The Difference For Founders To Exit Rich Vs. Exiting Poor With Michelle Seiler-Tucker

Podcast

Jun 15

One of the common mistakes many entrepreneurs find themselves when starting their business is they don’t plan for their exit. Not to be a pessimist, but planning to exit your business is a crucial part of success, especially if you want to leave better than when you started it. In this episode, Chad Burmeister sits down with Michelle Seiler-Tucker, the founder and President of Seiler Tucker, to talk about the difference between founders who exit rich and exit poor. Bringing her book, Exit Rich, she shares some of the gloomy statistics among small businesses who fall so in love with their own that they fail to plan. Michelle then shares what you can do to exit rich with strategies you can implement in running your company. As they say, those who plan to fail, fail to plan. Get your business’ worth and exit the right way!

Listen to the podcast here:

The Difference For Founders To Exit Rich Vs. Exiting Poor With Michelle Seiler-Tucker

I've got a special guest with me, Michelle Seiler-Tucker. I met Michelle at the Board of Advisor Event in Sarasota, Florida. She was rolling out a book that happened to hit me straight between the eyes because it's called Exit Rich. Who doesn't want to exit rich in life? Michelle, welcome to the show.

Thank you for having me, Chad.

I'm so excited.

That is a big point to Exit Rich because unfortunately, many business owners are exiting poor. That's why I came out with a book. When I wrote my first book in 2013 called Sell Your Business for More Than It's Worth, I did the research back then and found out that about 85% to 95% of all startups will go out of business. That's common knowledge. When I wrote Exit Rich with Sharon Lechter in 2019 and did the same research, the business landscape had changed dramatically. Only 30% of startups are at risk but out of 27.6 million companies, businesses have been in business for ten years or longer. Seventy percent of those businesses are at risk of going out of business.

The landscape changes so much. There's a company we're considering acquiring or considered acquiring because they're over ten years. They went from $2.5 million down to $1.7 million. Their EBITDA was something like $110,000 so they're shrinking, not growing. They’re $110,000 so they’re worth $300,000 to $400,000. That owner looked at it as if he was worth $20 million as in 10X. That's about a $300,000 business, but that's uncomfortable because they've invested their whole life wrapped up in that brand. I see and feel that.

That's the problem. Business owners will come to me and say, “Michelle wants to sell my company for $20 million,” and their EBITDA is $200,000. The problem is that business owners don't plan on exiting. They don't think about selling until they have to due to a catastrophic event occurring internal or external like COVID, health issues or the business is trending downward and not doing well. They think about selling but they base their price not on the value of the business but on what they need to do next. They want $20 million because that's what they need to retire on or that's what they need to start their next venture. That's the big problem. Steve Forbes says that 8 out of 10 businesses do not sell.

I've ordered my three copies, and I know that most people at the Board of Advisors also ordered their 3 to 30 copies. I'm excited to get it.

They were afraid of me, that's why they did it.

You were the Best Dresser of the entire place, that's for sure. Help us understand. Let's talk a little bit about the artificial intelligence side of the universe and then we'll pivot. Most people when I ask, “Tell me about where you've seen AI used,” they give me a blank stare. They’re like, “What are you talking about? I haven't seen it yet.” Because we're at the tip of the spear and yet if you say, “Do you use Alexa?” They’re like, “I ordered it.” There's AI on the backend of that. Have you made a massage appointment somewhere, you call and maybe they're not even a real person? You're talking to a computer and you don't even know it. What's happened is a lot of AI is creeping into your personal life and your work life, and you're not aware of it. Have you seen any?

They’re not aware of it but it’s spooky. If you’re thinking about taking a trip and all of the sudden all these different trips pop up on your phone or in your email. It happened to me. I was looking at a new vehicle online and all of a sudden they were everywhere.

You never want to go to market with a price in the SaaS business. You want to create a bidding war.

All you did is go to the website and then now it's on Facebook.

When I was looking at trips, I didn’t even go on the website. I was talking.

