As a business owner, what’s your exit strategy? You likely got into business either for the money, the freedom, or because you’re passionate about what you do.

What if that changes? What if it’s time you decide you want to do something new?

There’s a big difference between a 1x multiple, a 3x multiple, and a 5 or 10x multiple. And how do you get the bigger one?

Todays guest has been featured in INC, Forbes, Entrepreneur Magazine, and USA Magazine, she is an international keynote speaker and makes regular radio and TV appearances on Fox Business News and CNBC. She is a Certified Mergers and Acquisitions Professional with 20 years in the industry and is here to teach you how to exit rich.

 

Please welcome Michelle Tucker.

Episode highlights:

  • 0:27 – What we gonna learn with Michelle
  • 3:35 – Michelle’s Story
  • 6:14 – Getting any heat from the other people
  • 12:09 – Closing Deals
  • 15:10 – Touch of Reality

Learn more about this guest:

Contact Info

Podcast Episode Transcripts:

Disclaimer: Transcripts were generated automatically and may contain inaccuracies and errors.


Michelle Seiler Tucker, welcome to learning from others. Thanks for jumping on. Thank you for having me, David. It’s a pleasure to be here chapter, you know, you and I met, um, uh, on a referral basis. We have some mutual contacts and like, we kind of hit it off well and, um, I appreciated your expertise. And so I want to dig in more.   

So why don’t we, uh, tell our listeners, I, you know, I told you before we hit record, I got two usual questions. Question number one is what’s your background? What are we gonna learn from you today? So my background, gosh, that’s, that’s an interesting question because I’ve been an entrepreneur for gosh, I would say my whole life really.   

Um, I wasn’t your typical child. I didn’t really play with toys for dolls. I walked around with a notebook and I would walk up to strangers on the street or strategies of the grocery store when I was six years old and ask a bunch of questions and write down the answers. And my mom’s like, Oh my gosh, she’s going to be the next Barbara Walters.   

What kind of, what kind of questions are we talking about? Just kind of all kinds of questions. Like who are you? What do you, do you have a family? Are you married? Do you have kids? Do you own your own business? What kind of business? How did you start? I was asking those kind of questions when I was like six and seven years old.   

What was your agenda in doing so it just curiosity, Cassidy. I’ve always been extremely curious and with what I do today, you know, I’ve been in mergers and acquisitions for 20 years, but, and I’ve owned several different businesses. I’ve owned businesses and medical businesses and publishing graphics technology.   

And I’ve just always been really curious. What excites me so much about mergers and acquisitions is I’m like a kid in a candy store. You know, I can’t wait to find out how someone created a multimillion dollar, a multibillion dollar business out of their garage or their pickup truck. I mean, we’re working with a company right now that has an eighth grade.   

The owner has an eighth grade education and started a company. And now we’re probably going to sell it for about 70 to $80 million. Well, and he started out of his pickup truck. So I’m just like a kid in a candy store. I love hearing entrepreneur’s stories. You know, I’ve always been an entrepreneur I’ve been in mergers and acquisitions for about 20 years.   

Now. I’ve personally have sold over 500 companies, but my farm is sort of a thousand. Wow. So we really specialize in buying, selling, fixing, and growing companies. Okay. So before we dig in more on that, I want to ask you question number two, which is what do you suck at? But I suck at. So probably what most entrepreneurs suck at, um, pilot, most entrepreneurs suck at maybe not always the best manager, you know, cause I want things done yesterday. 

Well, they’re not the most patient person. It’s so fun when I, I asked that question because I think it’s the opposite of what most people would expect. Surprisingly, the answer along those lines is pretty common. Like I suck at the things that most people probably think I’m stellar at like the, the management side of things, organization side of things.   

Most people are like, now I need, I need my right hand person to take care of that stuff. Yeah, I would say I’m actually, you know, fairly organized in my head, not my desk, but pretty organized in my head. Cause I’m not your typical entrepreneur. I’m also very left brain, right brain, because, and when I do have to be extremely analytical, you know, I’m always reading contracts.   

I’m always looking at numbers, always looking at financials and you have to be extremely conscientious and attention to detail. So I’ve kind of trained even. I’m really salesy. I’ve trained my brain. To be ambidextrous and to be extremely analytical. Yeah. Yeah. I can appreciate that in the, in the space that I’m in as well.   

Um, all right. So Barbara Walters, junior, how did you go from Bailey Barbara to mergers and acquisitions? What happened in between six and whenever you started, when did you start? Oh yeah, that’s a big gap there. Huh?  

So I’ve always, like I said, I’ve owned, I owned a business, very young I’m on, uh, Uh, bridal magazine on different types of publications owned event companies. This is number one was called the wedding guide. It was wedding guide. That was business number one. Um, and then I kind of got sucked into corporate America because I got recruited by Xerox fortune 500 company.   

