Business Exit Planning
Episode 987: Business Exit Planning, with Michelle Seiler Tucker
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Business exit planning—Learn how to use extra money to create passive income and financial freedom in business exit planning.
Failure to prepare for your eventual exit from your company is a common mistake. This poor planning makes it much more difficult to sell your business when you’re ready to leave, and it has a negative impact on the value of your company when you do eventually sell.
In this episode of Onward Nation, business buying, growing, fixing and selling authority Michelle Seiler Tucker shares tips, strategies and actionable steps to help you prepare your business exit planning that will add value to your company now and get it ready for sale in the future.
What you’ll learn in this episode is about business exit planning:
- How Michelle’s ability to close deals led her to become regional vice president at Xerox after just six months at the company
- Why 70% of businesses that have been operating for 10 years or longer will go out of business because they haven’t adapted to how consumers buy products and services today
- How Michelle dipped her toe into working in franchise development while still working at Xerox, and how she sold 100 franchises in six months
- How Michelle transitioned her expertise from selling franchises to selling businesses and helping owners develop a business exit planning
- Why many established businesses aren’t salable because they are too dependent upon the business owner
- What common mistakes do business owners make that can end up hurting their company’s value or salability down the road
- Why preparing your business for sale requires you to ensure that six P’s are in place: people, product, processes, proprietary, patrons, and profits
- What important lessons can be learned from explosive brands like Amazon, McDonald’s, and Apple that can be applied to businesses of any industry and size?
- What surprising systems, relationships, and other assets add value to your company and make it more attractive to potential buyers
- Why profits are never the problem hurting your company’s value but are a symptom of the real problems
Resources:
- Learn more about business exit planning, and you can find Michelle here
- Elevate your ideas about business exit planning by tuning in to this podcast from Michelle: Exit Rich
- LinkedIn: www.linkedin.com/in/michelleseiler/
- Facebook: www.facebook.com/michele.seilertucker
- Twitter: @MSeilerTucker
Additional Resources:
- Sell With Authority by Drew McLellan and Stephen Woessner: https://amzn.to/39y7x13
- Predictive ROI Free Resource Library: https://predictiveroi.com/resources/
- Stephen Woessner’s LinkedIn: www.linkedin.com/in/stephenwoessner/
Business Exit Planning: Full Episode Transcript
Get ready to find your recipe for success from America’s top business owners here at Onward Nation with your host, Stephen Woessner.
Good morning, Onward Nation. I am Stephen Woessner CEO of Predictive ROI and your host as always, I am grateful to have you here and super excited. In fact, that’s really not even quite accurate to say super excited. I would say I’m over the moon excited for you to have an opportunity to learn from our very special guests today. And here’s why selling the business or selling your business so that you can eventually cash out someday and enjoy this financial freedom is the goal for most business owners. But with the exception of reading a few books and thinking about systems and processes, maybe trying to dial in their monthly recurring revenue, or make sure that we get every client on a contract and let’s build a solid team.
I often find that the workaround setting up their business in order to be able to exit well, well, candidly, it stops is common for business owners to have the dream to sell, but they also lack the plan that walks alongside that dream. So what happens, what we work for decades inside of our businesses, thinking that we’re going to sell it and then that someday someone will want to buy it and that they’re going to want to pay the exact price that we want them to pay. And, by the way, they are going to do it at the exact time that we want them to do it. But unfortunately, here’s the reality: most businesses don’t Sell.
And as you hear, you will hear Michelle talk about how 80 to 90% of the businesses don’t sell. And then, if a business does sell, the deal gets structured in such a way because it was poorly planned. It feels like a whole lot of not awesome for the owner because of the lack of planning. The exit wasn’t properly architected in the right way. So, deltas fixed all of that. I invited Michelle Seiler Tucker to join us today so we can learn from her insights and wisdom. Michelle is the founder and CEO of Seiler Tucker Inc, and she is a 20-year veteran in mergers and acquisitions. To get this Onward Nation, she sold hundreds of businesses.
She is widely regarded as the leading authority on buying or selling, fixing, and growing businesses. And Holy Bananas Onward Nation Michelle and her team closed nearly 98% of all written offers. On average, obtains 20 to 40% above the asking price for her clients which doesn’t happen by accident. So during this conversation, I’m going to ask Michelle to take us behind the curtain, take us into some deals confidentially, of course, and to share some of her expertise and how these types of results happen as well as some of the golden nuggets from her latest book entitled Exit Rich the six P method to sell your business for huge profits. So, without further ado, welcome to Onward Nation, Michelle.
Business Exit Planning: Michelle Seiler Tucker’s Introduction
Thank you, Stephen. Thank you so much for having me. It’s an absolute pleasure to be with you.
It is an absolute pleasure and honor to have you here. Thank you for saying yes. And before we dive into what I’m sure is going to feel like a litany and a barrage of questions. So I’m going to be firing your way, take us behind the curtain because obviously a very impressive track record. You are widely regarded as one of the leading authorities in this space. Okay. But take us behind the curtain and tell us more about you. Tell us more about your path and your journey, and then we’ll dive in.
