The Chris Voss Show - The Chris Voss Show Podcast – Exit Rich: The 6 P Method to Sell Your Business for Huge Profit by Michelle Seiler Tucker, Sharon Lechter Interview

Episode Date: November 20, 2020

Exit Rich: The 6 P Method to Sell Your Business for Huge Profit by Michelle Seiler Tucker, Sharon Lechter Interview Exitrichbook.com Too many entrepreneurs push off planning for the sale of their business until the last moment. But for a business to sell for what it's really worth — or even more — owners need to prepare for the sale from the very start. In Exit Rich, author and mergers and acquisitions authority Michelle Seiler Tucker joins forces with Sharon Lechter, finance expert and author of Rich Dad Poor Dad, to create a must-have guide for all business owners whether they're gearing up to sell a business now or just getting started building out their company into something to sell for a profit in the future. Seiler Tucker's twofold approach to selling your business for maximum profit combines two of the most powerful elements of her mergers and acquisitions toolkit: the ''ST GPS Exit Model'' to help business owners set goals for the sale before their business hit the market, and the ''6 P Method'' to help them objectively evaluate their business's worth, before their potential buyers do. Combined, these tools provide invaluable insight into the process of preparing a business for sale, finding the right buyers, and staging the sale itself. Throughout the book, Sharon Lechter's wisdom peppers each chapter in the ''Mentoring Corner'' section, providing forward-thinking entrepreneurs with the perspective that they need to take control of their business's future and exit rich. This book is a rich resource for any business owner looking to: Objectively evaluate their business before a sale Improve their chances of finding the right buyer Sell their business for maximum profit

You wanted the best. You've got the best podcast, the hottest podcast in the world. The Chris Voss Show, the preeminent podcast with guests so smart you may experience serious brain bleed. Get ready, get ready, strap yourself in. Keep your hands, arms and legs inside the vehicle at all times. Because you're about to go on a monster education roller coaster with your brain now here's your host chris voss hi folks is voss here from the chris voss show.com the chris voss show.com hey we're coming here with another great podcast we certainly appreciate you guys tuning in to see the video version of this broadcast you can go to youtube.com forward slash chris foss hit that bell notification button and you can get all the notifications of

all the beautiful posts we keep making of all these wonderful brilliant authors we always have on the show you can follow me at goodreads.com forward slash chris foss you can see all the books we're reading over there and all the reviews that we have up and air actions for that as well. You can go to Facebook dot com forward slash the Chris Voss show and follow us over there. You can also see there's like three or four groups for Facebook groups over there on Facebook if you want to search for those as well. You can also go to the CVP and dot com and Chris Voss podcast network dot com. You can also go to thecvpn.com and chrisfosspodcastnetwork.com. You can see all nine podcasts over there, and you may find this appearing on those podcasts as well. This is another brilliant author that we have with us today.

She has written the most exceptional book that I think you'll like. The book is called Exit Rich, The 6P Method to Sell Your Business for Huge Profit. Her name is Michelle Seiler Tucker. The book is coming out on January 26, 2021, but you can pre-order the book today and be able to take advantage, get your first dibs on that book when it comes out. Michelle is a 20 year veteran in mergers and acquisitions she has sold hundreds of businesses she's recognized as a leading authority on buying selling fixing and growing businesses michelle sees opportunity where

many see uh discouragement or have given. Her passion is to save businesses that might otherwise close. She closes nearly 98% of all written offers and on average obtains 20 to 40% above asking price for her clients. Welcome to the show, Michelle. How are you today? I'm great, Chris. Thank you so much for having me. Awesome, Sauce. Give us your plug so people can find you today? I'm great, Chris. Thank you so much for having me. Awesome, Sauce. Give us your plugs so people can find you on the interwebs, order up the book, and find out more about you. Sure.

So they can text to 888-361-0066. Just text Michelle. Again, that's 888-361-0066. And my social media will pop up. My exitrichbook.com will pop up along with my other business website. And we've got kind of a cover of the book there behind you. So people have seen that on YouTube. You can search for that on the Amazon, order that book up in your local booksellers, etc., etc.

