She holds the M&AMI (Mergers & Acquisitions Master Intermediary) title, as well as Certified Mergers and Acquisitions Professional (CM&AP) and Certified Senior Business Analyst (CSBA). Michelle also owns many other businesses in several different...
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Ronald Skelton 0:06
Hello and welcome to the how to exit podcast where we introduce you to a world of small to medium business acquisitions and mergers. We interview business owners, industry leaders, authors, mentors, and other influencers with the sole intent to share with you what it looks like to buy or sell a business. Let's get rolling
Hello, and welcome to the how to exit podcast. Today I'm here with Michelle Seiler Tucker. Bestselling author of exit rich and CEO of Seiler Tucker Incorporated. Thank you for being on the show today. I'm really excited to, to get to know you better and learn, learn from you today.
Michelle Seiler Tucker 0:47
Thanks, Ronald. Thank you for having me on. I just wanted to throw out Wall Street Journal on USA Today bestseller because I'm making said our best seller on Amazon.
Ronald Skelton 0:57
I have a friend who is he owns a publishing companies like he can get he it's, it's not that hard to to get best selling on Amazon. You just got to get a category down. So you pick a really tight category and you do some decent sales in there. The other ones you can't name him like so the fact that you're best selling on all the, you know, the different charts, there is pretty impressive. So I'm glad to have you here. And I always like to start off with just letting people get to know who you are and kind of how you got where you're at. So I jokingly like I said, Michelle, and I like to joke and say you were born. Some things happened and you end up on a show about buying and selling businesses. Could you can you fill in the gap on how you ended up here?
Michelle Seiler Tucker 1:39
Sure, happy to I've been asked this question a million times. And, you know, I've practiced along the way because I don't like to talk about myself, I'd like to talk about how to educate business owners about exiting rich. But anyway, I would say you know, I wasn't your typical child. Around seven or eight, I never really paid to play with toys, I didn't play with dolls. That was a waste of time to play with toys. I would walk around with a notebook and a pen. And I would walk up to strangers at the bank at the grocery store, you know, at church everywhere. And I'll ask them, Well, what do you do? How did you get started? How should I how can I get started? I was like seven, eight years old. So my mom's like, oh, my gosh, she's gonna be the next Barbara Walters. And so I'm not Barbara Walters. But I do consider myself somewhat of a reporter because I'm just curious. You know, I've always been curious. And I think that's what makes me so successful mergers and acquisitions is because I'm like a kid in a candy jar. I can't, you know, I can't wait to find out how somebody started their business, from the kitchen table, or were some of the department or company that started out a pickup truck with a third grade education. So I knew back then I was always gonna be an entrepreneur I knew back then I didn't want to work for anyone. And as I started your small businesses along the way, like lemonade stands and stuff like that. I always tell my mom, I'll never get that three letter, that three letter word job. That I would always be self employed. But I was wrong. So never say never. I did end up getting recruited from Xerox, and Xerox recruited me as their high volume manager. And then within six months, they promoted me to regional vice president over the South, overseeing 100, 250 salespeople. And then I realized really quickly, what am I doing here, I said, I would never get a job. And now I'm stuck in corporate America. I love working with clients. I'm a people person. I love, I love problems, because I'm like, come up with solutions. And I like building relationships that lasts a lifetime. And you're not doing that in corporate America. Plus, you're not getting anything accomplished. So I ended up leaving Xerox of my six figure position with great benefits and went into really franchise sales franchise development franchise consultants for the model franchise business. And I did that, you know, I was like, Well, how did you get in that? Well, I learned a lot about franchising and licensing in the Xerox model because it had all the small agency franchises. And so I'm like, Oh, this can't be too hard. I partnered with some franchisors, I was the equity partner. And I built my franchise development, franchise consulting purchase sales company. And then Ronald, all these bars kept coming to me saying, Michelle, Michelle, you know, do you have an existing business? Or do you sell businesses? And I kept saying, no, no, no. Now all of a sudden, I'm like, you know, what, if they keep asking for it, maybe I should provide. And that was about that was back in 2000, 2001. So I've been in this business 21 or 22 years. And that's kind of how I got started in m&a.