Sure. So as as a little girl, I don’t think I was every or a typical little girl, at least my momma. My momma tells me that I’ve never played with toys that I never played with dolls. I didn’t do what other little girls do. I would walk down and walk around with a notebook and pen. And Stephen, as you were asking me all these questions today, I would walk around and walk up to strangers and ask them a bunch of questions and I would write down their answers. And I did that probably starting at the age of five or six and I never stopped. So my mom always thought, oh my God, she’s going to be Barbara Walters. She was going to be the next Barbara Loft or as my daughters going to be famous.
And so I’ve always liked writing. I’ve always liked people and I’m always like business even from a young age, have always liked business. That was always fascinating. And they don’t really come from a family of entrepreneurs except for my father. And I had some have his own businesses, but you know, I don’t really come from a family of entrepreneurs, but it’s, it’s in my blood. I started a small business at a very young age, I’ve owned lots of different businesses in different industries, printing magazines, events, space technology, I’m just all kinds of different companies.
But then I kind of got trapped into a corporate America and I was working for a Fortune 500 company. I’m sure you’ve heard the name because they were very well-branded are not as well, Brendan as I once worked, but Xerox so I got it kind of caught into a market for a Fortune 500 company. And I was only there for six months. My nickname was to closer. So, every time that a salesperson can enclose something in a Xerox, they will call me in and they would say that the clothes, or do you let the closer to the clothes to do it? And that name kind of just stuck with me. In fact, I’ve had people say, Oh my gosh, don’t kill a closer and closer.
Business Exit Planning: From Newcomer to Regional Vice President
And then six months of being in the South, my manager came to me and she said, Michelle, you should interview for regional vice president of Xerox over, over the South division. So all of the Louisiana, Texas, Mississippi, and she said it was going to be a long process. You’re probably not going to get it, but you should do it anyway. And I’m like, why would I interview is something that’s going on? She says about a three-month process. And I said, well, why would I do that? If I’m never going to get that position? And she said, well, look, the reason you’re not going to get is because you’ve been here for six months. You’re up against people who have been here for five years, 10 years, 15 years, and you’re not going to get it, but you should do it because of the experience.
You will learn more going through this process than anything else you probably ever have done. She was right. So I did, I threw my name in the hat, and went through this group in the process of everything that you had to go to. You had to do a Q and A in front of all these high-level executives. You had to do it in a presentation or you had to do a demonstration and then you have to close them. And needless to say after a three-month process, I’m a member going to Office Depot and buying a Montblanc pen. Cause I’m like, yes. I’m like, if you know, if I had had that path and I feel successful when I dress successful, I’m going to be a successful and I’m going to get this.
Even though they told me there was no way in the world I was going to get this right. So guess what Stephen, do you think I’ve got the position I’m putting money on it, that you got it. I did. I did get the position. And it was, it was, it was bittersweet or it was so happy that I got it, but then all of my friends don’t talk to me anymore. And so it was mostly other women I was up against, but there were men in too, but it was funny because when I would go to the cafeteria Xerox and I would say at the same lunch tape, I’ve been sending it out. You know, the day in and day out, they will get up and leave.
I’m like a mean girl in high school. Yeah. So many ways. So, I got to the position and it was completely different than what I thought it was going to be. I love sales. I love getting to know people. I love building relationships will last a lifetime. And that was not it. You know, now in corporate America, when you have a high level executive position like that, you are having meetings to, to schedule meetings or to schedule more meetings, to schedule, follow up meetings. And you are not really dealing with customers anymore. So it was a great position. I was paid very well, great benefits by the time my husband and I said I’m wanna do something on this side.
Business Exit Planning: From Corporate Success to Franchise Triumph
So I started looking for a franchise to buy. And I stumbled across this franchise. My husband knew who the owner and it had two locations. So I approached them and said, look, I’m not going to leave. Xerox has a great position and great benefits, a six-figure salary. I said, However, I wanna buy a franchise hard for people to operate it, run it on the side. They said, Michelle, we don’t want you to buy a franchise. We know of you. We know of your reputation. We know you would call the closer Xerox and we want you to partner with us. We want you to help put us on the map will give you equity when you do that will give you a franchise.
So I said, listen, I am not going to leave six-figure position with great benefits from a company that has two franchises that have not been successful on their own, but I’ll tell you what I’ll do. I’ll try it for six months. And I said, for six months or a fly around, I’ll go two different franchise shows all set up a set of events. I’ll work at nights and weekends. And because Kate, my day job was Xerox. I went to see how it goes. And those six months I sold over a a hundred franchises. I’m more money in the six months. And I did an entire year at a zero.
Well, wait a minute. And then six months you sold a hundred franchises.
Holy buckets. I would say like 10 to one person, five to another person, three to another person. I so very few individuals, but most of them are PAX of franchises. And umm, so I went to a Xerox and you know, I gave my notice and then of course, all of my friends that I had beat out of the positions and was like, Oh my God, I can’t believe you beat us. And then your gun is six months. I said, well, the good news as you get to interview again. So anyway I left, Xerox went into the franchise development. That’s what started my franchise development franchise sales and franchise consulting business became a partner and really grew this business the next level.
