel for you now. Right, exactly.
So you should always be diversified in your client base and how you get clients. So if you’re getting all your clients from Amazon, I’d be very careful. You need to have multiple concurrent resources like your own website, you know, like maybe Etsy or something else. You have to have sufficient resources course being in the grocery store, et cetera. So anyway, this is customer concentration we want. So I’ll just give you a quick case study.
We had a business or manufacturing business we were selling that has 70 percent, 60, 47 percent of the revenue tied up in the BP contract. We appraise this company for nine point eight million.
We had over five hundred and fifty buyers.
We narrowed it down to 12, Alawi’s a lot of intense. Every single letter of intent had a condition in there that if you lose BP, then we’re not paying you. This isn’t this and that’s because we’re going to mitigate the risk.
However, we found a strategic that very similar products and services in a strategic. Didn’t care about the risk because the reward for them was far. Greater on the upside, because they’ve been trying to get their products and services into BP for decades and never could get their feet in Utah, it’s like, oh, this is perfect. We’re in there with this company we just acquired. Now we can get our other products and services in there.
Does that make sense?
Yeah, they were willing to pay 15 million for a company that was a price for nine point eight. Fifty million for 70 percent of the business, which is one hundred and twenty six percent more than that price price for the company for 70 percent. So we can sell a business with customer concentration. It just makes it much more difficult. We have to find a buyer of a needle in a haystack type of situation.
Yeah, that was a real unexpected value, but it’s an important one. It’s it’s hard to match those. But and also as well, like you talked about before, like the the outside view in is the only way in which they will discover that, because if they are simply looking at their own internal channel, that’s all they can be focused on. How do they possibly seek out a buyer who’s looking for a bidirectional access to the channel and sees a greater value than they even realize they’ve got?
So that’s and sometimes it doesn’t always work out. I think we had we had a media marketing company that were selling 10, 15 million range. They have five clients are only five, and they’re in the process. They lost two of the five. And the reason they have five is because of were casinos that cater to casinos and in marketing for the casinos.
It was so such a risky business because casinos will do the math. They bring on a new, you know, a new agent that makes the decisions and they will do the math and say, oh, we can do this in-house cheaper. And the marketing company. So they lost two clients out of the five. The revenues dropped in half or even have dropped in and they were no longer sellable. I ended up having to merge with another media and advertising marketing company.
So it doesn’t always work. How do you want to make sure you have customer diversification? And then the last piece, the most important thing, all entrepreneurs is profits. And I was like, Michelle, where do you put this last? The reason for profits last is because of that lack of profits is never the problem. Lack of profits is never the problem if you’re not making money. Lack of profits is not the problem.
It’s a symptom.
And the operating on one of the other types of clients that come the mail is that much of a profit problem. I’m like, no, you have a people problem or no, you have a process problem. You don’t have lack of profits is not a problem. It’s a symptom.
If you are running your business on all five PS, I can promise you you’re going to make money.
What’s that was a great example of never far from profit, they were as far from profit as you can get while still be considered in a business worth buying. But they had of the other five fees and majority of what was needed to bring value to their buyer. Right. That’s incredible.
That’s the sixth phrase. That’s your infrastructure. And you can see there’s infrastructure on the six fees. I can work for e-commerce businesses, right? Yeah.
Yeah. When it’s and it’s amazing. Like you said, it’s these practices apply to brick and mortar. They apply to e-commerce. They apply to locals to global site there.
It’s that’s right.
The methods play out and the importance is you have to just look at the overall methodology and make sure it all comes together. So like with that, I know, Michelle, we we’re coming up to time. And this has been fantastic. So Exit Rich is I highly recommend people people need to get this. If you’re at all involved in business, even if you’re not thinking today that you’re building towards exit, we have to understand we all are right.
The viability and sustainability is maybe your exit, maybe it’s your own personal exit. Are you creating something that’s sustainable to be worthwhile to the next person that’s going to take it over? Even if it’s not necessarily a sale, it could be the next CEO.
So we’ll have links to get get the book and Eric and I tell everybody the value that they get paid by the state.
Absolutely. That would be fantastic. Yeah.
And I’m sure your listeners want to hear about the extra gold nuggets, extra value we’re offering.
I like this even better.
So it’s so Rich launches in June towards the end of June. And Steve Forbes has endorsed the red state as a gold mine for entrepreneurs, as most entrepreneurs live way too much money on the table when they’re selling their business. Kevin Harington original Shark on Shark Tank wrote the foreword lectures my coauthor. So you don’t have to wait till June to read exit rate. You can go to exit. Which book?
Dotcom now for twenty four dollars and seventy nine cents, which is less than Amazon.
We will email you to digital download so you can start reading today. We will send the hardcover to your doorstep to anybody in the United States for no additional shipping cost.
We will give you a lifetime membership into the book club where there’s video content and made doing transformational questions and talking about strategies and techniques and doing deep dives in all these different things that I teach over the last 20 years, plus documents, documents to run a business necessary business. We have simple employee handbooks, not Kupets or charge licensing procedure manuals. We also have sample letter of intent. Purchase agreements, due diligence, checklist, closing documents, all of these are there not just for review, but you can download the templates and start using them.
If you want your attorney to try to recreate all these documents would cost you over thirty thousand dollars and all available to you just for buying the book at twenty four dollars and 79 cents.
Plus, we’ll give you a 30 day membership into Club CLS, which is an entrepreneur mastermind that we started to really help business owners build that sustainable, scalable and when already sellable business so they too can get rich. And that’s an rich book.
Dotcom, if there’s if you if you got twenty four, seventy nine to spend, which everybody does, then go, go there.
Yeah. Because if you’re going to McDonald’s save you save the burgers by the book.
Save the Quarter Pounder with cheese.
I can probably say I was lucky enough and thank you to your team actually sent a preview and I read it. It’s fantastically written, beautiful lessons. Like you said, you and Sharon did a great job and coauthoring this and like the book alone, well worth the value that that’s attached on that cover price. But the fact that you go far beyond it with what you’re giving and sharing, I really appreciate it. So, yeah, definitely folks do do go there and get the rich book.
This is this is a must have. And like I said, it’s it’s a manual that everybody doesn’t even realize they need until they start to read it. And don’t don’t wait until you’re looking to sell before you start to try and look backwards at what you needed to do along the way. It’s it’s like a manual for success.
So thank you for for bringing this to market.
Thank you. Thank you for having me. Eric has been an absolute pleasure. My main website, if anybody wants to contact me, Michell at SeilerTucker.com and then https://ExitRichBook.com.
Excellent. Yeah, I’ll make sure I got links to the show, notes. Michelle Seiler-Tucker, this has been an absolute pleasure and thank you so much. I appreciate it. And I wish you all the best. With the official launch in June. I’m looking forward to my hard copy cover arriving at my doorstep so I can put it on the bookshelf, but I’ll read it from end to end in the meantime anyways in advance, because it’s it’s an absolute must read for sure.
Thanks very much.
Thank you, Eric. It’s been a pleasure.