Ronald Skelton 4:43
That's awesome. I love the entrepreneurial journey like the background. I have a similar background i, I was from the time I could actually mow a lawn I wanted to work for my father who had a painting business. He told me I was too young. So I grabbed the push mower and pushed it Five and a half miles into town because we lived out in the country and mow lawns all day. And I would push it back. And after a couple, probably a couple of weeks by this be honestly after I got hit by two dogs in somebody's yard, he realized that you'd rather oversee me, and I'm a hard worker. So, you know, I, you know, since I could climb a ladder, I ended up working with him from that point on, thats probably, I don't know, probably 11,12, 13 years, so you walk 10 miles a day. Yeah, just mow the lawns, or like are, we live our, our next door neighbor's, we lived in this little place called Kellyville, Oklahoma. Our next door neighbors all had like 3000 acres, you know, so we were like a small little farm I had 26 acres. So, you know, I go to my, you know, my neighbor, one neighbor across the street, I only see one house and I guess there's one little trailer house one side. And then the lady beside us, she had 10 acres, which was the smallest plot of land on there. But like the guys behind us at 3700 acres, so you know, to do any thing, like you weren't gonna mow their lawns unless you had a brush hog. So to do anything, I was like, Okay, I hear kids make money mowing lawns, and I had done it earlier before he moved out, there's but in fact, I had an older cousin and I, we were mowing lawns, and I moved out there in fourth grade. So prior to fourth grade, him and I went around mowing lawns, and we learned so many lawns that my dad had to come out and help us finish all of them because we, we sold them committed to doing them. And he shut us down because we just couldn't keep up with we were too young to be doing what we're doing. And he's like, Yeah, stop it. But that was for we moved out to Kellyville in fourth grade. So and I love the young entrepreneurs, I have a friend who she just heard six year old just had a lemonade stand. And I seen it that she were telling her friends on social media. So I invited the police department, the fire department, everybody could on her social media, and she's got pictures of people lining up like this kid had the fire department come up with come by with lights on his stuff. If you look at what happens to little entrepreneurs when that happens, he's their first try is a big win. We just created it was his mom, mostly that I don't want to take credit for that. But Is mom set that up and, you know, put him in the place and I just don't market it. Because that was a friend of the family and made a loan to brewer for life. Right? Once you've got that in your blood like you did at a young age, either born with it or something happened. And it's like you get a win. And the rest of the rest of your life like I can do that again. So I love that entrepreneurs your journey, let's talk about, let's just talk about exit rates because you put a lot of work into that it's a best selling. And there's some real wisdom in the difference between just selling your company and actually selling your company for something that makes a difference in your life. You know, selling exit rich, is a whole different thing than I sold my company, right?
Michelle Seiler Tucker 7:40
Yeah, 1,000%. And I'll written three books on the subject, I have another one coming out. And you know, everybody's like, well, who came up with that title? Well, I can tell you this, it wasn't my publishing company. Because they're like, I felt off exit on your terms. Like, that's terrible. I want X original like, oh, yeah, that's great. So the reason why I came up with exit riches just because so many business owners are asking for. And the reason I wrote, you know, my third book on, on the subject, is because it's my passion, it's my mission to continue to educate business owners until they get it, you know, I need them to get it. And when I say I need them to get it, you know, Steve Forbes says 80% of businesses on the market will never sell 80% That means you have less of a 20% chance of success. If you talk to m&a source, which is association for m&a advisors that say 90% Never sell. So you have less than a 10 to 20% chance of success when you go to sell your company. That means that the 80 to 90% that don't sell or if they sell to actually import or selling for pennies on the dollar to closing their doors. They're following bankruptcy. And that's sad ronald because if you think about it, most of the businesses selling right now, and have been selling over the last 20 years are baby boomers and baby boomers poured their heart, their soul, their energy, their life, you know, work into, into building their company, and they make huge sacrifices along the way. We're supposed to grow our business, they have financial freedom. We're supposed to go in business to have a better quality of life, and be able to show up in our family's life be able to participate in our kids games and plays and, you know, musical theater and stuff. And when I talk to business owners like I have one that's been in business for 40 plus years, and he said, Shall I missed all of that. He said I haven't taken a vacation nine years. I missed every soccer game, every football game, every play for my daughter. And that's not going into business for yourself that's creating a glorified job that you got to look at everyday versus a business actually works for you. So exit Rich which is so important because it really teaches business owners how to build a business, not a job. You want a business that works for you. And so you're looking for it. I know that Ronald, you and I were talking before the show, about a company that we had that you might be interest When you said I don't want to buy a job, I don't want to buy a job, and most buyers don't want to buy a job. However, most business owners have created a job. And that's why it's not sellable. So there's lots of reasons why businesses 80% to 90%. Businesses don't sell the number one reason is because business owners have created that glorified job, not a company that buyers want to buy. Number two, business owners don't think about selling until a catastrophic event occurs rather than internal or external, internal, or health issues, partners disputes, divorce is over 51% divorce rate in our country. Death, you know, I had a lady called me up from Dallas has been dropped out from, from a heart attack at the age of 40. Left over the mountain edition and nothing about the business, nothing about the finances, and she asked me if I could sell the business, get a construction company. Boys are going to contractors, no processes, he didn't build his company on the six P's. When he died, the business died. And then the external pandemic or hurricanes tornadoes, this pandemic that we've experienced around the world for the last two and a half years. So you need to follow the Stephen Covey concept. Start with the end in mind. Accept from the beginning, your business is your most valuable asset, stop treating it as your baby. This is owners like oh, this is my baby. No, I can't separate from my baby or my baby's worth $20 million. This is your baby's not worth $20 million, or even as $100,000 a year. So you really have to have a mind shift. And I tell my business owners follow the GPS exit model that we that we outlined in my book exit Rich.