But the problem Stephen and this is what happens to most business owners. They market then sell, but they never build a solid foundation in which to handle the growth. And that’s what happened with this company. They will over-promising under delivering the walls were crashing because they never built that foundation on what I call the six PS that will get into M here shortly. That is outlined in Exit Rich they never built that foundation. So the franchisees are now angry. You know, these are my friends. I went to their weddings. I’d go to the hospital. When I had babies, I’d go to their birthday party and stay at their house when I fly into town.
Business Exit Planning: From Franchise Battles to Business Solutions
What is business exit planning and how did you know about it? So I was on their side, I’m on their team there in the client and I’m team client and the franchise owner and my partner was very upset with me. And they kept saying, well, Michelle you are on our son. I’m like, no, I’m not on your side. I’m on the side of the clients because what you’re doing is unethical. Wow. And so I just finally said, look, I can’t do this anymore. You have to buy me out. And so anyway, so I had them buy me out. I ended up, so I’m like, okay, what am I going to going to do now? And I’m like, well, what’s the easiest from selling franchises, selling businesses. So that’s when I transitioned into selling companies, at first small businesses, restaurants, coffee shops, and dry cleaners called wash of things of that nature.
And then I transferred, I really transformed pretty quickly in this selling company is $10 million and up. And then I said, gosh, eight out of 10 businesses don’t sell. And by the way, that’s not just me saying that that’s Steve, Forbes say now is the Forbes-endorsed Exit Rich. So I say, Oh my gosh, if I know how to fix it. So I’m going to start the day. So it was, I had it all kind of a transition from franchise sales and the business hours and then fixing businesses and then growing companies and then coming up with a bill-to-sell plan. So I don’t just sell and businesses. I also buy businesses and flip them. I do partner with business owners, investing my money, my time, my core competencies, my experience.
And sometimes I’ll bring other partners in and then I feel all of this person is a great fit because they have different skills than I had. But we have the same ethics. We have the same values, but we have different skillsets. So our partner or a business owner’s to put them on a build-sell plan so that we can sell the business for their desired price tag. So, I’ve spent over 500 businesses, and I do not count a franchise that I sold for that franchise company. And then my company has sort of a thousand plus we’ve done a lot, probably done thousands of dollars, a lot of evaluations businesses.
It is an impressive track record to be sure. And when I was getting ready for our conversation, I saw that we also have a mutual friend. You mentioned Steve Forbes. I don’t know, Steve, but when I saw a photo of you and Kevin Harrington together, I was like, Oh, look at that. There is such a small world. So Kevin is a great guy. And but it’s just, it is so awesome to have you as part of this conversation, can’t wait to dive in. So before we get into the, the six P’s set the stage for Exit Rich tho like why the right in a book is so hard. It is a labor of love. It is an issue. It is just so hard. So why did you decide to write this book?
Business Exit Planning: Insights from Kevin Harrington and the Journey to Writing Exit Rich
Sure. Before I do that though, I want to tell you about Kevin Harrington. I love Kevin Harrington. Yeah. I’m in the same mastermind with Kevin. He wrote the forward for Exit Rich. Oh, awesome. I didn’t know that he, he was on my podcast not too long ago. I don’t know if you know this about Kevin, but he actually started out in business Broker and he started out selling businesses.
That is funny. I know his background really well, but apparently, I’m missing a big piece. I did not know that.
What are the examples of business exit planning? Well, he was always an entrepreneur, so he started selling businesses, but he was he’s really, he’s really smart. You all. So it’s like, okay, well what has the business on our need? Do we need an attorney? You didn’t need a CPA. They didn’t need Prince in any of this and this. So you kinda set up like office is all around his broker’s office in the same building smart? So when they bought the business, I can go here, here, here, here. And he showed revenue and with all of that, and then he started going to trade shows and looking at other people’s products. And then that’s when he saw, well, look, there’s TV at two o’clock in the morning and nothing’s on it. Oh, I can buy time. I can put the judge, the jujitsu guy on TV. So, anyway, that’s his background.
So how do we really have a lot in common Kevin and I, but yeah, you don’t come forward. So the reason I wrote the book and yes, you’re right. It is a labor of love. And it’s very difficult for most people. Writing books is not difficult for me. Or you can remember as a child, I loved to write. I was always one in poems and songs and you know, all this stuff are going around, interviewing people. And I wrote my first book in 2013 called Sell Your Business for more than it’s worth. And I did the research back in 2013 and learn that 85 to 95% of startups would fail. Right. We all know that this is common knowledge. However, as time went on, I started seeing more and more businesses.
Business Exit Planning: Insights from Exit Rich
Family-owned businesses I’ve been in business longer than five years because it used to be, Oh my gosh, if you could, whether it is a five-year a storm and make it to six, seven, eight, nine, 10 years, Stephen you were a goat in and your business is your legacy. He’s going to last forever. All right. So I said, do you know what I wanted to write another book? And I want to put a lot more meat and potatoes in there about the processes. And you know, Selling the Exit Rich is not just about selling your business building a business that is sellable is eight out of 10 businesses. I won’t sell it. So it’s about building as a sustainable, scalable, and when you ready-sellable business.
So this is probably going to floor you. But when I did the research again for Exit Rich and like I did it for my first book, I learned that the business landscape has changed dramatically. It actually has flip-flopped. So now it’s only 30% of start-ups will go out of business only 30%, 30%. So you start ups. This is your time.