So, Michelle, what's the reason that motivates you to want to write this book and share it with other people? So, this is actually my second book I've written on mergers and acquisitions and selling businesses. I wrote my first book in 2013 called Sell Your Business for More Than It's Worth. And then I wrote Exit Rich in 2019. And the big reason that I decided to write another book is because the business landscape has changed so dramatically from 2013. You know, it used to be in 2013 that 85 to 95 percent of startups, one to five years, would go out of business, right? So any business over five years that made that five-year hump is pretty, you know, they're going to be successful.

And the risk factors decrease rapidly after you've been in business for so many years. That is the old statistics. When I wrote Exit Rich in 2019 and did the research again, I learned that only 30% of startups will go out of business. So startups are not at great risk anymore whatsoever. What's at risk are those businesses that have been in business 10 years and longer. So out of 27.6 million companies, businesses that have been in business 10 years or longer, 70% of those companies will go out of business.

70%. So it's flip go out of business. 70%. So it's flip-flopped. Wow. So startups don't have the risk that they used to. But businesses that have been in business over 10 years are at great risk. And you know this because you hear about the big box public companies, like Toys R Us went out of business. Kmart went out of business.

GNC is closing down 900 locations. Stymark, the list goes on and on. But what you're not hearing about are the private companies. Those private companies that are, you know, small businesses are on every street corner in every town and every state across our great nation. These businesses are dropping like flies. And unfortunately, go ahead. Is that largely in part because, you know, times are changing so fast? I know that usually every 10 years there's so much new innovation and so many changes that come into business. I know my business sometimes by the 10-year mark

we're having to change their model to adapt to the new times. Is that a lot of what's having that effect on them? It absolutely is. Buyers' consumer habits have changed. The way that they purchase goods and services have changed. And you can thank Amazon for that. You know, whoever makes the easiest for the consumer to do business with them is a company that's going to win.

So Amazon is winning because you can practically buy anything. You can even buy a horse on Amazon and have it delivered in two days. So the biggest issue, Chris, is that these business owners have been in business 10 years or longer, they become complacent. And it's like Blockbuster. Blockbuster saw Netflix and they saw the writing on the wall, but they did nothing. They sat back fat and happy and they did nothing to innovate whatsoever. And that's the problem with most business owners. They stop AIM. And AIM is always innovate and market, always innovate and market. And they stop asking their consumers, what do you need? What do you want? How can I make it easier for you to do business with my company?

Definitely. So give us an overview of the book. What's inside of it? What are readers going to take and get from it? Sure. So, you know, the book is all about planning. The book is really all about building a sustainable, scalable, and when you're ready, sellable business. So even if you're thinking, oh gosh, I don't want to sell my business, you should still read Exit Rich because Exit Rich goes through the methodologies that I've created over the last 20 years in a trench of selling thousands of businesses. I know you said hundreds, but my company has actually sold over a thousand businesses. And we've developed these strategies and techniques and methodologies that are in the book to help you build a profitable company.

So the biggest mistake that business owners make though, is they don't plan their exit, Chris. They never think about selling until they have to due to an internal or external catastrophic event occurring. And by that time, it's typically too late to sell your business because the business is not doing well. And so Exit Rich is all about planning your exit from day one of starting your business or buying a business. And, you know, I just met with a staffing agency in Houston yesterday, and she's been in business for 12 years. She wants to sell for $4 or $5 million. She just turned down the $3 million offer because they want her clients. But guess what? They don't know her financials. Her EBITDA is $200,000. She turned down a $3 million offer. I told her, I said, you should call them and tell

them to buy it because that's a 15 multiple. Once they see your financials, they're not going to pay you that. They're not going to pay $3 million for $200,000 of EBITDA. So in Exit Rich, I have what's called the GPS exit model. And Chris, it's all about planning your exit from day one. So number one, you should think about your end game. What do you want to sell your business for? You want to sell it for $10 million. Great. What timeframe do you want to sell it in?