I’m sure you’ve heard of them. Yeah. And I got recruited by Xerox, so they offered me a six figure position and I’m like, okay, why not? So I went to work for Xerox within six months. My nickname was the closer, because every time somebody couldn’t close a deal, they’re like, we’ll bring Michelle and she’s the closer she can close anything.   

And then my, uh, my manager approached me about S about six months being there. And she some show you should really apply for the Xerox vice president regional position. Hmm. She goes, you know, it’s a great position, huge benefits, huge rice. She goes, you probably won’t get it because you’ve only been here for six months and you’re interviewing, I guess people have been here for five, 10, 15 years.   

And I’m like, well, why would I apply for something I’m never going to get? It makes no sense to me. And she was like, because of the experience, because of how much you will learn and everybody knows Xerox house, you know, some of the best training in the world. Right. Um, so I went ahead and threw my name in the hat applied for the position.   

It was a three month grueling process had the interview process was three months, three months. I had to meet with all these high level executives from all over the country. And I had to do Q and A’s with them. I had to find out what their needs were. Do you have a presentation? Do you have demonstration of Xerox equipment and you know how their equipment will benefit them?   

And like I said, it was a three month grueling process and I ended up getting it. I ended up meeting everybody who had been there. And even my managers like, Oh my gosh, I’m shocked because they don’t hire, they don’t promote unless you’ve been there at least two years. So I ended up getting it and then I hated it.   

Yeah. Why, why does it, why do you think you got to over the other people and then kind of like a side question. Did you get any heat from the other people? I did. Yeah. So I think I got it because I think I really put so much energy into it. So much effort. I studied, I did a lot of due diligence. I tried, you know, I went behind the scenes and find out what they’re looking for.   

You know, what is it they’re looking for? And really knew what I was, you know, like I really just planned and planned and prepared and prepared and practice, you know? And I think the other ones didn’t put as much time and energy and effort into it as I did. And I think I really am the closer. And so yes, they hated me.   

These were some of my friends, you know, some of my very good friends and it was like, I would go to the cafeteria at Xerox and. It’s like the red sea part I did when I was sick, I got up and went to another table and I’m like, what do we mean girls in high school?   

Cool about it. Like the men were fine, know like, Oh good for you, women. The women will vicious about it. And then they were really mad because, so I got into it and then realized I didn’t like it, you know? And one of the biggest mistakes that business owners make. As they promote their top salesperson.   

Don’t do that. If you’ve got a great sales person, you don’t necessarily want to promote him to upper level management. Right. Um, what I didn’t like about it, wasn’t the management part. I’m okay. With the management part, you know, I’m not gonna say I’m the best at it, but I’m okay with that. What I didn’t like about corporate America in that position is you’re having meetings to schedule more meetings scheduled follow-up meetings.   

It’s just so much red tape and nothing ever got solved. And. You know, I wasn’t meeting with clients anymore. I wasn’t doing what I loved. And, um, so that’s when I told my husband, I said, Oh my gosh, I miss entrepreneurship. So I started looking for a franchise or a business to buy that I could operate on the side and keep my day job.   

And I stumbled across the franchise. I had a couple locations and my husband actually knew the, the owner. And I said, look, I want to buy a franchise. I want to, you know, hire people running it on the side. And they said, no, we know of you. We know of your reputation when or your husband, you know, and we know you’re the closer we want you to partner us.   

So we want you it’d be our partner and we’ll give you a franchise. So I’m like, you know, I didn’t, I didn’t say yes because I’m like, I’m not going to leave a six figure position with great benefits for a company. That’s got two locations. Yeah, but I didn’t want to say no. So I’m like, you know what, let me try it out for six months and see how it goes.   

I’ll keep my, my day job was there Oxo work, you know, on the weekends and go to franchise shows and things of that nature. I ended up selling so many franchises that quadruple my income within six months. Wow. And that’s when I knew it was time to leave. So then the girls that I’d be my friends, then I really hated me because I beat them.   

And then I bailed. Yeah. What industry was the franchising? I would rather not say. Okay. Yeah. Now did, it was a service industry. Okay. What’s interesting about, you know, you made a comment about bigger business and the red tape and. I totally agree. What’s what’s been interesting. Um, you know, the listeners, obviously I’m in the marketing space, but I’ve actually had our team kind of back off from the bigger companies because.   

You can’t get anything done, you hit them up and we’re like, Hey, we have this new content piece. Good to go. Well, let’s wait for the wait for the, for, for, for, for the meeting of the meeting of the meeting, if we can get approved. And it’s, it’s interesting that, that. Bigger, you get the less nimble you become and you think you would think that by now the bigger businesses are starting to become aware of that and trying to offset that in some way.   