And so that’s encouraging. Right? That, well, that’s encouraging. But on the flip side, it’s extremely discouraging. There are 30.2 million businesses in the United States, employing over half the U S workforce. Small businesses are the backbone of our economy. If we don’t have a small business, we don’t have jobs right now, the workforce goes out of employment, right? So, on a 27.6 million businesses, those businesses that have been in business 10 years or longer, 70% of those businesses will go out of business because they’re sent it was not a yes, that’s one reason.
The other reason is that consumers’ buying habits have changed dramatically. The way consumers purchase products and services is not the same way. They used to purchase products and services, but the business owners haven’t done so. When I call aim, aim, aim is always innovate and the market always innovates, and market and business owners who have been in business for 10, 15, 20 years stopped doing it. Now the 70% think about this. You never know when people don’t know this fact. When I tell people this, they are floored, but you hear it in the media every day.
When you turn on the news or read the Wall Street Journal or read something, you hear about the public companies going out of business, right? Twice for us after so many years, Paul’s bankruptcy. Close’s 18, a hundred locations is as close as Kmart closes. Steinmart closes in Montgomery wards. JC Penny’s is in trouble. Steinwart closes a peer, one club, and closes at 900 locations. But Steve, and here’s what not. You are not hearing. You’re not here in about the private companies. They only talk about the public and the media. So all the private businesses on every street corner, on every street in every town, and we stayed at the cost of a great Nation. These businesses are dropping like flies on many of these business owners who are baby boomers are forced to sell for pennies on the dollar or clothes or business, or even worse, file bankruptcy.
And when they file a bankruptcy, don’t just lose our business assets. In many cases, they lose our family assets too, because most business owners commingle assets, which Pierce is the corporate Val. So is my mission, my own passion, to help save as many business owners as they possibly can so we can help save the American economy. Right? And so that’s why I will Exit Rich. That’s what really inspired me to write Exit Rich so I could help business owners build their Exit on the day-to-day start or buying a business because business owners’ never think, this is the biggest mistake they make. They never think about selling their business until they have to do an internal or external catastrophic event and crying catastrophic event.
Business Exit Planning: Preparing for Business Catastrophes
Business exit planning in catastrophic event (COVID-19) and it is a catastrophic event. And a lot of business owners are like, Oh my God, I’m a Sell, I’m a Sell. Now I’m a Sell or an internal catastrophic, a bit vent could be divorce, health issues, death have a spouse or death, having a partner, a partner dispute. Usually, when you wait to account a stroke, have an event occurs. It’s too late. It’s too late then because your business is typically trending downward. Yes. You might still be able to sell, but not for a maximum value.
Hey, Onward Nation. I wanted to take a quick break from the Episode to share a practical and tactical Resource with you. When we first released our book profitable podcasting, it became a number one new release on Amazon in a lesson 18 hours. Well, that was nearly three years ago and we’re still getting great feedback on how helpful the book has been to business owners. Just like you, they are launching a podcast to build their business. When I think a strategy is that you could be applying right now during these challenging times, having your own show, which will be a conduit that you could use to teach and share your insights with your community, launch a podcast or growing your existing show really should be at the top of your list.
I want to help you get started by giving you access to a free chapter of my book. Just go to Predictiveroi.com/Resources, and you’ll get the chapter where I show you how to confront and overcome your three biggest obstacles to success.. And we will send a right to your inbox. I love this. This is going to be such a great conversation. Has already been in that, and thank you very much for that. Okay. So, you took us behind the curtain as to the purpose which hearing the passion in your voice. I can tell that this really means something to you. This is clearly your life’s work.
You mentioned the six P’s a few minutes ago. And so what are, can you give us just high-level what are the six P’s? I can give you a high-level. I would like to break it down for a little bit, but it’s your dance? So well, if you’re willing to go high level andl that will be awesome. So yeah, let’s go through them. Okay.
All right. So number one of the first P is people, good people is as simple as that sounds People is probably one of the most important. You don’t build a business, and you build people and people build a business. So many businesses are not sellable because of the business is dependent upon the owner of a pull the owner out of the business. There is no business. So, number one is people. You must have the right people in the right seats, in the right people in the right seats. And Stephen, you must ask who questioned, who opened the doors, who deals with customer service, who does the manufacturing, who deals with transportation, logistics issues, and my own mental and legal issues.
Business Exit Planning: Key Principles for Business Success
You know, the cost of acquisition marketing. And the clue, Stephen is you should never be next to the who.
So, you as the owner or the owner should never be next to the who. The owners should never be an X to the Hill. The owner needs to be the visionary. An owner needs to look at things from a high level and they need to have an integrator. So you have the visionary. We have the integrator, as a liaison, and the integrator shall make sure that the owner’s vision is being executed on by each department. And there should be layers of management. So it should be a CFO, or there should be a CEO. Now granted, if it’s a small business, then I can understand you’re not going to have all these layers of management, but you still have to create a team where the business is not dependent upon you. And if you are out of the business is still successful.
Okay. And so, let me just illustrate this a little bit further. Okay. A dental practice with one dentist hard to sell is easier to sell.