Ronald Skelton 11:44
I get it. You know, you mentioned the very alarming statistic that you mentioned it from one angle and I want to say it from another. The baby boomers owning businesses right now, if they and only 80% of them that ever sell. I think that's actually 80% Of all the ones that are listed don't sell a lot of them. Yeah, a lot of them don't get listed at all. That's a big concern, considering if you look at the statistic 51% of all businesses in the United States. 51% of all employers in United States currently are still owned by those baby boomers who have to retire. Right. And, you know, they're in some area and ranging from what's in their 60s Right now all the way up into the 70s and 80s. Depending on I guess the range in the next 15 to 20 years, we're gonna have real problems if we don't find a way to transfer those jobs, jobs, you know, they're just gonna start going away because the owners setting, setting the charity long, right? They said that they're their office, and I get it, I get the I know what happens. As entrepreneurs, we allow too much of our identity to be tied into what we've created. Right? That business is part of who you are. So there's a psychological side of, you know, what. I found a really cool little so company has come up a bunch of different times on the show, guy does a few million a year in revenue didn't get too deep into his numbers, because his wife thinks he should sell and, and one of his best friends connected me with him because I think he should sell I think he just turned 80 right around 80. And I got him on the phone because I don't want to sell all my friends have sold their businesses die within a few weeks. I'm not ready to die. And he really believed this. Right? Because I said, so you just run it until you you're gone. And he's now no sell at Sunday. And I said, your 80 and I've known this guy for a little while he wanted to be one of the investors in my in my real estate firm. So I took him to lunch a couple times. So I've gotten to know him a couple of different times. And I was like so it could be a little blunt with you. It's like you're 80, and just had to step foot in your neck because you were close to having a stroke. Right? So, you know, when's the right time? He goes I don't know just not right now I'm just not ready.
Michelle Seiler Tucker 13:59
That's, that's a huge mistake. And the problem is he set his family up for failure not for success. And gentleman that that dropped out of a heart attack at the age of 40 has completely set up his wife for failure. She's going to have to file bankruptcy. And if you don't plan your exit for yourself, at least get smart. Build a company that's sellable, build a sustainable, scalable, sellable asset. So if something was to happen to you, it could be sold for the family because the likelihood of the family stepping in and running a company is really slim to none. And companies are not passed down from generation, generation to generation like they used to be. So planning for your exit from the beginning is extremely intelligent idea. It's just crazy to me because if you think about it, you have kids, right Ronald? And when our kids are born, we plan out their entire life. We find out you know where they're gonna go to pre-school, where they're gonna go to kindergarten, elementary and high school. Junior, junior high, high school, college, some, some,some people, but if they're gonna marry. And so even financial, you know, advisors, we're hiring a financial advisor a lot of us do and we plan for retirement, we take our most valuable asset, which should be your business. And we don't plan for the financial success of financial exit. So our family can exit rich one day if something was to happen to us, it's financial suicide. And people gotta get out of that ATO mindset. You know, and I love the millennials and the generation X because they're starting really great businesses, fast businesses, ecommerce businesses, and they're building that to sell, I never got an answer to sell within a few years, you know, one thing they are missing is the solid infrastructure. But other than that, they have the right mindset, they have the right psychology, they're not going in this to be married to their business, and, and to treat this as your baby. So it really does take a huge, huge mind shift. And it's hard for baby boomers because their whole identity has been around their business, like you just mentioned earlier. And then the other thing, I wanted to point out that you made a comment too, because you're right, it's 80 to 90% of businesses that are listed. And most people don't know this. But there's over 30 point 2 million businesses in the United States and point over half the US workforce, you have a small business, you lose jobs, you lose shop to lose spinning power, people stop eating out, they stop spending money, they stopped spending money on discretionary. And so before you know that the economy tanks, because of small business without small business, over half of our economy will lose jobs. I mean, although the economy will tank because we'll lose jobs. The other thing I wanted to point out that is so, so important these days that nobody really knows. When I did my research for my very first book, sell your business for more than it's worth. I did the research and learn that 85 to 95% of all startups will go out of business within the first one to five years, there are great risks. When I will exit rich in 2019. And I did the exact same research, I was flabbergasted to learn that the business landscape has flipped flopped, startups are not a great risk anymore. Because you've got millennials and Generation X people come in and starting online businesses or solving problems, or companies are solution oriented to solve problems are not just another brick and mortar restaurant or brick and mortar, smoothie store and a pizzeria. And they're actually solving problems. Now only 30% of startups are going out of business. However, on a 27 point 6 million companies 70% of those businesses are closing down and the seven zero is almost as bad as 80% not selling. And the reason for that is because of lack of AIM, I call it lack of Aim. Aim is always innovate and market always innovate and market. And it's baby boomers become complacent. They want to keep doing things the way they've always done them. And the reason startups are so successful is because they're innovative. They're different. You know, and lack of AIM has always innovative market, business owners stop innovating, they stop marketing, they want to do things the way they've always done them and guess what your clients are aging out. They're not buying like they used to. So you really have to innovate. So you can appeal to the new generation, which by their buying habits are completely different than the generation you've been selling to. So we have a bigger problem in America even bigger and businesses not selling. And that's businesses going out of business.
Ronald Skelton 18:34
You know, I one of the things that I'm interested in, in this space is, is the concept of I've been an entrepreneur for many years. I told you a little bit about the real estate one before that I've had other businesses. And inside of that whole journey of entrepreneurs is I love the origin story. How do people get started. And it's interesting. In the last couple years, I've interviewed over probably 200 Plus closer to 300 plus businesses to either acquire them we had a big rollout projects, a lot of them are marketing companies. And their origin story is something I always like to start with. And I was surprised at how many I refer to as accidental entrepreneurs. They never sat down, they didn't come out of business school, they didn't come out of anything, like trained to train them to be a business owner. They were really good at running one particular item or will do one particular thing. Somebody bought it, and then somebody else heard about it, they wanted one and the next day and Oh, this guy's producing widgets. He owns a business and you know, X number of years goes by now he's talking to you or me or somebody to, to sell it. And it was just kind of grown organically. So to some extent. I had to give up like expecting their books to be perfect and some other stuff to be perfect just because nobody's ever showed them how to do that. Right? They did it just enough that they're You know, their accountant and their tax person was okay with what they were doing. And that's all they ever had to live up to. So.