But, you know, I don’t have a question. I think it’s just, I was acknowledging your comment that, yeah, I agree. Yeah. And that was my frustration. You know, I was used to, you know, working with clients, getting things done, um, you know, finding out what their needs and wants were providing solutions, figuring out the problems, providing solutions.   

And then, but when you get up and level mandate, upper level management like that, you just have to go through so much red tape to get anything accomplished and to make any decisions. And it just takes forever. So I wasn’t a fan of that anyways. So the franchise, or, and that’s why I don’t want to say who it is, but the franchise, or did what a lot of business owners do.   

They grew really, really quickly. I sold hundreds of franchises. And they start, they never built it, the solid infrastructure to solid foundation to handle the growth. So the over promise and under deliver, then it had a lot of disgruntled franchisees and the franchisees were talking about class action suit because they were not performing.   

And I’m a partner that I’m team franchisees. So I kept arguing with the franchise, Oregon. And they were getting them. So with me going well, whose side are you on? I’m like, well, I’m side franchisee, I’m team franchisee. They paid the money. They need this, that services. And so anyways, having, I, I became very aware that our values were not aligned anymore or maybe they were never aligned. 

  Um, but we had a very different set of values, different set of ethics. And I said, you need to buy me out and that’s happened. And that’s when I said, okay, well, what am I going to do next? And that’s when I said, you know, what, why not transition to selling companies? How much harder can it be? Plus it has so many buyers that were asking me for existing companies.   

So what made you back? So let’s go back a little bit. So at Xerox, and as you started to realize that you’re good at sales and even through the process of selling franchises, like what made you different? Why were you the closer? Why could you close the deals that other people couldn’t, you know, I don’t know what all the secret sauce is other than the fact that I do. 

  I asked the right questions. I shut up. I listen. I don’t get into cans, features or cans fails. You know, I really listened. I really listened to what they’re saying and what they’re not saying. And I really dig deep to find out, you know, what, because what they think they need is not always what they need, you know? 

  So I really dig deep to find out what is it that they really need? What is it that they really want? What problems are we trying to solve? You know, how can I make it, you know, how can I solve their problems? And, and. Uh, make them comfortable doing business with us and moving forward. And I think it’s because I do ask the right questions and because I do listen and because I do care, I mean, a lot of my franchisees and even my, um, sciences, they’re also good friends of mine now. 

  So I’d build rapport really quickly. I can make friends really quickly. I don’t just care about the sell or about the dollar. I care about the client. Yeah, you bring up an interesting topic about you, help them identify what they actually need versus what they think they need. Uh, one thing that I, I run into a lot in one I mentor early stage entrepreneurs is you have to find the right and I I’m curious your, your take on this, cause I’m sure you run into it as well with business owners is you have to find the right balance of saying exactly what you said. 

  You think you need that, but you don’t really need to. So you have to give them the tough love. How do you. How do you approach that? I’m sure you’ve had awkward conversations where you’re like, no, you are so far off the Mark. Here’s your problem? Here’s your solution. I don’t care if you disagree with it. I am right. 

  Like how do you have that type of conversation? Well, you know, those conversations are really prevalent in selling businesses because a business owner thinks are businesses worth $20 million. The business owner thinks that baby is pretty. The business owner thinks they have the best business ever. You follow me. 

  And so, yeah, I have to have those hard talks and those hard discussions with the business owner. On a regular basis and tell them, look, your baby’s not as pretty as you think. You know? And so like I tell a business owner, the hardest part of my job is telling you that your baby is not that pretty. You remember the Seinfeld episode, did you used to watch Seinfeld? 

  I’m I’m one of the rare ones that didn’t fit. I see, I see the clips, like, obviously I know what Seinfeld is and I’ve probably seen, you know, the little shareable snippets of, of the clip, but yeah, there’s a cliff where a lane has gone that baby is so ugly. That shit. Yeah. So, so this is owners. I have to have those kinds of hard discussions all the time. 

  And, um, Because many of them are just not realistic and they just aren’t educated in this process. Is it because they’re too emotional with it or, or they’re just out of touch with reality? I think it’s a couple of things and Milan, they are too emotional. They look at their business as their baby. They don’t look at the business as their asset.   

They become emotional connected to it. And I’ve always said that you need to make decisions based on logic, not on emotions. Yeah. And then I think that they are just so detached. Like they looked through the business through their eyes, through their sweat equity, how much time, energy effort, money. They poured into it, the sacrifice and say made along their path.   