What about business exit planning? My guess is that it would be harder to sell because going to the dentist is personal, right? I just kinda like go on to a hairdresser. It’s personal. And so when you pull that densest out of that dental practice, clients are going to stop going. They’re going to go find another dentist. Sure. So the only way you can sell that practice is if the densest stays on for a while. So dental practice includes chiropractic practices, MMD for practices, interior decorators in insurance, and appraisers’ real estate agents. All of these other professions really have to have associates in our practice so that they know when they’re ready to sell, they can sell. I’m dealing with a practice right now.
That’s been in business for 40 years and a doctor has to associate’s. But the problem with his two associates they are both leaving. They are both leaving, which makes it very difficult to sell. So that’s very important for people to have the right people and ask the who question. And then number two is the product. So, the product is your product or your industry, and ask yourself if it is your product. And the way up here on the way out do you have an Amazon or do you have a blockbuster? And if you have a blockbuster, it is time to pivot, and unfortunately, because of COVID, many industries that were thriving before COVID are now dying and vice versa.
So if you’re in an industry, if you’re a product is dying and not thriving, you really need to align yourself with an expert, a mentor that can help you see things that maybe you are not seeing because when you are in your Fogg is foggy and start asking transformational questions because business owners become transactional and they start to become transformational. Transformational is what changes us. Transactional is just day-to-day. So, the three questions you should ask yourself are: Number one, what business are you in? Number two. What do you do really well? And number three, what business should you be in for me to illustrate this really quickly, I’m going to use Amazon.
Business Exit Planning: Lessons from Amazon and McDonald’s
Amazon started in What Business Books. So Amazon asked themselves, what business are we in? And in one of the books, Business, what did we do really, really, really well? Or do you remember what they did really, really well?
I don’t back in 1995, I would say logistics and distribution, but what, what did they do really well in 95?
Fulfillment, ah, which is the same or less so fulfillment. So they said we’re on a book of business. We do fulfillment really, really, really well. What business should we be at? We should be in the fulfillment business, not just the book of business. So these three questions is what took Amazon from a book company bookseller too. The multi-billion dollar role Why conglomerates is what they are today. Business owners don’t have to start asking themselves what business am I? And because things change and that’s a problem with businesses that have been in business for 15, 20 years, they are doing things the way that they’ve always done them twice in a Ross was in business for 70 years.
What did they change? What did they innovate? What can I do differently?
It is kind of like how early on with McDonald’s right? When Ray Kroc was still arguing with the McDonald brothers and Ray Crock thought he was in the burger business. And then you know that my attorney pointed out that no, actually you’re in the real estate business, right? To your point, right?
Yes. I love that story. I was going to tell that story about it. I didn’t know if you watched a movie that Founder I love that. I loved that scene because right now is in the bank to learn about more money because they already pierced as a corporate Val by taking out a loan against this is personal property against his house. He was trying to borrow more money because the franchisees and we are not compliant. They were not paying him and he was upside down. So, I don’t remember if the gentleman was an attorney, but he overheard this conversation. So he followed right outside of the bank and he said, I’m sorry, I just overheard your conversation. I think I can help you.
They said, what business? Where are you in and buy it? So I’m going to fast food. I am in the restaurant business. So you said, no, what business are you in a race like I’m in the restaurant. And he said, what business should you be at? And when I was like, I have no idea what you’re talking about. And he said, you should be in the real estate business. You should be buying up the property’s building. McDonald’s listens to the franchisees when they are not compliant, then you avoid their franchise agreement end. You put another franchisee in there. And those questions right there are what changed Cox’s trajectory and make it McDonald’s the wall ride franchise that it is today, but not only you, that they are the number one real estate holding company in the world, in the world with those two questions.
Business Exit Planning: The Power of Processes
Business exit planning: And that was an outsider’s perspective. That overheard Ray’s conversation. So, a lot of times, business owners need an outsider’s perspective because it’s hard to read the label from the inside of the bottle. So that’s Products. So number three is Processes. Stephen most business owners would never think about Processes until a customer’s a customer complains. And it says they had a terrible experience. Well, then it would be like, Oh, we need a process for that. Or if somebody gets hurt on a job, Oh, we need a process around safety. You need to design your processes in the beginning and keep a customer experience in mind. I make sure that a productive and efficient.
So here’s another McDonald’s story for you could be because now that I know you watched a founder, I’m going to unload. So what I like and what I love about McDonald’s is that they started McDonald’s back in the forties. I remember you just had the drive up a fast food restaurant back then, where they came out on roller skates. A problem was the order of the food was always a code. The order of most cases was wrong and it took forever. So the McDonald brothers are not right, chronic, McDonald brothers said we are going to start a fast food restaurant called Mcdonald’s and we are going to deliver great-tasting quality food. I don’t know if it’s quality or if it has great tasting food in two minutes or less.
Business exit planning: And we’re going to design a process around the customer experience that we want to achieve, right? So then they go to an empty tennis courts. They take all the employees. Do you remember this scene and do very well. And they go to an empty, tennis court. They drew it all out. They moved around and it did that all day to practice and document the process of who takes the order. Who’s hosted a bond who cooks a burger who puts a pickles on a button and who gets to the client in two minutes or less de design or processes with a customer experience in mind to be efficient, productive, and deliver the same experience worldwide. That’s why you can eat out. And McDonald’s in Hong Kong, Russia, Singapore, and America.
