Episode 187: Lessons for Building a Sellable Business
Michelle Tucker is the Founder and CEO of Seiler Tucker Incorporated. She holds a M&AMI (Mergers & Acquisitions Master Intermediary) title, as well as the Certified Mergers and Acquisitions Professional (CM&AP) and Certified Senior Business Analyst (CSBA) titles. Michelle also owns many other businesses in several industries. She has sold over a thousand businesses in almost every vertical with a remarkable track record of success. Michelle is also an author; her latest book is called, “How to Acquire Wealth Through Acquisitions.”
As a 20-year veteran in the M&A industry, she is regarded as a leading authority on buying, selling, fixing, and growing businesses. In this episode, Michelle explains why 80% of businesses can’t be sold and how to not become a statistic. She is the ideal person to teach you how to build a valuable business to sell, and to create a company that works for you - not one that you work for.
Build A Sellable Business For The Desired Price Tag
There are plenty of opportunities for businesses to do deals that will bring profit, but certainly, M&A is one of the biggest tools to grow and create enterprise value; however, most businesses are not sellable. According to Steve Forbes, 80% of businesses on the market will never sell. M&A Source says 90% of the ones that sell are not sold for the desired price tag.
According to Michelle, the number one reason businesses are not sold by the desired price tag is because business owners are too busy working in their business, and not on it. They don’t think about selling until they are exhausted and burned out by working. Another reason is that in times of crisis, such as the pandemic, businesses go through difficult situations and entrepreneurs decide to give up their companies.
Michelle warns you should never sell your business during a catastrophic event, as is trending downward. If your business is not making much money, the only one interested in buying is a turnaround specialist. Usually, this type of professional wants to acquire your business for a lower price than it’s worth.
Start Planning The Exit From Day One
Business owners have to plan their exit from day one of starting or buying a business. In case you’ve been in business for 10, 15, or 20 years, it’s not too late to plan. Start somewhere. If you want to sell a $20 million company, then build a million-dollar company. Use the GPS Exit Model as a guide.
The GPS Exit Mode
Michelle advises all business owners to plan the exit with this GPS exit model. Many entrepreneurs do not have a destination and manage their company finances aimlessly. To work around this, follow the steps below:
- Choose the amount for which you want to sell your business
- Know what your current valuation is. Most business owners never had their business valued. This must be done annually by an M&A expert, not by a CPA, as they often do not value the synergies; they don’t see contracts, or account for the full value in the patents, trademarks, or branding.
- Understand who your buyer might be. Michelle says competitors are your best buyer, as acquiring competitors will catapult their current business to the next level.
- Define how long you want to exit your company. That way, you will have more precise planning.
- As the last step, you’re going to reverse engineer your plan and think about what your numbers may be. You’ll get a proper sense of how much your business is worth, and if it’s smaller than expected, then invest in your business to make it more valuable.
How to Make Your Business Sellable
To build a more salable business, business owners need to invest in infrastructure. These following items contribute to greater value for your company:
- People: Many business owners work performing most of the tasks in the business, making the business 100% dependent on them. Michelle’s lesson is to address your business weaknesses, rather than trying to solve them yourself. In other words, hire people smarter than you to deal with the issues. You’re never going to grow unless you let go of the control.
- Product: Your product is your company or service. When you decide to sell it, you must do it in your prime. Map the industry and look at your position. You don’t want to lose the timing and sell your company when it’s outdated.
- Process: You can have the best team in the world, but if you don’t have an effective process, it won’t be profitable. The process helps manage the people and streamline. Michelle uses McDonald’s as an example; the process design was developed around the customer experience. As a business owner, do not make the process convenient for your lifestyle. Ask yourself: what do my customers want to experience? If you don’t invest in great experiences in these competitive markets, especially in this economy, you’re going to lose market share.
- Proprietary: Many entrepreneurs make the mistake of just registering their website’s domain and thinking that’s enough to protect their name, without ever checking the federal database, risking not being able to use the company name legally. To resolve this, hire an attorney to do the legal work.
- Profits: To make a profit, you need to have multiple revenue streams. You can’t take the risk of relying on just one source. The pandemic was the biggest example of this. Don’t put all your eggs in one basket.
Your Business is Your Asset
To make your business sellable, Michelle advises business owners to think differently. Try to analyze the market you are in, evaluate the pros and cons of your company in this market and work on your business weakness. That way, you will create value for your company and be able to execute your exit plan.
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Corey Kupfer is an expert strategist, negotiator, and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author, and professional speaker. He is deeply passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.
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