And they put a value based upon what they need to enter the next phase of their lives. So, you know, if they want to retire and I’m like, Oh, I’m $29 or Taiwan. And they don’t look at things and, and are not educated on much. In this space, but they don’t want to look out through the buyer’s eyes. And when I tell them, you know, what, always flip it around and say, okay, they haven’t really.   

Would you pay for a company that’s netting, a hundred thousand a year. Do people really come to the table with that big of a gap in expectations? A hundred grand to 20 million? Yeah. Such a big gap, you know, and I won’t say it’s that big, but it’s pretty big, um, recent stories we had, um, I have a landscape company.  

It was like called. He emailed us. He’s like, I will only speak to Michelle top. I won’t speak to anybody, but Michelle. I have built this business   

but, um, so I, he said I built this business to sell for $25 million and I will only speak to Michelle. So I get on the phone with him and he’s telling me all this stuff. I go and meet with him. I drive an hour and a half away and meet with him and he’s got pretty impressive, um, facility, but then I get the financials.   

And then numbers. All I think is net income for last year for 2019 was like $200,000. You’re not going to sell it for $25 million. He’s like, why sell? And I said, you’re nowhere close, close. That was low. But what’s the gross hive to confuse him. Is that where he thought he had that potential? Wasn’t I mean, it’s gross.   

I am trying to remember. I think it’s mostly around. Wasn’t it no was gross was not that high. Maybe around three or 4 million. Wasn’t that high. So he’s just so unrealistic. He’s like, well, I know I need to build a little bit. I go a little bit. You need to build a lot more than a loop, even if it’s net. Was that the three or 4 million gross Mark?   

You can’t flip that from 20 that’s crazy. No, no, no. Do you find that, um, The sellers age makes a different in their understanding of the process like this. Do, do you see people’s understanding of the ability to sell evolve with age? So they, over time they become less detached from the baby and then they realize it is an asset sometimes. 

Yes, sometimes no, it just really depends upon the business owner. Um, we had a business owner that had a, um, and we were never able to sell this business just because we couldn’t get the owner. Unattached in the business, it was a distribution business. And I think that even though it was around 1000001.5, but he does everything.   

He does absolutely everything and everything is in his head. And we have to work with our business owners to really create a business. And get out of the job mentality so that we can sell it because buyers don’t want to buy a job. They want to buy a company. So he was very difficult. We have a fabrication company that was selling for right now.  

And the owners are approaching 80 there’s true far, or has been in business 40 years and they have four employees. The problem and they want to go, they’re not attached to it anymore, but the problem is they can’t really go because everything’s in their head and they don’t, they haven’t put all this IP.  

I mean, if I could just take a flash drive and stick it to somebody’s head and, you know, SAP out all of the data, that would be great. But, um, That business is very difficult to solve because all of the information is in the owners, hats, how long of a transition processes that usually, maybe not that exact exact situation.   

Um, but in on average, like how long does it take when you engage a seller to get them to get it in a sellable format? So it just really depends. I know I keep giving you the pen answers, but there are so many different intricate details and so many moving parts. That nothing is the same. The fastest that we’ve sold a business has probably been a week.   

We just sold a business that had about $3 million in EBITDA in about three months from start to finish the longest time it took us with six years. On average, it takes about a year. The, the, the higher, the EBITDA, typically the quicker to sell as long as a solid gives us what we need. What takes the longest is not so much us or the buyers.   

It’s the sellers that are dragging our feet. The sellers are not giving us the information that we need. You know, we started evaluations seven months ago and we’re still waiting on financials. Is that because they’re hesitant to give them or they just don’t have them ready? It’s not because they’re hesitant to give them it’s because they’re a mess.   

And you know, most business owners won’t need a clean financial house. And let me get definitely answers in order. So especially, I feel like at the end of the year, you know, now we get, we’re getting, you know, we got 20, 20 PNLs. We’re still waiting for most of our clients to give us 20, 20 P and LS. But now we need 2020 tax, which ones, especially the evaluate the business, because we don’t wanna evaluate the business without the tax returns.   

So, but a lot of clients would just drag their feet and say, well, I’m waiting on my CPA. I’m waiting on my CPA. Or I have to turn all this information over to my CPA. To get the PNLs and it gets attached to his lungs. Yeah. So it’s a big weight game on what we do. Yeah, I want to, I want to tell you, um, a brief story of my experience of where I learned something about sales process of selling a business, and then I want your opinion on how you usually suggest approaching, structuring the sell.   

So probably. Eight nine, 10 years ago. Um, when my business was, was smaller, um, we had a VC company that was referred from, I had another good friend who was selling his business. And so part of the arrangement they wanted to structure with buying his business was well. You do online marketing, but you’re missing this piece and Damon’s business has that piece.   