And your experience is the same. Most business owners never designed the process is with the customer experience in mind, Stephen most business owners design to Processes to alienate the clients. You know, they do the reverse. So Processes or huge. They must be well documented. Employees must be trained on such. We must have SOP charts for each division as well. Very important. And I can tell you see where I’m like right now I am selling a $59 company, and they have very few Processes and procedure manuals. Wow. An SOP chart. So they don’t have any of that. They are putting it together now. So a lot of people will think, Oh, this is a small business problem.
I know this is a big business problem, too. Okay. So Processes number for less. Do you have any questions so far? No, this is fantastic. I love how you’re going high level. Then, the eye level in the examples is phenomenal. So yeah. What’s the next one?
Business Exit Planning: The Power of Proprietary Assets
Thank you. So Proprietary Proprietary is the number one value driver Proprietary will get you a higher, multiple on the Sell every business in any other P. So Proprietary Proprietary there are six pillars to Proprietary and I’ll try to come up really quickly. But number one is branding. The more well-branded your business is as long as you’re brand is irrelevant and the mind of the consumers, the more money you can get for your business. And the reason I say relevant is do you think anybody is going to pay any money for a blockbuster? No. No, because everyone knows that Blockbuster was a bus, right? So your brand still has to be relevant.
And the mine of the consumer, who is the biggest brand in the world, would you say? All right now, I think that’s Apple.
It is Apple you want the surprise on a prize? So Apple is worth $389 billion. That’s without EBITDA earnings, before interest taxes, depreciation, and amortization that’s without M assets, real estate inventory. That’s just the Apple brand alone, which is worth $389 billion. So build your brand, build your price check. The other thing is very valuable under Proprietary is trademarks company named trademarks slogans, anything that’s unique to you? I trademarked Exit Rich. Here’s the biggest mistake the business owners make they go out and I get a state trademark.
Business exit planning: They don’t check to see if that trademark is available on a federal basis. So there will be in business operating for 10, 15, 20 years and all of a sudden and receive a cease and desist letter. It happens all the time and they throw thousands of dollars at it. Hire an attorney, think that they’re going to win and they are not going to win. So then they have to stop using that name and they have to change their business name. So they would have to start the rebranding process all over again. So spend 1500, the $2,000, go get a federal trademark, protect your company name. I see this happen over and over and over again.
Even with the podcast, if you haven’t trademarked a podcast name, you should do that because you can get as a system to sit at a cease and desist letter and not even be able to keep your podcast name.
So it was absolutely one of the very first things that we did when we decided bef well, before we decided to launch Episode, one was piled for a federal trademark, then got the registered Mark. But, but for the exact reasons that you’re describing, because I didn’t want to be sitting at Episode 985 and then receive a cease and desist.
Business Exit Planning: The Power of Proprietary
Right. And here’s the deal. Yeah. You know how many podcasts I’m on, and I’ll talk about this. And there are like taking a note and I’m like, Oh my God, I’ve got to go check it because they have a trademark there, fuck ass. And I’m like, you know what? I’ll go trademark and sell it back to you. So the trademarks are very important, and the other thing is patents. You know, a lot of people all over you don’t need to patent once you apply for a patent, and everybody knows what you’re doing, but that’s not true. Who watches, shark tank, everybody watches, shark tank. It wasn’t a question they always asked. Why do you have a pen? Do you have a pan? Do you have a patent? Do you have a few too many times as a provisional patent that still that carries some weight, right? That shows that they are serious about IP.
Business exit planning: Yeah, it does. Yeah. We sold a company for $18 million. It had 18 patents, million dollar is a patent. So bands are very valuable contracts on a very valuable manufacturing, contracts, distribution contracts, any type of exclusive contracts. A franchise that has franchisees is very, very valuable. Client contracts are the most valuable because buyers want to buy a business that has work in progress. And when I buy business that has a recurring revenue stream, and we want to have a bot. They want you to buy a business if they know cash flows coming in. So a client contract is a very valuable one. Another mistake business owners make is they don’t add to the two Synthes transferability claws in our contracts.
I’ll not say that again. They don’t add the two-sentence transferability clause in a contract saying that there’s contract is transferable 99.9% of all of these cells are assets. Cells are not stock cells. So the buyer is going to buy the assets of the corporation. They are going to set up a new corporation doing business as that company’s name, but they are buying the assets. But if those contracts or not transferable, then the deal will stop it in its tracks.
Holy buckets. Wow. Michelle I have not only if I had never thought of that, I’ve never even heard of putting that in your contract. Yeah,
Business exit planning: Well, it’s actually shocking to me. Like we were selling another business for $72 million right now. And a lot of contracts are transferable. They have a 150. I sent them the two senses clause, even before they hired me. I said to the team to sense this clause and told them once a day, and then they hired me and now all your contracts have that transferability clause, but we have to go back and get all the other companies to do it because in all likelihood it’s going to be an asset cell. So you gotta put that transferability clause or rather you have a franchisees vendors, exclusive distributor agreement. So, exclusive manufacturing agreements are important, especially as a client agreement.