And where are you starting from? What's your current evaluation? So if you want to sell your business for 10 million and you're currently at 5 million and you want to sell it in three to five years, well, now you're starting to work on a plan, right? And let's say you have a distribution company. Well, then you need to do the research and see who buys distribution companies. There's five different types of buyers. And in Exit Rich, we go over to five different types. So if you're trying to sell a $10 million distribution company, in all likelihood, it's not going to be a first-time buyer. It's probably going to be a private equity group, a strategic slash competitor,

or a sophisticated serial entrepreneur. Then you need to ask yourself, what is our buying criteria? What do they look for? Where does the gross revenues have to be? Where does the gross profit margin have to be? Where does the EBITDA have to be? To sell a business for $10 million, you need to have at least $2 million in EBITDA, at least. Okay. And then the last component of the GPS exit model is your why. Why do you want to sell for $10 million? Because Chris, you know as well as I do, nobody does anything unless you're motivated, unless you have a powerful why. Because if it was easy to sell a company for $10 million, everybody would be doing it. That's true. That's true. I was laughing earlier because I've seen a lot of entrepreneurs that will take a business

and they will just run that model right in the ground. They won't change it. They'll be like, this was working at one time, and they'll just keep just right on driving that thing in the ground, and they won't ask for help. I mean, I've written exclusive first right of offers to people to, you know, they were in trouble and they were looking for money, and I was like, look, I'll give you a first right of refusal on your business when you decide to sell. But you cannot call me the day when you're one day from filing bankruptcy and say you want to sell to me now. You have to call me sooner.

And 99.9% of the time, they always call the day before the bankruptcy filing and go, hey, you want to buy the company now? I'm like, are you crazy, man? You're insane. And so, yeah, I've seen a lot of that. We used to run ads. We had a lot of companies at one time. We used to run ads that would offer to loan money to businesses that were in trouble.

And it was doing what you guys, I think, are doing, business bro, uh, business selling and stuff. And so we would use it to, uh, find businesses that we could either assimilate into ours or, you know, find people that were cash poor and asset rich. Um, and yeah, it was interesting. Uh, I, it was just, it was the most amazing thing. Sometimes we, we could buy businesses pennies on the dollar. Um, sometimes, you know, they would just drive into the ground but yeah i've seen a lot of that you're so right um when i was telling you the story about um 70 percent of businesses going out of business um that's that's true and that was before covid now every nine seconds a business is going out of business wow what's so sad about these statistics to me is that many of these are baby boomers and they're going to be forced into selling for pennies on the dollar or closing their business down or filing bankruptcy. And Chris, when they file bankruptcy, they don't just lose their business assets.

They're going to lose their personal assets, too, because most business owners pierce the corporate veil. Yeah. They've got a personal guarantee. They take a loan out against their house. And now the bank is going to go after their personal assets. So that's really why I wrote Exit Rich, you know, is because I don't just sell businesses. I'm a mergers, acquisitions, master intermediary and a senior business analyst. I also buy businesses and flip them.

And I also partner with business owners, investing my money, time, expertise, and resources to help build to sell. So I'm like on a mission to help save as many businesses as possible from going out of business and build to sell these companies so they are sellable. Because like you said, they don't think about it. I mean, you gave them a first right to refuse, though, and they call you at the end. And it just so mind-boggling to me but what happens you know when you're in a fog it's foggy right yeah yeah and they're just so overwhelmed with the day-to-day of the business that you're not thinking straight and business owners really have to stop being transactional and maybe just start thinking transformational yeah i mean and

you bring up a really good point about the, about when they pierce the corporate veil, a lot of people don't even know what that is or how it can pierce a C corp and make it exposed. And, and, you know, they're, they're doing all sorts of stupid accounting or some sort of BS with their personal accounts. You know, if, if they have, if they have a business account, they could be running out of their personal. Well, I mean, it's as simple as a business owner buying a real estate where the business, the real estate where the business is operational,

but they put that real estate in the business name. Well, what they should do is set it in a separate corporation because if somebody gets hurt on that property now they're going to go after your business yeah or they co-mingle funds that's a lot of stupid stuff they set up the real estate in a personal name which is even worse because now they're going to go after your personal assets i don't it's amazing how many entrepreneurs i don't know they'll tell me something and i'll be like wait you have a c a C-corp? What? What are you doing? You're in trouble, man, if you ever deal with that. So during the pandemic, you see a lot of more businesses going out of business. What mistake