So let’s kind of blend them together. Now I went into entertain the discussion. I ended up backing out and declining, cause it was just like a gross conversation, which is which, which I’ll bring up at the end about structuring the sell. But what I learned was something that you touched on. I learned two things.   

One was, as you said, Business buyers want a turnkey business. They want to take the keys and they want to run. And so that’s why documenting processes is so important. The second thing they want is, you know, where is the fire? Because I want to pour more fuel on that fire. Where are the cells coming from?   

So that was an interesting learning experience, but. What I, the, one of the main reasons why I backed out, aside from it just, you know, a gut reaction that wasn’t a bad, uh, it wasn’t a good arrangement was how they structured the tentative sell. And it was third stock, third note, third cash. And so to me in my mind, like I understand that in some circumstances that’s probably acceptable, but in my mind, I’m like, wait, The only guaranteed price of that is, is the third cash.   

I’m pretty confident that they’re going to squeeze me out on the note and the stock, like that’s on the back end. They know that in advance and it’s strategic. So I was fortunate enough to kind of catch that in advance, but so, so maybe two things. One, can you speak to that structure? Was I right? That a lot of times that there is kind of these, not for you, but you know, in other circumstances where there’s kind of this odd backend structure, that’s kind of strategic and then two, assuming I’m correct.   

How do you, how do you encourage your sellers to structure the deal? Okay. So question was, what type of buyer was, it was a private equity group or was this strategic? It was a private equity group. Yeah. Of equity. Their goal was to roll it into a shelf corporation, put it on the stock market, grow it and then dump it.   

Yeah. That’s her claim to fame. So that’s why I asked you who was the buyer of fingering? It was private equity. So, yeah. So the only thing, and they’re not going to do personal guarantees. So on a seller’s note, they’re not going to personal guarantee that, right. So all you really have is accounts that you can count on.   

It’s kind of like an earn out, you know? Oh, you can really count on as a cash. So you, you did the right thing by backing out. Um, my sellers, like typically we don’t, we typically don’t get a transaction where they’re offering so much cash on the stock. And then seller’s note is typically so much cash.   

Maybe a small solar smoke portion or so much cash, and then maybe so much earn-out to bridge the gap. If there’s a valuation gap. Um, the way that I protect my sellers is number one. I want to make sure that they’re not, they’re not taking any stock unless they really are comfortable with that. And they think it’s valuable.   

And I think they’re actually going to get it. Does that make sense? Number two, on the sellers note. I’d rather be as much smaller portion. Most sellers have to provide some seller financing. It’s just the way it’s been this way for a long time, especially since 2008 with the financial debacle, even if, um, the buyers coming in with lending, you know, typically that the lender, especially if it’s SBA wants everyone to have skin in the game.   

So then once the buyer opened up, some margin, want the seller to hold so much paper, et cetera, on a million dollar deals. You know, the typical protocol can be 70% down, you know, the rest and sellers note, but a lot of those buyers, private equities, strategics, sophisticated competitors. They’re not going to do personal guarantees because they don’t want to tap the personal assets.   

And plus they’re going to borrow more money to buy more businesses. Am I making sense? So we’re trying to minimize the risk and try to keep the seller financing down as low as possible. Plus, we put other guarantees in there to protect seller financing. I had never have had one of my friends, clients take the stock because we never thought it was a good deal for our client.   

Um, on an earn-out situation. You know, I tell my clients the truth, you know, you may, you may get this. You may not get this. You know, you’re not going to pay me on this. A lot of MNA advisors charge on me or now I don’t charge them with clients because they have to work for that. Or now that are now, it’s not free money.   

You got to put some sweat equity into that. Earn-out so I don’t charge my clients for the are not pays, whereas most Gemini advisors too. And then on the seller financing portion, like I said, we put everything that we can like, you know, they follow UCC. Um, you know, we don’t transfer the name. There’s all kinds of things that we put.   

To protect our clients, but unless they sign a personal guarantee, then it’s not, you know, there’s not a lot of teeth there. Does that make sense? Yeah. What’s any kind of touched on the, you know, the million dollar Mark is, is there kind of, um, uh, at what point does, at what price point does seller financing, is there kind of like a lower end where it’s like, eh, seven 50 and below, we can usually get a cash deal on that?   

Well, Castro’s are tough because. No, we’ve got a cash deal right now, but it’s a small Deb’s on their half and nine. Um, but cash deals are tough because buyers want to leverage their money. You know? So if, if it’s a deal for, let’s say it’s a million dollars, let’s say it to happen. $1 Dale. Why take that half $1 and give to that buyer to that seller.   

When I could take that same half million dollars and buy a bigger business. And that’s all. I was probably willing to do some seller financing that makes that make sense. So they want to leverage their money. So, yeah. Um, so on a smaller deals, we have make sure we get personal guarantee, or we tell ourselves not to do the deal on a larger deals.   