That’s where it gets spooky. You have to wonder what’s going on.

That's why I said it's a little spooky.

Did you go to a physical dealership? Were you just talking about it out loud?

For that, I did a Google on my phone and was looking at different cars. For the trips, I was talking to my husband about different resorts and on my cell phone and they all started popping up.

I've researched that. They say that Siri or Alexa are not listening to you. They're not using it in ads. I always try to peel back the onion and think maybe you googled something. When it comes to Google, they're monitoring your IP address and then they're selling that information to all the different vendors. The listening thing always makes me wonder.

They got sued by the government.

There are a lot of things going on and a lot of government lawsuits going on these days. That's for sure. Let's talk a little bit about becoming an author. It sounds like you've already written a book and this is another book. When did you decide you wanted to write your books?

I've always been a writer even as a child. I wasn't your normal child. I would walk around and I wouldn’t play with toys. I always walked around with a notebook, asked everybody a bunch of questions and wrote down the answers. My mom's like, “She's going to make a lot of money. She's going to be Barbara Walters.” I always wrote lyrics. I still write songs, poetry and short stories. I've always done that. I decided in 2011 I wanted to write a book about selling companies. That's when I wrote Sell Your Business For More Than It’s Worth. The reason I wrote Exit Rich is because I think it's so mind-boggling that the business landscape has changed dramatically. There are 30.2 million businesses in the US employing over half the US workforce and small businesses are the backbone of our economy.

You hear about the public companies all the time closing up like Toys “R” Us, Kmart, JCPenney's, Stein Mart, GNC closed down 900 locations, even Starbucks is having trouble. What you're not hearing about is all the private companies on every street corner in every city in every state across our great nation. These businesses are being forced to sell for pennies on the dollar, close their doors or file bankruptcy. The problem when they file bankruptcy is in most cases, they pierce the corporate veil. They're going to lose their business assets and their personal assets. That’s when I wrote Exit Rich. I wrote it with Sharon Lechter who wrote Rich Dad Poor Dad by Robert Kiyosaki and Think and Grow Rich For Women. She's a New York Times bestselling author seven times.

COVID comes around and I'm sure you didn't foresee that when you wrote the book.

That research was before COVID, 70% of businesses are going out of business before COVID and now they say businesses go out of business every nine seconds. I did not foresee that. The book was set to come out twice in 2020. I told my publisher, “Let's forget 2020. Let's come out in 2021.” That's why we're in presale mode because the book is going to come out on January 26th, 2021.

Let's dive in a little bit. What is the core? If you think of the legs of the stool so to speak, is there a methodology for things that an entrepreneur should think about when it comes to building their business and exiting?

There is. The big thing that they should think about is planning your exit. I've been doing this for more than twenty years. Our company sold over 1,000 businesses. At any given time, I'll operate 5 to 10 businesses that I built to sell. You'd be surprised how many business owners never think about selling. Step one is to plan your exit. Do you have kids? Did you and your wife plan where they're going to go to preschool, elementary, high school and college? We plan out our life, we plan out our children's life but we don't plan out the exit for our most prized and most valuable asset, which is our business. I always tell my clients, “First things first, come up with your desired end game. If you truly want to sell a business for $20 million, have a $20 million business. Determine your endgame. Reverse engineer it like a GPS. Know where you're starting from. Know your current valuation.” You'd be surprised how many business owners are clueless and have no idea what their business is worth now. It’s like when you get your automobile checkup, health checkup and even a financial checkup. Nobody gets a checkup on their business on what it's worth now.

That's interesting. We did that and hired a company out of Reno that does valuations. There are three different methods for valuing a business.

There are more than three.

These guys used three and they came up with the valuation. They called us a $10 million company and they discounted it by 10% for marketability because of the market that we're in at the end of 2019. On a $1.2 million annual run rate at the end of 2019, we were valued at $9,010,000. I was like, “That's cool. We’ve got an extra $10,000 so we can use it to buy a car someday.

What industry?

It's in Software as a Service.