Michelle Seiler Tucker 20:09
yeah, they're not they're not taught these business lessons. But I will tell you, a lot of entrepreneurs for the third grade, fifth grade education, that got a lot bigger businesses and someone with a master's degree. So it's not always about education. About grit. So it's about grit, it's also about identifying what your weaknesses are and hiring your strengths, hiring people smarter than you. Getting the right person and accounting because three out of five businesses on 1000 every year. So getting the right people in those positions, but I will tell you, my greedy business owners are far more successful and some of them are master's degrees.
Ronald Skelton 20:44
So, I have this show note here that says what are asked you about your six P's? What are the how to build sustainable, scalable and sellable business? What are those six PS?
Michelle Seiler Tucker 20:55
First, it starts with and if you're if you're Are you do sell businesses on or do our businesses
Ronald Skelton 21:00
I acquire though my actually my buy and hold or I'm what they refer to as acquisition entrepreneur. I'm looking for things that I could buy some things I want to buy and hold and other things I want to buy, fix and sell later. So within the.
Michelle Seiler Tucker 21:13
But you are looking, gonna buy a company, not a job. Exactly. So let's let's go through the six P's with you in mind as you require. That will be fun. So number one, why no one wants to buy and we go by Ronald Iran, I
Ronald Skelton 21:30
should ask you that Ronald is fine runs fine. Either one.
Michelle Seiler Tucker 21:33
right, (inaudible), right? You got all that money (inaudible). All right. So Ranald wants to buy a business not a job. The number one P before any other P's, people on this one want to buy business without people because Ronald doesn't want to work in the distance. So the number one P is people, you don't build a business. You don't build a business, people get this wrong. You go people, and people build their business. So entrepreneurs have to focus on their strengths, hire their weaknesses, entrepreneurs, are control freaks. So their mindset is, if I want it done, right, I have to do everything myself. But that can't be farther from the truth, because nobody is good at everything. And you'll never grow unless you let go the control. So you have to have the right people in the right seats. And you have to ask the who questions we have this customer service. When those you know, sales, marketing, accounting, legal, manufacturing, distribution, quality control, who handles the list goes on and on and on. The cool here, Ronald, is you never want to be next to the fool. Because you want to sit on the board. You're the visionary, you want to grow the company, high level, you don't want to get into the weeds and work in the business you want on the business or on the business less people. So you're not gonna buy business or businesses 1,000% depend upon people. Let me give you another example. Real quick. I give you a construction example already. We have a dentist, been in business 50 years, one dentist in a small town in Florida, three dental hygienist, the three dental hygienists for his daughters. He asked me if I could sell the business. I said yes, I could sell it because I'm not good. But it's not going to come without risks. Meaning there's good deals when we structure with an O now, I some seller financing this new structural clawbacks meaning that you have to stay on for two to three years. Otherwise, you're gonna pay a lot less for the business, because the minute you and your daughters leave the client, the patient's leave. And he said, Well, honey, we're not selling. I mean, we're not staying. And I said, Well, honey, you're not selling. And so we walked away from that deal. But people's everything and second thing is product. Wanna when you're looking at a business to invest? Are you looking at something in it's fine? Well, you know, it's got a long, long, long shelf life in the industry, like Amazon, are you looking at someone like a blockbuster who's died? You know, what are you looking for? Are you looking for something that is in a time is going to continue on for decades, right?
Ronald Skelton 24:10
Absolutely. I'm looking for something that, you know, people are gonna, there's still going to be a need in the market right now. I'm looking for things that there's going to be a need in the market that can handle a recession or potentially depression, right.
Michelle Seiler Tucker 24:23
So that's 1000%. And then you're also looking for just you're looking for a product industry service that is striving, not dying. And I always tell my sellers, you sell when you're in your prime when you're in Amazon and you're in your prime, that's when you sell you don't sell on your blockbuster because you're never going to exit rich that way. But Ronald you also, I'm sure you're looking for this because you're a savvy buyer, savvy acquirer. I'm sure you're looking for multiple profit centers, multiple congruent revenue streams, because if you have one revenue stream, that's what happened to restaurants during this pandemic. Now, one way they get paid, customers come in it and they eat or they take food good to go. There was no ecommerce business, there was no private label, you know, specialty items that they could sell, it's a gourmet shops, they had no other revenue streams. So I'm sure you're looking for multiple congruent revenue streams. So if one dies, then you've got other ways to get paid in the business. And I'm sure you're looking for a re a subscription model, reoccurring revenue model, because most buyers are looking for when we acquired revenue, because that means you got no (inaudible) coming in every month. Right?