We tell our sellers, you’re probably not going to get personal guarantee because the buyer’s not going to give you one on, on smaller deals. First time buyers will do personal guarantees. Yeah, I want to, I want to talk about the eighth grade education clients, 70, $80 million kind of thing. Um, w w what, how did that guy find success?   

Like, is there, like, did he just get the right people around him or do you kind of know what drove his success? This guy I tell you, he’s just amazing to me. Um, He, you know, he he’s, I don’t want to say the industry really. Um, but he’s, he can’t, he grew up with a family in that industry. So he had some mentors from his own family members in our particular industry.   

Um, and he just saw it as a way out. Yeah, he’s from another country. He’s run the, I don’t want to say where he’s from, he’s from another country, but he just saw it as a way out way out of that country went out, you know, way out from mom and dad. He just saw it as way out. And he was selling products from his truck and he’s just, he’s very, very smart, extremely smart.   

And he just figured it out. How did you different things. And I gotta be very careful. Cause again, I don’t want to say the industry, but there’s not been much competition on what he does. And he got lucky because he got some great retailers and he was able to get some exclusivity and some good branding and he’s got some really good trademark products.   

So I think just, you know, him growing up in that industry and learning what to do, what not to do. And, you know, here’s the main, a lot of mistakes along the way. I’ll tell you that. Um, but they’re having their best years ever good fit for him. He’s not a quitter. He’s a great salesperson. He’s very personable.   

He’s extremely ethical. Good. Yeah. Well, um, I want to be sensitive to your time shell. Um, I, you know, you’ve sold over a thousand companies. Maybe, maybe I’ll bring one last question to you. You’ve sold over a thousand companies. What is the most unique deal you’ve made? And you can answer that in any way, like the, the Mo in either be a unicorn that got more than you expected, or just a bizarre industry, like what kind of comes to mind as something that was a unique deal that you scored?   

Probably, I don’t know. There’s so many unique ones. It could be the staffing. It could be, it could be the staffing business that could have sold for $30 million. But the husband, you know, initially been warning signs to me, red flags. Like you said earlier because the husband kept telling me the business or it kept telling me everything’s in the trust.   

Everything’s in the trust. And I’m untouchable. When somebody tells you I’m a touchable, there’s a reason they’re telling you that. Cause they’ve had, they’ve had, they’ve had to protect themselves from something $30 million company a year in LeFon a year, year, year and a half. Yeah. About $30 million company.   

We had about 700 buyers. Um, got several LOI what’s that I said, Holy crap. He had 700 interested people interested about it’s very, I don’t want to use the word easy, but, um, a lot of times when we have businesses all run down and EBITDA, let’s not being fast to have at least 300 and up buyers. The last few deals we’ve done, we’ve had over 500 buyers.   

Hmm. We have over 28,000 miles, there’s five different types of wires. So when we get the right businesses, there’s better, there’s more businesses for good businesses and all good businesses to buy as simple as that sounds, but it’s true. So when we get businesses are two, 3 million up in EBITDA, we know we’re going to create a bidding war.   

So, but this particular company, we had several, several, um, interest Lys. He decides to leave his wife. I married his high school sweetheart, which by the way, is not even illegal during the deal. Yup. Then they have a catastrophic event occur in one of their plants and the guy, the employee lost an arm. And then he falsified worker’s comp papers, workers’ comp and, and this all kind of, some of this gets out public or to the all got out and all got out because when you fought, when you falsify.   

Worker’s comp applications. That’s a big no-no right. I don’t know what you know about workers’ comp that’s huge. Yeah. Yeah. I got clients so bigger and biggest clients started dropping him. Hm. They had lots of locations all throughout the United States and several of them closed. I mean, it’s all happened within months.   

So the buyer that I had. That was throwing off a lot of money. The business ended up going into bankruptcy court and I got approved by the bankruptcy court as a stocking force. That means the bankruptcy courts approved me to be the MNA advisor to sell the business during bankruptcy. That was probably the biggest unicorn because I have never done that before in 20 years, you know, so lots and lots and lots of guys will says.   

2050, $60 million and never only ended up selling it for 12, for $1.2 million as a company. At one time when we started, that was worth 30 million, you know, I call this the biggest, I’m not going to curse on the show, but the biggest, you know, what it was, what were they in denial during this process? Or were they acknowledging what was happening?   

Complete them now. They really thought they were on touchable. You know, it’s, it’s interesting. There’s um, I think it’s, I think that will not obviously as a narcissist, but I can see that let’s say a Molly to complete the untouchable and it was a mess, you know, I’ve never, I’ve never done anything like that.   