Wow. Because if your client or agreements don’t transfer, then that deal could fall apart. Well, yeah, no, I would have never thought of that, but it was a huge, huge golden nugget. Thank you. Thank you. And you know what shocking to me Stephen is that you’re not the only one. Most people don’t know about this. Like, I don’t think I’ve come across any business owner to actually have a transferability clause, email on the franchise, or just forget to do it. So that’s like number one; make sure you put that transferability claws. Yep. All right. So the other Proprietary is databases. Most advisors are clueless when evaluating databases; databases are huge.
Business Exit Planning: The Power of Intellectual Property
Especially at that database, it can be really targeted and repurposed. Let me give you an example of Facebook pay $19 billion for WhatsApp. 19 billion WhatsApp was hemorrhaging. They will lose the money hammer Jean. So, but Facebook didn’t care because WhatsApp had a synergy that Facebook was willing to pay a lot of money for. They had a billion users, billion and Facebook knew that they could all lie and monetize on those billion users. Yeah. So databases are big on the other pillars, and proprietary is what I call it. The intellectual real estate. So in an electoral real estate is not your building or your land or anything like that.
It’s IP real estate. Let me give you an example. Let’s say that you have a diet company and Russia, Russia, and bar, and you can hate rush Limbaugh if you want. Who cares? It’s just an example. Rush Limbaugh endorses, your diet company will rush. Limbaugh has thousands of millions of followers, right? He can only, celebrities can only endorse one diet company at a time, that is big money, big real estate. So as a strategy, let’s say it’s a company that doesn’t do diet, but it, maybe they do fitness online fitness or whatever. And they’re like, well, we want Marshall Lombarda at tens or six, right?
It’s hard to get to these celebrities. That’s harder to get them than doors for your product. It’s words, a lot of money. Let’s have, you have a skincare product now, and you are on Oprah’s favorite things. And Oprah Winfrey is endorsing you and your skin, Caroline. Let’s say that you manufacture everything linen. So Lennon. She let’s say everything Lin and you know, and letting the Rose, Lyndon sheets one. And this one and that, and your number one on Wayfair, let’s say that you manufacture a certain widget and you’ll have a patent on this and your number one and the corner of the market on Amazon. Well, that’s what I call it. IP real estate. These are synergies that are competitive. Competitive that there are five different types of buyers, but these are the synergies at competitive buyers and strategic buyers.
And even private equity groups would pay you a huge money for like a Facebook page, 19 billion for WhatsApp. Most people don’t understand these synergies. So that’s why the fourth P Proprietary is the number one value driver. There is the fifth P is Patrons. So you’re going to ask yourself, do you follow the 80/20 rule where 80% of your revenue comes from 20% of your clients? And you lose a few clients. Could you practically go out of business, or do you have customer diversification? If you have been in business 20 to 30, 40, 50 years, you’re clients are probably aging out. So you have to replace those clients. And here’s what business owners stopped doing.
This is why they’re out of business. They stopped asking their clients what they needed. What do you want? Most importantly, how can I make it easier for you to do business with me? Or whoever makes it easiest for the consumer to do business with them is winning. Yeah. Amazon is winning and Amazon is the one company that single-handedly changed the way that consumers purchase products and services, products. We’re really seeing a handle on Amazon change the way that we Buy. All right. So if you don’t make it easy for your clients to do business with you, they’ll go somewhere else, especially millennials, because millennials don’t purchase the way Gen X purchases or the way baby boomers purchase.
Business Exit Planning: Unveiling the 6 P’s of Business Success
Right. And they’re really not loyal and they, they are more about experiences than anything else. So you really have to know the market trends. You really have to know what your customers want and need and stop. You know, they stop asking. You always have to keep asking, keep asking, keep asking. COVID also changed the way that we approach those products because we used a part we purchased everything on Amazon, but then we still go to the grocery store, right? Nobody wants to go to the grocery store anymore. So now Amazon bought Whole Foods so they can sit. And of course she has to your home, but now Target or Walmart has also started their own clubs and are shipping groceries to your home.
It is not going to be that much longer with grocery stores or going to be empty. Yeah.
And it is fascinating to see all of the shifts like they’re there are, and that’s why we often talk Michelle I’m on the show about yes, absolutely. COVID has dealt a serious blow to businesses to be sure in 2020 has been choppy in Rocky and all sorts of other metaphors. And with that said, without trying to sound insensitive at all to many of the business owners who have had to work all of that, there’s also been silver linings. So the things that you just mentioned about grocery stores as well, okay. That’s going to then spawn and grow things like Instacart or the next version of what Instacart is, right?
There’s there’s all of this new Proprietary stuff that is going to come out of those silver linings. Right?
Absolutely. And guess what grocery stores are not experienced in hardship grocery store is actually doing great. This is actually to be a better than ever before because people went into panic mode and a lot of people are still in panic mode where they are buying up toilet paper and paper towels. And you know, you can’t get a Clorox wipe anymore. I’ve had Clorox wipes from a hoarder forever. So yes. So there are a lots of silver linings. There is money all around us. There’s opportunities all around us. You just have to if you’re in a fog, like I said, it’s foggy. You just have to get an outsider’s perspective who can help you see things more clearly.