can entrepreneurs that are trying to sell, that's on the rise when they're trying to get fast cash for their businesses? What mistake? Yeah. What mistake do you see on the rise during the pandemic? When they're trying to get fast cash? Well, you know, that's hard to answer because it really depends upon what their current state is. You know, do they have to sell because they're upside down and they're in debt and they have no money for their family and they really just need to get rid of that asset so they can get rid of their debt? I will tell you that if it's an emergency sale, they really need to look

at everything and cross the T's and dot the I's and make sure they're not selling the business for so low that you can't get out of debt. So there's, you know, it just really depends upon where that owner is. But I would say, you know, anybody that's hurting or struggling like that, call a mergers and acquisitions advisor, whether it's me or somebody else, and make sure you get a good one though, and let them help you. You know, I had at one point, I had a graphics company that was struggling and they called me to sell. And I asked the guy, the gentleman, a few questions. And I said, you're not sellable because it was husband, wife, one employee.

They told them one employee that they're selling. So that one employee did what all employees would do. He went and found another job. And I started asking him questions about why do you want to sell? And he said, well, it's me and my wife are working 14 hours a day. We're about to kill each other. We're about to get a divorce. They're out of the garage. And he said, Michelle, I just don't have the business acumen to grow this company to the next level. And I'm just tired. And I said, well, listen, you're lucky you got me today because if you would have got any other broker they would have put it on the market

and it wouldn't have sold and you would have lost everything including your house because he had mortgaged his house wow he goes well what am i gonna do i says and he did tell me one thing on that call he says and i'm turning down 6 000 clients a year what yeah so they specialize in graphics vehicle wraps for first responders so all the ambulances fire trucks police cars and i'm like are you kidding me 6 000 clients a year i went ding ding ding we're not selling we're partnering and he asked me what are we going to do i said we're going to partner i said i'm going to put up the money and i'm going to take you out of garage into a six thousand square foot building we're going to hire people we're going to create a business because all you have right now is a

glorified job that's killing you and that's what i did and now they're doing great and i will tell you something now that this guy is out of his fog he has more business acumen than most business people i've ever seen but when you're stuck you're stuck it is hard to think it's hard to see the forest through the trees right that is the craziest story ever six thousand but it's a true story but here's the deal get the money right there like they were doing the graphics hunting the graphics right doing the artwork doing the graphics sticking the vehicles you know what they were doing the graphics, printing the graphics, right? Doing the artwork, doing the graphics, sticking the vehicles. You know what they were doing? They were stepping in voices in the desk because they didn't even have time to build people.

They didn't even have time to do that. Oh, my freaking, oh, man. So anyway, I partnered with them. So I would say the most important thing to a business that's struggling is call somebody like me, you know, and get that advice because maybe I'll partner with you. Maybe I can help, you know, grow your business. Because like I said, when you're in the fog, it's foggy, and it's hard to read the label from the inside of the bottle.

You need an outsider's perspective to read the warning signs and keep you out of danger zone. There you go. There's some people that just either shouldn't be in business or they need to work with a partner like you that knows what they're doing. So, you can't do everything in your business because nothing will ever get done and the business will start to crumble. So, that's what entrepreneurs do. They're like, well, I'll do this and this and this and this. And the problem is they're not effective and they're not really building a corporation. They just have a glorified job.

It's killing them. I love how you think about this and how you approach it. It's interesting. So in your book, you talk about how new entrepreneurs who are just getting started, they can design their business now to sell for a profit in the future. I've started now in, I think, 22 corporations over my life. I've never sat down. I always try to build for empire, but i did find what you had mentioned is that after 10 years that things stagnate or models change or innovation comes out that you know

you've got different things for me 2008 was a big changer after 20 years a lot of our businesses just took ground to a halt because of the recession um and i think more are probably going to happen with the upcoming uh probably in the next year, depending upon how deep this recession runs. So give us some ideas on how these new entrepreneurs can think about this, because this is definitely a different paradigm for me. Yeah, it really is, and every new entrepreneur, if you're just about to start a business or buy a business, you really should read Exit Rich,

because Exit Rich lays the foundation to build, lays the foundation to build a sustainable company. So in Exit Rich, what I do is I take entrepreneurs through what I call the six Ps. And I've been working with my clients for over 20 years on these six Ps that I've come up with. The first P is people. You don't build a business. You build people and people build the business. The problem with the graphics company is they didn't have people. It was just husband and wife and one employee. And, you know, not only did I save their business, but I also saved their marriage, Chris.