Ronald Skelton 25:33
Right. Okay, absolutely. I've come in from the real estate, and it's kind of trained that we're supposed to get a monthly check. So I, I look, I'm currently looking for businesses that either have a subscription model built into it, or something that would be easily added to it. Like I'm looking at a vault in coffee roasters and companies, just because I've seen a couple that move to the subscription base are just killing it in that space. So
Michelle Seiler Tucker 26:00
okay, so I think I know what you're looking at probably some good businesses. And then the therapy is processes. And because you want to buy a company and you want to work on it, in it, you want to grow it, you want it to be sustainable and scalable, you want it to have processes in place that really drive the people versus the people driving the processes. And processes are typically the most broken. Typically the P that people pay the least amount of attention to in their companies. And now it's not just small companies, we're selling $55 million company right now 350 employees, six different divisions, one division has no process for it. And they tell their employees to write up the processes. So you want to make sure that you have process is run on not just any process, because this is a competitive landscape very competitive with these millennials coming in, with all their brilliant problem solving, you know, brain trust. And so you want to make sure that you're designing the processes with the customer experience in mind. I'm going to take you back to a movie called The founder, I don't know if you've ever watched a founder based upon McDonald brothers, you haven't watched that I encourage all of your listeners to go watch that movie. So the McDonald's brothers started McDonald's back in 1940. And the founder is based upon their story and Ray Kroc, how Ray Kroc came in. And Ray Kroc came in and really took away from McDonald's a good to what it is today. But it's really important. When you design your processes to ask yourself one question I ask your clients, what do you want to experience? McDonald's back in 1940, so we want our clients to experience fast food restaurant, we want them to experience very tasty and food that's hot, and fast in 30 seconds or less, because it was nothing at that time, it was all drive up fast food, which is not fast food, you know, the sonic type restaurant. And so McDonald's designed their their processes around that customer experience. And Ronald, they did that back in 1940. But it is the same processes that they use today. And it's why you can eat at McDonald's anywhere in the world and get the same experience. Have you ever been to a doctor's office? Yeah, because offices design their processes around the patient experience, or they design it around the owners agenda.
Ronald Skelton 28:30
It's usually around the owners agenda.
Unknown Speaker 28:31
agenda because their hours are ridiculous, I can point to go to the doctor hours are 9am to usually four. And they're sometimes they're close for an hour for lunch. And then they're usually open half a day on Thursday and closed on Fridays, open a half a day on Friday. So my husband, I have medical clinics and we did this, we said okay, let's design our processes around the customer experience not around origin or adopters agenda. Adopters want to work closer they know you know that you're gonna follow this process. So our processes are we're open three nights a week from 730 at night. And we're open till two on Saturday and we're open all day products. What a concept. I'm we're very busy. So you really got to design those processes with the customer experience in mind. Now, you also want to make sure you have those processes and procedure manuals, I'm sure wanna when you go in and look at a business, you're inspecting those policy and procedure manuals, irrespective of employee handbooks, you're making sure the upper level management team have non competes in place, and you make it sure that there's SOP checklist. You know, you want it to learn like a McDonald's or Burger King. And so this is very, very important (inaudible) walk in due diligence and look at this stuff and walk out because like, Oh, this is too much work. We have to rebuild this company. So very important processes. The other thing that's really, really, really big is an. Let's skip this step and pause it but I can come back to that proprietary. Proprietary is the number one value driver runner will probably pay more money for a company that has, it is well branded. Because a more branded and your company has a the more I can sell it for but the more revenue that business is going to generate look at Amazon, the most valuable brand in the world is y'all know,
Ronald Skelton 30:26
probably Coca-Cola, Pepsi.
Michelle Seiler Tucker 30:29
Coca Cola is in the top 10 Pepsi is not
Ronald Skelton 30:32
Apple, Apple Yeah, I got it, yup
Michelle Seiler Tucker 30:35
billion dollars just for the brand toner and 89 billion just for the brand. That's not anything else. That's not inventory assets, real estate. That's nothing else. That's just the brand alone. So if you're selling the business, you want to build your brand, the more valuable your brand is, the more I could sell your company for. Also trademarks, no run appeal again minor business, I would assume it's important for you to buy a company that has federal trademarks on your company name, the company slogan, their logo, because if not, you can receive assistances letter in the mail. And that says you have to stop using that company name that slogan, anything that's important to your company. And then you have to start the planning process all over again. Because the likelihood of you losing a quarter is pretty great. So you want to go to make sure you get those federal trademarks. If you're, if you're have a company, if you're buying a company, don't buy a company without that because it's extremely important or you gotta go get that go get it do your research first and discounted from the price of the business. And then same thing, we're upon it if the company has products like we're showing a company that has multiple products to pretty much similar but they have different trademarks. And each product is exclusive to TJ Maxx exclusive to WalMart exclusive to, you know different different retail stores. So you can also get a federal trademark on that. If you don't have a federal trademark right now, put (inaudible) hidden behind your name. But (inaudible) behind your slogan behind your logo. This is proprietary assets, it can take you from a three multiple to four to five to eight to 10. Also patents if you've ever watched short tape, you want to have a patent. Because short, shorts always ask, you know (inaudible) utility patent, and we won't So a company that wasn't making that much money for $80 million, because they're (inaudible). And then the other big thing is contracts. If you're trying to buy a company has really according to Treasury model, you want to make sure they have contracts. Now, there's all kinds of contracts, there's vendor contracts, there's distributed, distributed, distribution contracts, there's franchisor, there's franchisees. There's also like I said, manufacturing, there's supplier contracts, the most valuable to clients like Ronald is going to be your customer, your client contract. But here's the problem with contracts, most business owners, I've never seen a business owner get this right, let's just be real here. In 22 years, I've never seen a business owner get this right 98% of all sales are asset sales, not stock sales.