There are more buyers for good businesses than there are good businesses to buy.

What multiple were they using?

10X. The reason it's not a 20X, and I'm seeing a lot of software companies get 20X multiples, is because we had been white labeling and not building our own technology. We're starting to roll up some of the players in the space. As we start to own the IP, have patents and trademarks, that becomes a more defendable position and now you can look to the 20X multiple.

That definitely does. Here's the deal. A valuation is a valuation but at the end of the day, it's not this company in Vegas telling you what the business is worth. It's the buyer who’s willing to pay more and outbid everybody else to buy those certain synergies. That's why we don't go to the market. We go to market without a price in the business. You never want to go to market with a price in the SaaS business. You want to create a bidding war. You want to know what those synergies are and you want to bring the right buyers to the table to bid more on those synergies. Does that make sense?

Totally because there could be a gap in the market. If they filled it, I remember an example, one of my former CEOs, Chris Beall is the CEO of ConnectAndSell. He worked for a company that during the i2 Ariba and IBM, there were a whole lot of roll-ups going on. He was with one of the companies that were the real deal in the space. They went up. I remember he showed me. He went to a piano and he put the number four down to the CEO of the other company, $4 billion. It was ‘read between the lines’ thing. They gave the nod. He's like, “I will do that deal.” He takes it back to the CEO and the CEO says, “I'm not doing that deal.” He's like, “We've put in $50 million into this company and we got off for $4 billion.” Long story short, fast forward the tape, that went down to about an $18 million acquisition a year later because they missed the window. The company bought the competitor.

These sellers sometimes get greedy on realistic expectations. They're like, “I can get more.” He walked away from that $4 billion to get an offer for $18 million.

$18 million to $20 million or somewhere around there.

Did he end up selling it for that?

Yeah. It was a poor decision.

What a moron.

It was the CEO. He was the CTO and he brought the deal to the CEO.

Exit Rich: Business goes out of business every nine seconds.

She must have felt pretty bad after that.

How would you not?

It happens a lot. We have a construction company that we can sell for about $70 million and got an offer and they're like, “We're going to hold on to it for a little bit longer.” I'm like, “Why? You’re 80 years old. You never know what's going to happen.”

Get while the getting is good. You can invest the money and you'll be set for life. Who knows what could happen? This election cycle isn’t over. It can be up, down or sideways. There could be a physical war for all I know, at this point. Take the money off the table. You have to have a plan and roadmap.

It sounds simple but nobody does it.

I remember my uncle at Pfizer said, “Chad, you need to look at the resume that you want, the type of job you want and then go build your resume to get to that job.” It's a similar concept.

Determine your endgame and reverse engineer it. If you want to sell for $20 million, what time frame do you want to do that? If you want to do that in ten years, what's your business worth now? Is it worth $10 million now? Who's your buyer going to be? Let's say you're in a manufacturing company. Who's your buyer going to be? There are five different types of buyers. You need to know the different types of buyers and then you need to know what their criteria is. If you're still a manufacturing business who buys manufacturing, heads do and other equity groups do. If you're going to sell for $20 million, you better have an EBITDA of over $3 million. You need to know what the gross revenues, comps and EBITDA need to look like. Who are my buyers going to be? What’s their buying criteria? My book, Exit Rich, you haven't read it yet.

No. The check is still in the mail. It may be there by now because I'm in the mountains and my family's at home.

You ordered it online so you get the digital download. When the book comes out in January, we ship it to your house. That’s how it works.

I've got the digital. I'm virtual, then maybe I can start reading.

A good salesperson asks the right questions, and then they shut up and listen.

When we evaluate businesses, we evaluate them on the asset approach, the discounted cashflow approach, industry and market approach and what I call the Six P’s. The Six P’s is what I came up with years ago being in the trenches. That's what buyers look for. SaaS companies are different. SaaS companies don't always have to have a management team in place or to always have employees. Also in businesses, most buyers evaluating them on the Six P’s. Number one is people. You heard me talk about it at BA.