And he actually talks about it. And I'm like, is that good or bad? Because some people are like, oh, you saved my marriage. It's bad. No. But anyway, he talked at my birthday party and had tears in his eyes. And he said, not only did you save my business and my home, but you saved our marriage too. So anyway, people, you got to have the right people in the right seats.

And you got to ask the who question. Who opens the doors? Who turns on the lights? It's as silly as it may sound. Who answers the phone? Who handles customer service? Who does manufacturing? Who handles complaints? Who handles distribution? Who handles, you know, banking and accounting and everything in the business? There's like, you know, a hundred who's. Who does that? You need to put a name next to each who, and it shouldn't be you, Chris. It shouldn't be you.

So you got to have a name next to each who. Who does that stuff in your business? And what are the seats? You know, one person can have three or four different seats, but you got to have the right people in the right seat so i suggest that every entrepreneur goes through this exercise identifies the seats in their company writes the names of who handles those seats and all the who's in your business and what the responsibilities are. And the key to success here is not to put you next to any who. So people is very important. And then you've got to be careful because business owners sometimes make really dumb mistakes.

You know, we have a manufacturing company we're working with that has 150 1099s in the manufacturing plant. Guess what? 1099s are not covered by workers comp you get one catastrophic event occur and you're out of business because you're gonna have to pay for that not only that but you'll have a class action suit from all the other 1099s yep so put w2s where they go put 1099s where they go i was working with another company that has a distribution business and he had a bunch of 1099s in the warehouse so i said that's really stupid they're driving forklifts if they get hurt you're screwed you're out of business okay so people

is number one you cannot you cannot have a business without people and there's a lot of businesses like dentist they're the only dentist chiropractor he's the only chiropractor photographer you have one photographer interior designer you got one interior designer so a lot of businesses that are not really sellable because they're a job not a business yeah that's a really good point yep and once you take the owner out of that business you have no business and that's what happened with the graphics company. That's why you're not sellable. If I take you two out of the business, there is no business. You can't work for anybody else because you've been self-employed since you were 14 years old.

So people is number one. And then number two is product. Ask yourself, is your product, is your industry thriving or dying? Do you have an Amazon in your hands or do you have a blockbuster? And if you have a blockbuster and many industries are dying right now because of COVID, well, many industries are thriving because of COVID. But if you're dying, then you need to pivot and you need to get creative and you need to throw that box away and figure out how to act and grow at revenue streams and ask yourself,

this is the most important question a business owner could ask themselves. This is how you become, how you go from transactional to transformational. Ask yourself, what business are you in? Yeah, it's... Are you in? And then here's a follow-up question to that the most important question what business should you be in so let me give you a couple of examples mcdonald's did you ever watch the movie the founder i did not but i'm kind of familiar with that okay so the founder so ray crockett who really took mcdonald's and grew it into this huge empire not the mcdonald brothers ray crockett came in and grew that business ray crockett was in the bank and trying to borrow money he had already he already taken out a loan against his house and pierced his corporate vow.

He was already upside down, and he wasn't hardly making any monies off of royalties. So he was in a bank trying to borrow money, and the banker said, you're already over leveraged. I can't lend you any money. And then there was a young gentleman that followed him out, and he says, hey, I just happened to overhear your conversation. He said, can I ask you a question? And Ray said, of course. He goes, well, what business are you in? He goes, I'm happened to overhear your conversation. He said, can I ask you a question? And Ray said, of course. He goes, well, what business are you in? He goes, I'm in the restaurant business.