Ronald Skelton 33:08
Michelle Seiler Tucker 33:11
If your client contract doesn't have a transferability clause, and your buyer doesn't agree to a stock sale, you have to go to all your clients and get them to agree to transfer, to consent to transfer. We got to have marketing companies got 2000 clients. That would be a nightmare. We have a transportation company that we sold them in Kansas City, they ended up having to go stock because they had 100 clients and like hospitals, nursing homes, etc. I told them their entire process your transferable language. So you want to make sure you have that transferable language. Also build up that reoccurring model because like Ronald said, he wants to buy a company that either has a subscription model, or at least has the potential that they can build one into it. So special model businesses typically sell for much higher multiple than nonsufficient models. And then databases. I mean, Facebook pay $19 billion, WhatsApp and WhatsApp was energy. About WhatsApp had a billion users. So buyers like Ronald they're looking for, they're looking for those, those congruent synergies, you know, because a lot of times as a strategic buyer, there's five different types of buyers, and are looking for strategic buys that can help catapult different companies to the next level. So databases can do that. We have an app company, it's been on the market for two weeks and we sold over, over a base price because they have a huge database. And then the other big thing is celebrity endorsements. We have a client is working with Oprah. Lots of, lots of strategics will want to buy that company because they want to get their products in front of the plane of everything. Radio personalities, I mean Ronald right here looks like a right big famous radio host. So radio personalities are huge because that's digital real estate. If you've got you know, going back or something really big unfortunately a product that can only indoors One vertical at a time, because they lose credibility. And if you have that those morning slots or you have, you know, you own that, that real estate, for your product, lets say a skincare company, nobody else can bump you from that. Traditions will pay money for that. And same thing with like number one on Etsy, or, you know, good spots in Amazon. This is what we call digital real estate. This is your proprietary asset, this will get you the highest value possible. I've had people outbid people, I have one company pay 165% More for a company because of proprietary synergies. And then the fifth P is patrones. Most businesses follow the 80, 20 rule where 80% of their revenue comes from 20% of their clients, they lose a few clients, they're literally at risk of going out of business from bankruptcy. So you want customer diversification, not customer concentration. And the other thing that's important you've been in business 20,30,40 years, your clients are probably aging out. I said it earlier, always aim, always innovate in market, the last few years profit rather than business to make money, we're not in business to lose money. But unfortunately, I will tell you a huge percentage of businesses in business lose money. And it's for a lot of different reasons. But I always say the lack of profits is never your problem. The lack of profit is a symptom of not having the right people in the right seats. The business owner doing too many things a business being dependent on an owner being in a dying industry (inaudible) dies, you still get paid. Now having the right processes designed with the customer experience in mind not perfected or, you know, not particularly proprietary. So we have a client right now spent over a half a million dollars trying to protect your company name. Nobody wins in those lawsuits except for the attorney, attorneys. So lack of pop, it's never your problem. Also, I mentioned earlier, three out of five companies get, get embezzled every year. So a lot of you know owners are control freaks, and then when they let go Ronald they look up. And I never inspect what they expect. They trust that they never verified. So you got to make sure you have those checks and balances, especially when it comes to your clients and your money.
Ronald Skelton 37:19
(inaudible) as I,I brought this up on the show before I looked at a Texas company seemed pretty good. And the owner was retiring out. And then I started meeting some of the other C level and V level. The VPS, and as the other C level C chief marketing officer and everybody that I met, I started realizing they're all over 70. So I started asking, it's like okay, well, owners are retiring, what are you doing? And like? Well, I'm just saying around, like, I had four of the top, like people running this company, four out of six people that are in this company told me that they were they're hanging around without a loyalty for him. They wanted to they've been trying to get him to retire for a while. So like, Okay, now you realize that they just without saying it, they just told me that, within the first two years of this thing to be up and running. I'm gonna have to replace everybody that knows how to run it.
Michelle Seiler Tucker 38:09
Yeah. And that's why it's good to have a have an advisor, because advisor, especially good advisor like us, we're gonna look at all that we're gonna look at how old is the management team? You know, why are they sticking around, or they're just sticking around because of the owner, are they sticking around, because they're really passionate about the company, and they love the vision and love where the business is headed. And then if it is a situation where all the team is aging out, before we even go to market, we're gonna put together a good succession plan, as far as okay, what happens next? How do we plan for these people leaving and getting the right people? And while some of those people are still there, what is that going to cost us and more money? Because that could be a reduction of.
Ronald Skelton 38:51
Yes, the problem with this one is there was the company was running lean enough, I guess, the last couple of years, everybody's kind of starting to check out that that scenario is everybody starting to think about really retiring, so they start to do less. So the revenue declines, the profitability declines. And now there's not enough profitability sitting there to double up some of that stuff. And that's what you kind of needed to do is hire in the mid 20s, the work that you either hire in or promote within and work side by side, which for a little while, there's an extra overhead, and I didn't see a path to do it. And the first thing I told them is go find a great, go find yourself a great advisor and you fix fix your management team
Michelle Seiler Tucker 39:34
why to fix a business before he goes to market because I never maximize value. I got a similar story to that, which I'll tell you about really quickly because I think this is good advice. And good advice for buyers and good advice for sellers. You know, I think we're covering both bases here. But we had a plastics manufacturing company, and they're from a different country and culture is very important to them. And everybody that works for them is is from the same country. And they believe in law too. So they keep waiting so that people have been there for 20,30 years. And they keep giving raises, raises, raises, raises more raises. And guess what, it's a very slim margin in the plastics industry. And it's not really about quality, it's about price. And they just over, they just over there, their overhead is killing them. Because there's not enough profit to cover that overhead for them, (inaudible), and I met with them when I did the valuation, or they're sticking money into the company just to pay their employees. So I had the hard talk about and their big thing was, it's not so much what we sell our business for is making sure our clothes are taken care of. So Well, that's all fine and handy, right now the company's not really working. Because you don't have any profits, you putting money in the business, and the new owners gonna come in, and they're gonna start cutting people they have to, you have to start replacing people don't go, well, we're not gonna sell. I said, Fine. We'll be out of business in a couple of years house, right?