Indeed. I know that we’re quickly running out of time. So we’ve covered People product. Processes Proprietary Patrons what’s the sixth P.
So, the sixth P is the most fun, which is that profits are made well in business to make money. The reason I put Profits last As because Profits is never the problem. Hmm. It’s always the symptom. I had people to come in and meet all the time. And I’d say Michelle and Michelle, and have a problem and not making any money of a profit problem. Know you don’t have a prophet problem. You have a people problem. You don’t have the who’s. You don’t have the right people in the right seats. And you have the answer to the who question or no, you don’t have a profit problem. Do you have a product problem? Your industry is your industry is dying. You need to do it. You need to pivot. You need to maybe require a different industry margin with another company. You know, so pawn it’s a Profits are never the problem.
It’s always a symptom of not having the right people on the right product or the right process is not operating on one or the other piece of it is a symptom, not the problem.
This has been so awesome. Michelle, I want to be respectful of your schedule. I know that is compressed. I am very grateful for you sharing your insights and wisdom and the golden nuggets, a few of them anyway from your book. And I know that there’s so much more than what we were able to cover today before we go, before we close out and say goodbye, I know we covered a lot, but any final words of advice to any final recommendations then, and then please do tell Onward Nation, business owners, the best way to connect with you.
Business Exit Planning: Last Bit of Advice and Connect with Michelle
Sure. So I would say my phone out words of advice, as you know, don’t give up and don’t panic. I’ve seen so many people panic right now because of fear. This is not a time to panic. This is a time to get help from an expert who is already done. It has already been down. You’ve been down that same road before, who is already, who is very successful because I would tell you that the more successful somebody is, the more time they have the more money they have to help others. So, just to align yourself as an expert who can help you see the things, do you have clearly not seen ’cause, like I said, you are in your fog. So pivot. You gotta pivot. You are going to ask this transformational question.
You have to align yourself with mentors and you have to figure out, okay, what can I do next? Because there are always opportunities. Or there’s a world. There is a way you just don’t. You just can’t give up. You got to figure out what’s the best pivot for you. And then take massive action, always innovate and all of these markets. So how can I tell her how to get it right?
Yeah, that would be awesome. So when you said always innovate in markets, that’s the aim, right? Okay. Yes. Please do tell us the best way to get Exit Rich.
So we are in the middle of pre-sales right now. So we have to have the pivot Exit Rich was coming out in April of 2020. So now it’s coming out, our pub date is in January of 2021. However, we’re in the middle of a pre-sales is right now. So if they go to ExitRichbook.com, they can buy the book for $24 and 79 cents, which includes shipping. It’s more than that on Amazon or any of the other retailers. Plus, we will email them the digital downloads so they can read Exit Rich immediately. Then, we will ship the hardcover to their doorstep. Plus, they will get a lifetime membership and Exit Rich book club acts at Rich book club has to be doing video training like this, where I go and take deep dives and the different strategies, and different P’s.
Plus, we have document downloads. So if you’ve never seen an employee handbook or an organizational chart, or maybe you’ve never seen a sample letter of intent, you didn’t even know what that looks like or the sample purchase agreement or do your diligence checklist for you and closing docs. They are all there for you to review and you’re download. And then you get an additional 30 days into clubs com, which is a like-minded entrepreneurial group that I found. But we do hot seats and masterminds Q and A. So we can help you with those transformational questions so we can help you not just survive this pandemic, but come on the other side, thriving. So you too can build it up to be sustainable and scalable. And when you’re ready to sellable business.
I love that. Onward Nation, we’ve been talking about that right—four months. What are the tools? What progressive decisions do you need to make to come roaring out the other side of this recession? Michelle just listed several of those and great resources to help you on that path. We will include all of those links in today’s show notes as well. Yep.
Okay. And then they can also text me Stephen. They can text me at 288-526-575. Text and then there, it will automatically see all of my websites in all my social media, so they can follow them.
Okay. That sounds awesome. Onward Nation, we will include Michelle’s number, which she just shared. You will include that in today’s show notes as well. Michelle, there were really amazing conversations and Onward Nation, no matter how often you go back, and I sure hope you do go back and listen to Michelle’s words of wisdom. We’re going to have to loop back to something that she just said about seven minutes ago. And that was taking massive action, right? She just gave you the blueprint. She just outlined the six PS at a high level and then at eye level, as she shared an abundance of exceptional resources with you. But none of it means anything unless you take it from her, take the golden nuggets, the insights, and wisdom that she generously shared with you, take it and apply it, and put it into practice.
Michelle, we all have the same 86,400 seconds in a day. And I’m grateful, my friend, that you said yes. I’m so glad that you came onto the show to be our mentor and guide. Thank you so much, Michelle.
Thank you so much, Stephen. It was an absolute pleasure and thank you so much for having me. I loved doing this stuff and you can tell I’m passionate about it. I could talk about it all day long. Thank you.
This episode is complete. So head over to OnwardNation.com for show notes and more food to fuel your ambition. Continue to find your recipe for success here at Onward Nation.
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