He goes, no, that's not the business you're in. He goes, what business are you in? He goes, I'm in the restaurant business and I don't have time for this. And the gentleman said, what business should you be in? And Ray says, I have no idea what you're talking about. And he goes, you need to be in the real estate business. You're not in the hamburger business. You're not in the restaurant business. You need to be in the real estate business because if you're in the real estate business,

you buy up the land, you build the buildings, you lease them to the franchisees. The franchisees are noncompliant. And guess what you do? Just foreclose. Put another franchisee in there one question what business are you in what business should you be in has made mcdonald's the largest real estate holder in the world wow in the world

and amazon did the same thing amazon asked themselves what business are we in and they said we're in the book business and they said said, what did we do really, really, really well? And what should we be in? And I said, we should be in a fulfillment business and carry everybody's products. And that's how they got in a fulfillment business. So everybody should be asking themselves, what business are you in? What business should you be in? And then pivot if you're in a dying industry and innovate. The number one key to success is innovation. The next business I start, I'm going to read your book and I'm going to plan out my exit. So I don't know if we covered this,

but the five types of buyers of a business, what are they? And how do you know which type is right for you? Do you want me to finish the six P's? Sure. I'm sorry. Yeah, go ahead. I'll do the six Ps and then I'll get into the five types of buyers. So we talked about people. We talked about products. The third P is processes.

Processes are huge, huge, huge, huge. And most business owners don't think about process until they have to out of necessity. Because a customer complained or something happened or somebody got hurt and then a process becomes developed. That is not the time to develop processes. You should develop processes in the beginning with the customer experience in mind. So McDonald's, I'll tell you another McDonald's story and then you're going to have to go watch a movie.

But the McDonald brothers took all their employees out to an empty tennis court because their mission, their objective, because this was back in the 40s and 50s. And back in the 40s and 50s, you had all the like Sonic type drive ups where they would come out on roller skates and the food, the order was always wrong. It was always cold and it was always slow. So McDonald's objective was we're going to create quality, great tasting food fast, fast within so many, you know, within two minutes or whatever it is from the time you order to the time you receive it. And so they took all their employees to an empty tennis court field and they had them practice. Who's going to take the order? Who's going to toast the buns? Who's going to cook the burger? Who's going to put the pickles on the bun and who's going to give it to the client?

They design their processes with the customer experience in mind. So no matter if you go to McDonald's in Russia, China, Hong Kong, Singapore, US, the experience is the same because the processes were designed with the customer's experience in mind. And guess what? They're dummy proof. You need to have a dummy proof policy and procedure manual for your people in an SOP checklist. And you need to make sure all your employees are trained on it and you need to hold them accountable. But processes,

most companies like we're selling a $60 million company right now, and they don't have all their processes down. Oh, wow. Yeah. So the fourth P, and the biggest value driver, Chris, is proprietary. Proprietary. Biggest value driver. So there's six pillars to proprietary. Number one is branding. The more well-branded you are, the more money you'll get for your company. Guess who has the biggest brand of all? I can think of a few, or at least

that I perceive. I don't know. Go ahead and tell us. Well, the number one brand is Apple. With $389 billion. Yeah. And that's without assets, cash flow, inventory, anything. It's for $389 billion.

Coca-Cola is worth $89 billion. Wow. Build your brand, build your exit and exit rich. And then the other most important thing is trademarking. So, so many business owners get a state trademark, but they don't get a federal trademark. So, I see a lot of business owners that receive a letter that says you can't use this company name anymore because the trademark belongs to them. So, now they're spending a tremendous amount of money fighting them, and they'll never win.

So now they have to change their company name and start their branding all over again. So if you don't listen to anything I've said, listen to this. Go get a federal trademark. Protect your company name. Protect your logos. Protect your slogans. Protect your IP.