And I worked on this deal for a while, so. I wanted some commissions is better than no commission. It’s. Um, you know, aside from, uh, aside from the explosion, you, you bring up another interesting topic. There’s a gentleman named Rand Fishkin. Um, I don’t know if you’re familiar with him. A lot of the listeners in the marketing space will be familiar with him.   

He was one of the co-founders of a business called MAs and he wrote a book called, lost, and lost and founder. And it’s, um, it’s, it’s a great book. That’s candid about the growth of a VC unicorn that you know, is making a bunch of money, was the darling of the internet marketing space. And he had, I think it was HubSpot, but he had HubSpot or some other marketing tech company that said, Hey, we’ll, we’ll buy you.   

An offer was. The offer was like $28 million or something like that. And he said, no, we want 40. And so they negotiated back and forth. And ultimately the potential buyer said, you know, now it’s, you know, we’re still friends, but that’s just too big of a gap. And then the business went downhill after that.   

Nothing, nothing catastrophic. It was just. You know the market and they went down, they’re still around. They’re still successful, but the, the value came down substantially. And in his book, he says, that was probably the worst mistake I made in my career is not cashing out when I could, I’ve heard so many stories like that.   

And that definitely is the biggest mistake that business owners make. And they, and then I just tend to get, I don’t know if I want to use the word greedy, but like I said, I just tend to think that their business is worth more than it really is. And there’s that valuation gap and buyers only going to pay so much that buyers won’t see the value.   

If they can’t see, you know, how they can take that business and really kind of put their current business to the next level and take advantage of economies of scales and everything else. I’m not going to purchase this business, but I’ve seen so many owners walk away from great deals. Well, their business just goes down a lot of them that, you know, go out of business after that.   

Yeah. Um, well the last question, I’ll all the, for sure. Last question then I’ll give you the floor to share contact info is, um, you know, speaking of like multiples, we’ve had a handful of other people that are either business brokers or, you know, in the space and, and I’m always curious what kind of the average multiple that different people in your positions speak of?   

Um, you know, some people say it’s, obviously it depends on the business profit margins EBITDA. This and that, but can you kind of give an average, is it, you know, it seems like three times earnings is, is kind of an average. Would you say if the EBITDA, if the EBITDA is under a million under a million, then I would say it’s anywhere from, it can be anywhere from one and a half, one and a half.   

Believe it or not for some industries for three, three and a half, maybe four. Under a million. Okay. You can say the average is right. We could go with that again. It depends upon the industry. It depends on like, what you said also depends upon is the business running on what we call an exit. Rich, all six piece.   

The more synergies that a business owner has, the more bond, the more a buyer is willing to pay for something like we’re really good at creating bidding Wars. We were able to create a bidding war for company that a price for $9.8 million. And it was, they had a little under 3 million in EBITDA, like 2.8 and EBITDA and the buyer.   

We have 550 buyers for that business. Uh, we found we have $12 wise. We found a strategic buyer, hexagons customer concentration. They are 65% of their revenue is tied up in the BP contract. But the buyer that we found has some more products and services and been trying to get in and BP for years and could never get the products in.   

So they paid $15 million for 70% of the company, 50 million for 70%. That’s a 65% higher price that they paid. So buyers will pay for synergies. So on a businesses, over a million dollars of EBITDA, I would say the average is five. When it’s overnight, not three, when it’s over nine, I would say fine. And then it depends upon the industry, SAS businesses.   

We’re working with a SAS business right now. It’s going to be about 23. Multiple because of all the IP they have. So when we evaluate businesses, we use six different methods. And so we, as you know, um, discounted cash flow, we use the asset approach. It was a market approach, music industry approach. We use the, um, what I call the six P approach.   

So we go in and we assess what the synergies are. So as a business owner, you know, as well, branded and proprietary is one of my  proprietary is a highest value driver you can possibly get in a business. So if a business is well branded, then I can sell that business for more. As long as that brand is relevant in the minds of consumers, nobody’s paying anything for blockbuster.   

Right? So, so also trademarks patents hires will pay more money for Tomasa pay more money for patents contracts. They’ll pay a lot more money for contracts as batch late client contracts. We’re selling a business right now that has 175 contracts. And in like, I want that, I want those contracts. So contracts are very important.   

Here’s a caveat with contracts. Most business, almost all business owners never had the two sentence transferability clause, 99.9% of all sales are asset sells. Not a stock sell. So if those contracts don’t have the two sentence transferability clause and they’re not transplanting over, so either the buyer has agreed to do a stock sell, or we got to go get your clients to sign a transfer.   