That's what's interesting because when you talk to a VC, we've talked to probably 4 or 5 over the last few years and most of the time, the answer is, “Call us back when you're $5 million.” You look at it and go, “I might not need you by the time I'm $5 million.” They're looking at what’s your growth. It's the triple, triple, double, double, double is the typical San Francisco Bay Area play. The last couple of conversations I had is, “I don't care that much about your margins even, I care that you're tripling. I don't care if you're making or losing money either.” Which is the opposite of what most companies like that. Are you profitable? Are you responsible with investor funds? It’s counterintuitive. Whenever there's a bust in the market, things come back to normal a little bit. We saw the first downturn in 2020 and I suspect that within the next couple of months, we'll have another correction. At that point, it'll be back to business basics when it comes to acquiring companies.

There are lots of acquisitions going on now, believe it or not. We have so many deals we're working on and there are so many buyers. There are more buyers for good businesses than there are good businesses to buy. Most businesses don't meet the criteria. The EBITDA is not high enough. They don't have the team in place. They don't have the IP. They don't have what buyers are looking for.

Let's talk about becoming an entrepreneur because there are a lot of salespeople, marketing people or engineers, and I was one of them, who played it a little more conservative. They find themselves in Corporate America. They're 10 to 15 years in and they're going, “I need to be an entrepreneur.” At what point did you realize that you wanted to build a company and do it on your own.

I was always an entrepreneur. I was walking around with a notebook asking everybody questions and that's a good salesperson. A good salesperson asks the right questions and then they shut up and listen. I was doing that as a child and I was always an entrepreneur. I've done lots of different things. I own event companies, publishing countries, magazines and all kinds of different things. I got sucked into Corporate America working for Xerox. My nickname at Xerox was The Closer. When somebody couldn't close a deal, they would call me. Within six months, my management team came to me and said, “Michelle, you need to apply for the regional management position overseeing 85 Xerox agencies.” I was like, “That sounds great. Does that mean more money?”

They’re like, “Of course but you won't get it.” I go, “What do you mean I won’t get it? Why am I applying if I'm not going to get it? That makes no sense.” They said, “Because of the experience.” I ended up applying and I was only there for six months. The reason you won't get is because you haven't been with Xerox long enough. You should do it for the experience so I did it. I ended up winning. I ended up getting a position and beating everybody else. I did that and I was making great money, six figures, great benefits and I told my husband, “I miss owning my own company. I miss doing my own thing.”

I started looking for franchises or businesses to buy that I could operate on the side. I stumbled across this one franchise, they had a few locations. One of the owners knew my husband. I approached him and said, “I want to buy a franchise.” They said, “We don't want to buy a franchise because we know of you, your sales ability and that you’re The Closer at Xerox. What we want you to do is become a partner with us.” I said, “You’ve got two locations. You're not successful. You want me to leave a six-figure income with great benefits when you're not successful?” They go, “That's why we need you.”

I said, “I'll tell you what I'll do. I'll do it for six months, we'll see how it works out but I'm going to keep my day job.” I flew all over, did trade shows, had events and all this stuff. I ended up making more money in six months than an entire year at Xerox. I started a franchise development, franchise consultant, franchise sales career, became a partner and I transitioned to selling companies. I've always been an entrepreneur and I've owned medical clinics, a vehicle graphics company that specializes in vehicle wraps for first responders.

I went on a ski trip with 48 entrepreneurs. The minimum cut line was that you had to be $1 million a year in revenue so 48 of us were there. One day, one of the co-owners of this mountain came in and he was worth $5.4 billion. He was a normal guy. He came in and talked through it. Like I'm getting that same tone in your voice where he said, “I didn't know anything about pharmaceuticals but I went into this pharma company and I figured it out.” You have to get your head over your skis a little bit. I'm in the mountains, that's the terminology we use here. Don't lose control. Keep your balance. You have to take risks in life and be okay with that. Be a lifelong learner. Anything's possible for anybody. This is great.