So branding and trademark is huge. And then patents. Pat patents are a great value driver. I mean, we sold a company for $18 million because they had 18 patents. Wow. And then the other big one is contracts in place. You should always, if you're a manufacturer, you need a manufacturer's contract with your manufacturing plant distribution, you need a distribution contract, vendor contracts. Most importantly and the highest value are those customer contracts. Those client contracts will bring money because buyers want to buy a business that has built-in income, reoccurring income. So contracts are huge, but here's the number one mistake that business owners make with contracts. 99.9% of them never have the transferability clause and 99.9% of all sales are asset sales,

not stock sales. So go get that two sentence clause that says this contract is transferable. That's one thing I never thought about. Nobody ever thinks about that. And it will stop a deal in its tracks, and a buyer won't buy the business if the contracts are not transferable. So the other big thing in proprietary is databases. If you have a large database and you can retarget it and repurpose it, then I can get you a lot of money for that. Facebook paid $19 billion for WhatsApp and WhatsApp was losing money. They were hemorrhaging.

But they had a billion users and Facebook knew they can monetize and ROI that investment. And then the other thing in IP is real estate in business. What does that mean? Let's say you're an e-commerce business and you have a household product. Let's say you sell sheets or you sell pillowcases or you sell

pillows and you're number one on Wayfair. That is prime real estate. Let's say you sell a niche product on Amazon and you have a patent and you've cornered that market on Amazon. That's prime real estate. Let's say you have a skincare product and you have, you know, Glenn Beck or Rush Limbaugh or the Kid Craddock show or whoever selling your product, they can only endorse, you know, one industry, right? They can't endorse like five different skincare companies. So that's prime real estate and we can get you a lot more money for that real estate. Wow. Yeah. And then the fourth P, because I know you're being very patient here on my piece, the fourth P is patrons.

Patrons, client base. Ask yourself, do you have a diversified client base or do you have customer concentration? I once sold a, well, I didn't sell it. I had to merge it. I once had an advertising business, a media business that specialized to casinos they have five casinos during the process they lost two oh they were almost out of business because they had to keep the high overhead and they had to keep the high talent people that they had to service the other three casinos so i ended up merging them with

another advertising company oh wow you gotta. So you got to ask yourself, do you have customer concentration or customer diversification? And if you've been in business 15, 20, 30, 40, 50 years, look at your client base. Are they aging out? If they're aging out, you better start replacing them. But millennials don't buy the way that baby boomers buy. So you need to, again, ask your clients, what do you need?

What do you want? How can I make it easier for you to do business with us? And give them what they want. If you don't, somebody else will. There you go. The last P and the most important P, and the only P that probably we all care about is profit. And I always say that profit is never the problem,

but always the symptom of not operating on one of the other piece if you don't have the people in the right seat if you don't have the right people if you're doing all the who's and you don't have everybody assigned to a who you're going to lose money if you're if you're in a product or an industry that's dying and not thriving and you haven't innovated you're going to lose money. If your processes are not productive and efficient and designed with the customer experience in mind, you're going to lose money.

And if you haven't protected your IP, your proprietary, and you might lose your company name because of that, you're going to lose money. There you go. The company is never the problem. It's always the symptom. The six Ps, and you can find them in your book. Yes. They're all in. Just find them in your book. Yes.

They're all in. Just go to exitrichbook.com. These are excellent points. They really are. I mean, I'm actually learning a few different techniques than I never really thought about. I remember years ago, I actually met a guy, and I don't think his business was very big,

but he did get a C&D, a cease and desist order over a federal trademark. And I don't know why he just shut his whole business down and he told me that and i said to him i said why don't you just change the name of the company he looked at me like i just did the dumbest thing i ever did i was like why you just you just go down and change the corporate name i mean like that's you don't have to shut the business down. Business owners, I don't know why. They just sometimes make really stupid, stupid, stupid, stupid mistakes. And I just, you know, I don't know why.

