302: How to Exit Rich with Venture Capitalist and M&A Maven, Michelle Seiler Tucker

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By The Misfit Entrepreneur and Dave M. Lukas. Discovered by Player FM and our community — copyright is owned by the publisher, not Player FM, and audio is streamed directly from their servers. Hit the Subscribe button to track updates in Player FM, or paste the feed URL into other podcast apps.

This week’s Misfit Entrepreneur is Michelle Seiler Tucker. Michelle is the founder of Seiler Tucker Incorporated, a pre-imminent company for fixing, growing, buying, and selling businesses. Over 20 years, Michelle and her team have assisted in the buying and selling of over a thousand businesses. She is also a venture capitalist and two-time #1 best-selling author, speaker, TV, and radio host. Her latest book is called, Exit Rich and it’s being hailed by everyone from Steve Forbes to Brian Tracy, Les Brown, Jack Canfield, and many others.

Michelle has been featured everywhere from INC to Forbes to Entrepreneur and holds just about every certification possible in the M&A space. It’s safe to say she is an expert in how to grow, sell, and buy businesses. And I’ve asked her to come on the show to go in depth in all those areas.

www.SeilerTucker.com

Get the book Exit Rich

Michelle has always been an entrepreneur going back to when she was a kid. She did work at Xerox and climbed the ranks quickly, but she could not stay and had to pursue her entrepreneurial spirit. She went into franchise space. She had a lot of buyers that would ask to buy existing businesses instead of starting from scratch. She saw an opportunity and began providing these services. Nowadays, her firm specializes in selling, buying, fixing, and growing businesses. She also invests in businesses and helps guide them to maximize their value.

What are the characteristics of a great business?

  • It is an actual business and not a job.
  • 80% of businesses will never sell – Steve Forbes.
  • Most business owners don’t build the proper infrastructure that allows the business to grow and scale without them.
  • A great business maximizes the 6 P’s: People, Processes, Product, Proprietary, Patrons, and Profits.
  • A business is sellable when it has a sustainable, scalable, and predictable structure in place.

Go in depth on the 6 P’s. What do we need to know?

  • 80% of businesses will never sell.
  • Most business owners don’t build their business to be sold and most are emotionally attached to it having created a glorified job for themselves.
  • The business must work for the owner, not the owner for the business.
  • The #1 reason businesses don’t sell is because the business is completely dependent on the owner.
  • People: You build people and people build the business. The right people in the right seats. As the who question? Who does what? What are the characteristics of that person?
  • Product: Your product, industry, and service. A business must always innovate and market. You must constantly ask, “I am on the way up or the way out?” A business must have multiple revenue streams.
    • What is your business best at?
    • What business should you be in?
  • Processes: This is where most businesses fail. You have to identify your processes, but most business owners do this wrong. They design their business processes around their own agenda – it needs to be around the customer agenda. Michelle gives a great example of this with medical clinics. Your process must be concrete and tested and wow your customers.
  • Proprietary: This is the highest value P. Business that are under $1 million in EBITA will trade between 1-3x EBITA. If the EBITA is over $1 million, it starts at 5x and up. Proprietary is a number of things. Part of this is branding – the more value your brand has, the more your company is worth. Trademarks are valuable as well. They need to be registered Federally, not just in the state of the business. Trademark your products as well. Patents are important as well. Contracts are another value driver. Data is valuable.
  • Patrons: Your customers. Customer concentration is something that does happen, but a business must be careful not to have the bulk of the revenue highly concentrated in a small number of clients. It is a risk. Diversify your client base and offerings to grow clients.
  • Profits: Most companies are not making a profit. Lack of profits are not the problem, it is a symptom of not having the rest of the 6 P’s.

How does an entrepreneur plan their exit strategy from day 1?

  • The worst time to sell your business is during a catastrophe or risk event.
  • You want to sell your business at its height.
  • You must have a realistic value of what your business is worth – not what you think it is worth.
  • Follow the GPS exit model: Start with the end in mind. Plan your exit from the beginning. Know the destination before you begin the journey. (what is the goal to exit or sell the business for)
  • Know where you are starting from. (what is the business worth today)
  • Know who your buyers are.
  • Build the company to sell from the beginning.

What are the big mistakes entrepreneurs make in the sales process?

  • Not hiring the right professionals to help you or trying to sell the business on your own.
  • Get an experienced M&A advisor.
  • Get the proper disclosures signed.
  • Be careful selling to customers or employees.
  • Go back to the 6 P’s to maximize value.
  • Make sure contracts, employee contracts/non-competes all buttoned up.
  • Beware telling your employees and clients you are in a process.
  • Don’t negotiate outside of your M&A advisor.

Anything else we should know?

  • Don’t ever divulge your customer list.
  • Make sure you have a non-compete if a competitor is buying you.
  • It’s not what you know that gets you into trouble, its what you don’t know.
  • Many deals fall apart because of taxes. You have to pay taxes – don’t not sell your business because of taxes. There are ways you can defer capital gains.

Best Quote: 80% of businesses will never sell. The #1 reason businesses don’t sell is because the business is completely dependent on the owner.

Michelle's Misfit 3:

  1. Build your exit from the beginning. Use the 6 P’s. People, Processes, Product, Proprietary, Patrons, and Profits
  2. It is hard to read the label from the inside of the bottle. You need an outsider’s perspective. Get a mentor who has been down the road you want to travel.
  3. Do your best to have a balanced life of God, family, and work. Keep a 30-day journal and document things. 3 buckets. Bucket A are the things only you can do. Bucket B are the things that you are good at but should be delegated. Bucket C are the things you can outsource entirely.

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