Ronald Skelton 41:04
Yeah, you're gonna run out of money, this, you can't sustain this forever.
Michelle Seiler Tucker 41:08
No, because you always go look at those profit margins, and you can't, you can't have your overhead. And you gotta be able to compensate for that, if you're gonna get raises, you need (inaudible) revenue streams, you gotta be able to, to get 10% profit margin, but in some industries, you can't increase it. And that's one industry really kind of increasing them.
Ronald Skelton 41:29
Yeah, I came across one, one of one of the first ones I looked at when I got into this space, and, you know, they had 55 employees. And we're churning out about $12 million a year in revenue, and had less than $100,000 in EBIT quite a bit less. And then I looked at the company that was a competitor of them. That was all like almost making identical products, same industry, couple different things on the product line were different. And it was in concrete storm shelters and stuff. They had 18 employees and doing 3 point 8 million a year in revenue. A started looking at one of them, you know, 60 something years old third generation, they don't hire anybody, they've got kids that were working there, you know, 1819, they're just hired because dad worked their way up all work there, it's time to give the kid a job. So they had jobs on that floor that, you know, I I'm suspecting at this point. Yeah, 55 employees getting paid to. And they kept them through every winter, winters really slow for them. So it's just one of those it was done, because it's a family business. Everybody there knew everybody. All the management was related. You know, it was the biggest concern I had was the, you know, it's a small town too. So very small town. So one of two places to work in town, unless you want to drive 30,40 miles we come in and we clean house. You know, that's not something you necessarily want to do off the bat. Now, we made an offer on that property that that business, what turned it around as they had some, some issues, some tax issues and stuff that blocked it from sale, we found out during the due diligence, but you know, they're gonna have a real problem. And the real problem is, as anybody, like you said, anybody comes in and looks at that is going to have to make some major adjustment and staffing. Now, the other thing I found, and I've looked at a bunch of these, one of the things I asked for, and I just kind of quit asking because most people don't have it is give me a list of all your key employees and their job descriptions, like who are they? And what are they supposed to be doing on a day to day basis? What are they responsible for? And it's important as a buyer for me to know who does what and who's responsible for what and what falls on each person's shoulders. But a lot of these companies under, under 40 or 50 employees, it's just not documented anywhere. People kind of just know what they're responsible for. And I was like, Well, I don't, as a buyer, I don't know what you're, you know, I've seen chief marketing officers doing financial tasks I've seen like, like that. They're really good at something. So it became part of their responsibility.
Michelle Seiler Tucker 44:15
imperative that those defined seats, you know, those seats and define roles, and yes, you can have one person will cover multiple seats. But it's really important to define that and then have everybody stay in your lane.
Ronald Skelton 44:27
I'm not worried about I'm standing in line lane, because I know people will jump in and help each other in different ways. And people are good at things that are not necessarily in their job title. They're just really good at it. I just needed to know as a buyer who's responsible for who's, who's accountable for certain tasks in the company, right. And so, who do I, who do I call and ask if this you know, okay, marketing is not like, you know, we're not getting very many leads, who do I call? Right?
Michelle Seiler Tucker 44:58
Well, and that's why I said You know, the main because here's what happens, it happens to me from time to time, because I have different companies, we don't just sell businesses, we also partner with business owners, and I invest my money resources, you know, core competencies and help them build the business to sell for anywhere from 10 to 20 million. And I noticed that people will jump into another lane because they are passionate about that. And they really like that, or they hate what they're doing, or they hate certain tasks. That's why it's so important to really interview and make sure you put the right person in the right spot, because so many people are trying to fit a squirrel and square peg into a round hole. And if they are jumping into another way, not just to offer support. But are they all constantly jumping around? Things, you've probably got a problem with that person.
Ronald Skelton 45:44
Right? So we're kind of at the 45 minute mark here. Let's make sure when people know you've got your own podcast, you've got your books out, you've got your firm, how do people reach out reach out to you? How do they learn more about you and the resources you have available for them.