That’s why I transitioned into fixing businesses and helping business owners build to sell because 8 out of 10 businesses don't sell. I'm going to start with that if I don't have to build to sell. That's what I do now. I have a whole built-to-sell plan.

Exit Rich: If you truly want to sell a business for $20 million, have a $20 million business. Determine your endgame and reverse engineer it.

It's buy, sell, fix and grow. There you go. How can people order your book if they'd like to learn more about what we've been talking about?

They can go to ExitRichBook.com. The book now is $24.79, which is less expensive than what you can buy on Amazon. That $24.79 includes shipping. On Amazon, I want to say it's $27.97 plus shipping, it's also going to be in Barnes & Noble and Books A Million. Hopefully, the airports come back so it can be in Hudson. Not only do you get the digital download but you also get access to the book membership club where we have video trainings of me walking through different strategies, techniques and case studies about how to create a bidding war.

How to get more for your company, how to hire the right people or how to create the right systems and the processes. We also have digital downloads. A lot of business owners have never seen an LOI before, a purchase agreement, closing docs or due diligence checklist. They've never seen anything like that. We also have org charts and all kinds of stuff that you need. Plus, they get a 30-day membership in Club CEOs where we have Q&A and hot seats. It’s an entrepreneurial group trying to help other entrepreneurs.

I would think if there's a PE or a venture capital firm reading this, they might want to buy multiple books so they can give it out to all the CEOs in their portfolio. At BA, you made an offer that if you buy a certain number of books, you can have a consultation with you. What's that all about?

If you buy three books, I call it my Three Pack. My accountant says, “You need a three-pack.” I’m like, “What about a six-pack?” For a three-pack, you get a 30-minute consultation with me. If you buy ten books, you get two hours with me. If you buy 25 books, you get the two hours, plus you get my Build to Sell Blueprint course. If you buy 50 books, you get all of that plus Sharon Lechter’s Money Masters course. If you buy 100 books, you get all of that plus my valuation. My valuation is about $10,000 alone. If somebody buys 500, Chad, you look like you could buy 500, you would get a mastermind retreat with me and Sharon Lechter in Arizona on her Ranch.

That's awesome. Five hundred gets you all the goodies with Michelle if you want to spend some time in hot Arizona. Michelle, it's great to meet you. Thanks for coming to the show. Exit Rich, make sure to check it out. You can buy it at ExitRichBook.com. I'm a fan. I'm looking forward to my 30-minute session with you at some point in the near future.

When the book comes out in January 2021, we ship it to your doorstep. I forgot to mention that. Thank you for having me.

Thanks for joining. We'll catch you on the next episode.

About Michelle Seiler-Tucker

Michelle Seiler-Tucker is a Mergers and Acquisitions Master Intermediary (M&AMI), Certified Senior Business Analyst (CSBA), Certified Mergers & Acquisitions Professional (CM&AP) Certified Business Broker (CBB), Panelist for M&A Source, Keynote Speaker.

Michelle is also the Best-Selling Author of the book “Think & Grow Rich Today”, “Sell Your Business for more than it’s Worth”, and her latest book “Exit Rich” is available now for purchase. In addition to being featured in INC., Forbes, and USA Magazine, Michelle makes regular radio and TV appearances on Fox Business News and CNBC.

She’s personally sold over 500 businesses and her company has sold over 1,000! For more than 20 years, Michelle’s been in the trenches helping hundreds of business owners build a scalable and sellable business. She helps owners create a business that works for them, rather than the other way around and has helped thousands exit rich!

Michelle specializes in identifying a company’s ST 6Ps™ checklist and has assisted in driving the business to run on all 6 cylinders, all 6Ps. She has increased their profits and help formulate their ST GPS Exit Model, their build-to-sell model, so when owners are ready, they too can sell for their desired price tag!

She has taken her extensive knowledge, experience, expertise and proven formulas with buying, selling, fixing and growing businesses and packaged it into a step-by-step process within EXIT Rich.

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