And yeah, so buyers and in databases, I mean, Facebook pay $19 billion for WhatsApp and WhatsApp was hemorrhaging money, but they had a billion users. So the right type of strategic competitor, even private equity buyers. We’ll pay a lot more for a business that has synergies that will take and catapult their business to the next level.   

Does that make sense? Also, we look for economies of scale. So we work with our buyers and say, okay, we have this manufacturing business and this manufacturing business has this distribution center. We, you, the buyer has distribution all around the country. You don’t need their distribution center. We cut that distribution center.   

You just cut your overhead. Well, we’ve doubled EBITDA. Does that make sense? Yeah. Yeah. So a lot of times I have to absolutely. You know, we have to look at both sides because that’s the only way. Number one, we’re going to get the buyers to pay more. We want to sell our business, our sellers business for as much as we can monsters all that for Michelle, you are a business.   

Dating expert, you find the most ideal match for both parties. Yeah, I do. Cause you know, it’s got like, I want it to be good for the bar. I wanted it to be good for the seller, but you know, at the end of the day, if it’s not a good match, it’s not going to close less than 40% of the close that’s than 40%, eight out of 10 businesses don’t even sell.   

So that’s 80% of businesses that don’t sell. According to reports and Steve board’s endorsed my book, a rich. Because he’s like exit, Richard’s a goldmine punch in the nerves because entrepreneurs need to think about the South from day one. Yeah. Yeah. I’ve, I’ve, I’ve recognized that gap. Um, the deeper my entrepreneur network gets is, um, you know, people, as you touched on, they either create jobs or even if, even if they’ve got themselves out of the job, like.   

You know, you talked about the, the older couple that has a business that are in their eighties and they don’t have the processes documented. It’s pretty interesting to see how big of a gap there is between even if they’re a successful business owner and like, what the hell are they gonna do next? Yeah, exactly.   

And it’s not that they just don’t have the processes document, but they don’t have the people. So people is the first P in the six paints. You’re going to have the right people. They have four people that they would have been gloomy, somebody all this time. You know, the checkup and the knowledge and take over everything that’s in our head.  

Then we want to be in this position right now. That’s why so many businesses are not sellable because buyers are fearful that you can take out the owner. There is no business. Yeah. Yeah. It makes a lot of sense. Well, Michelle, I appreciate your time. You mentioned the six P’s. You mentioned your book. So I’m going to give you a last few moments to tell us more about the book and how our listeners can find out more about you.   

All right. Well, I’m not gonna tell you about the six pieces, cause that’s going to take a lot more time, but I will tell everybody where I’m pre-sell so you can go and get the book at exitrichbook.com. Make sure you put the book in our exitrichbook.com and it’s actually less expensive there than it is on Amazon, but you can buy it on Amazon as well.   

but at exitrichbook.com or selling a book for $24 and 79 cents, who will email you to digital downloads. So you don’t have to wait for the launch date. Hmm. And in addition to that, we’ll ship the hardcover to your doorstep. Plus we’ll give you a lifetime membership and to the exit rich book club, exit rich book club is video training of me take, you know, doing deep dives and to the GPS, exit six PS valuations negotiations apply types of buyers.   

What type of business are you like have a business owner? Are you, we, you know, I go into all of that stuff. Plus the most important thing is documents. So business owners have to have documents, right? I know you’re a tech guy, but you got as occupant. So in our policy and procedure manual, you got to have employee am.   

Non-competes lots of clients that said, you know, Michelle, I don’t even know what an ally looks like and let them intent or purchase green mountain due diligence, checklist of closing docs. We have all of these documents to run a business and Stella business available for your review and download for no additional fee.   

That alone is over $25,000. If you want to your attorney to try to recreate all of that. And then we also give them a free membership in the club CEOs, which is a mastermind, uh, where we ask those tough questions and we do a hot seats and Q and A’s and things of that nature too, to help business owners survive and thrive on the other side of this.  

So they took an extra rich. Very cool. I appreciate your time and, and digging into the actual deep details of this. So Michelle seilertucker.com and find out more at exitrichbook.com. Thanks Michelle. Thank you so much. It was a pleasure. Thanks for having me. 

What did you think of this podcast?

As a business owner, what’s your exit strategy? You likely got into business either for the money, the freedom, or because you’re passionate about what you do.

What if that changes? What if it’s time you decide you want to do something new?

There’s a big difference between a 1x multiple, a 3x multiple, and a 5 or 10x multiple. And how do you get the bigger one?

Todays guest has been featured in INC, Forbes, Entrepreneur Magazine, and USA Magazine, she is an international keynote speaker and makes regular radio and TV appearances on Fox Business News and CNBC. She is a Certified Mergers and Acquisitions Professional with 20 years in the industry and is here to teach you how to exit rich.

Please welcome Michelle Tucker.

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