Michelle Seiler Tucker 46:00
So I just like to tell a little bit more about exit Rich really quickly. extrovert was endorsed by Steve Forbes, who said exit Rich is a goldmine because, you know, most businesses won't sell. And the ones that do sell need lots of money on the table. So exit Rich. She was endorsed by Steve Forbes, also Sharon Lechter. I don't know if you've heard of Sharon Lechter. But she is my co author. She wrote the mentors corner after each chapter. And she is quite interesting individual because she's a financial literacy expert. She's a CPA, and she has been an advisor to many different presidents, and then of course Kevin Harrington original shark from Shark Tank was the foreword so I just want everybody to know who is exit Rich. Exit Rich is really pretty looking to buy business, start a business, anyone who owns a business, anyone looking, who's an entrepreneur, even high level executives, you know, I had a pharmaceutical company by exit rich, even before it was out. They bought the PDF version, they put it out on ledger paper, and the owner gave it to each department head, and all the high level executives and like oh my gosh, this is awesome. I've never done this before. So Evan said rich is not just about selling a business. It's about building a sustainable, scalable, sellable asset. So when you do get ready like this eight year old that you talked about, you actually have something to sell for your desired price tag. And you can get accent Reg, all the Hudson bookstores are at 99 locations. You can also pick it up, obviously Amazon, Barnes and Noble wherever you pick up your favorite book, we did just release the audio version. So the audio version is live. You can get that at Audible on Amazon just downloaded it. Yeah, to get it for like $4
Ronald Skelton 47:43
I have a subscription to Audible I don't even know
Michelle Seiler Tucker 47:47
right now because we're just launching it. So it's anywhere between two to $4. And I'll never be that price again. So go get your audible book today your audio book today. And where can people reach me? So yes, I do have an exit Rich podcast, you can certainly tune in. We typically have million billion dollar exits, great ideas for business owners. And then also follow me connect with me on social media. I'm everywhere Facebook, Facebook, Twitter, Instagram, you can reach me at going to STI which is salotto corporated STI at three sixty.com Everything is there my books? Are there my programs are there everything is that STI three sixty.com. That saves me from going out onto websites. One thing I would encourage you to do is go to Sato Tucker academy.com. And take the six week quiz and see what on your screen as far as as far as feasible.
Ronald Skelton 48:40
Awesome, awesome. Well, I do appreciate it. And what what is one thing our audience can do for you? I mean, is there? Is there something right now that you can then share the book Lakers? What's something we can do to help you move your world forward?
Michelle Seiler Tucker 48:54
I can always, I can. You know, I love that question. Because I've been on over 400 podcasts and nobody's ever asked me. That's a great question. They can really help support the audio book right now and go out and buy an audio book, share the links. You know, you can buy your audio book, wherever you buy your audio books, share that with your community, share that with, you know, your network, your friends, family, and really support me because we are, you know, heading into some bestsellers for the audiobook. And then the other big thing that will really help us is Amazon testimonials. So the red X red tip is if you've listened to help you in any way that that would be phenomenal for us. And if you know any business owner that struggling, we have a road to exit rich program where we put them in our program and we really work on their business, getting them to build a solid infrastructure in a six phase so that they can start with a desire price. And if you know anybody looking to sell a business, we would love to talk to them.
Ronald Skelton 49:55
Awesome, awesome. And I'll encourage all the listeners if you're not running your business as if you're trying to sell it you really should be. You might find that you don't want to sell it once it's running that way, because it takes a lot less of your effort.
Michelle Seiler Tucker 50:08
You have to have a sellable asset and for success not for failure,
Ronald Skelton 50:13
it's sealed. You know, if you take your car to the detailer to get a detailed because you're thinking about selling it, and once you start driving down the road afterwards is like, Man, this is too bad. Why would I want to sell it? Right? I think if you get your business running, right, if you're selling because of any type of burnout stress or anything like that, this might be the answer to creating some it's definitely answered before you sell it to get it, get it running, right, get it sellable to sell for something substantial. But it's also might be an answer to having it run to grow and become more of a sellable asset later on. I think a lot of times you'll get a lot of owners like one just burnt out, I want to do something else. And it's because you're in there doing every single thing yourself, right?
Michelle Seiler Tucker 50:57
And then if that's the case, you will have business to sell anyway.
Ronald Skelton 51:00
Michelle Seiler Tucker 51:01
So Exit Rich is really like the first half of it Ronald is not even about selling your company. The first half is all about, you know, building a sustainable, sellable, scalable business. So when you already sellable and if you decide you want to take some chips off the table, a lot of times, business owners just they want to take some chips off the table, or maybe don't want to be the 100% owner anymore. And maybe you want to score 60, 70, 80% of your company. And that's what exit Rich is all about, is you know what's best for you and it might not be selling and that's okay. We're not you know, we're not shoving exit Rich you gonna sell your business. But what we are saying is you got to stay in business, because we got to protect the United States economy. And we got to continue to import over half US (inaudible) is what I'm saying. You've got to either stay in business, saved the company for going out of business. And when you're ready to exit Rich not an exit four.
Ronald Skelton 51:53
Awesome. Thank you for being on the show today. We're gonna wrap this up. All right.
Michelle Seiler Tucker 51:57
Thank you for having me.
Ronald Skelton 51:59
That's the show guys. Hang out for just a second. Hey, it's your host, Ronald Skelton. I want to thank you personally for watching the show today and invite you to call our new hotline 918-641-4150. That's 918-641-4150. Call us and tell us about our show, ask questions, suggested guests or even tell me about a business you have for sale and we'll reach back out to you. Again that number is 918-641-4150. Call our hotline leave us some information. Thank you. The investors and entrepreneurs professional mastermind. The investors and entrepreneurs professional mastermind combines that additional peer to peer mastermind introduce first in Napoleon Hills famous book Thinking Grow Rich. With accountability partnering, where your peers help you ensure that you set goals take action and get results. If you want to scale blow past roadblocks and achieve success faster than you might think is possible, I suggest you take a visit over to tiepm.com That's T i e. P m.com. And check out the investors and entrepreneurs professional mastermind.