I don't know. They just need to, like I said, they need to become more transformational and they need to think more before they make these kind of decisions. So you want to know about the five types of buyers, right? Yep. All right. And you want to know, how do you know which one's right for your business, right? Okay. So number one, 90% of buyers are first-time buyers. First-time buyers will buy smaller businesses, typically under $5 million or under $3 million. And a lot of them are looking for coffee shops, restaurants, you know, those types of businesses, retail. A lot of them will

never pull the trigger because they don't have a strong enough powerful why to pull the trigger. So they'll waste time, you know, and those are first-time buyers. So if you have a small business, like a restaurant, a coffee store, retail, you know, anything like that, I would say under a million, in all likelihood, you're going to get a first-time buyer. That's who your buyer is going to be. Yep, and a way to negotiate with first-time buyers the way the way to sell to first-time buyers is you gotta ask them a series of questions number one before you waste your time make sure they're qualified make sure they have the money but make sure they're willing to pull the trigger and spin the money because just because you have it doesn't mean you're going to spend it

and really qualify them at what their comfort level is, what their skill sets are, what their passions are, what their strengths are, what their weaknesses are, and try to get them comfortable buying a business. That's first-time buyers. The second group is PEGs, private equity groups, and private equity groups buy two ways. They buy based on platforms or add-ons. So let's say that they want to get into healthcare and they've never been in healthcare. They're not going to buy a small healthcare company. They're going to buy a large healthcare company with an EBITDA. EBITDA is earnings before interest, taxes, depreciation, amortization of at least $3 million and up. At least $3 million and up. Okay. Then when they get that platform, they'll buy what's called an add-on. So let's say

that they bought a hospital and an add-on could be other hospitals or urgent care centers or something that's congruent and strategic. And then they'll look at buying those add-ons for even a, they'll go under a million for add-ons. The platforms have to be three million and up. Okay. So that's how private equity groups fly. And then you have strategics and competitors. Now, strategics and competitors can sometimes be the best buyer, but sometimes they also want to pay pennies on the dollar, you know, so you really got to make sure it's the right fit. Buyers buy synergies. So let's say we have a plumbing company and there's an AC heating company. Well, a lot of these AC heating companies are creating

a one-stop shop where they have AC and heating, they have electrical, they have plumbing, they might even have some construction, they might even have flooring. Okay? So that's kind of a one-stop shop. So if we have a plumbing company, one of the first things we're going to do is pull a list of HG companies that want to expand. That's a strategic. Or a competitor would be another plumbing company.

Okay? Then we have sophisticated buyers serial entrepreneurs they they are typically industry agnostic and they are just buying ebita so i have different buyers you know i'm one buyer that's been in construction been in manufacturing has a hospital has a truck stop you, there's no rhyme or reason to the companies he has. He just buys EBITDA. And then the last type of buyer is a turnaround specialist. So a turnaround specialist, well, let me kind of back up a little bit

because you asked me, Michelle, what are the five types of buyers and how do I know if they're right for me? So if you have a small business, that's going to be a first-time buyer. If you have a business over $3 million, that could be attracted to a private equity group. If you have a business that is in that specific industry, healthcare, then a private equity group could still be attracted to you if they have that platform. Sophisticating competitors are attracted to synergies. They buy talent, they buy contracts. That's why you got to make sure your contracts are transferable. They buy patents, they buy something like, I'll give you a quick story. We sold our oil manufacturing business and we appraised it in the $9.8 million range.

We had about 550 buyers. We disclosed them all. We had about 12 LOIs. And then we found a buyer that was very strategic, that had a similar product and service but different. And this company had a few patents. But this company had customer concentration. 60% of their revenues was tied up in the BP contract. Wow.

This buyer had been trying to get in BP for years and years and years with their current products and could never get in. They gave me a $15 million offer for 70% of the business because that's what BP was worth to them. Wow. So buyers buy synergies. Okay. So you, you gotta see, you know, you gotta ask yourself, you know, who's, who's a strategic, who's a competitive, what synergies do I have that would be attractive, attractive, that would create somebody to help, but everybody else, because we have so many buyers, we have the largest buying database in the industry. We're able to create bidding wars. Okay. And then the last, the last

one, oh, so serial entrepreneurs just buy EBITDA. So if you got high EBITDA, they would be interested in you. And then you have turnaround specialists. They buy, they buy failed assets, distressed assets. So they go in, they fix them, they turn around and sell them. So any, you know, any businesses that are really hurting right now, like restaurants, hotels, gyms, anything like that, turnaround specialists might be interested in the business. Yeah, turnaround specialists, that's an interesting business. That's what we used to do. We used to hunt for stuff.

And the beautiful part is we used to to cherry pick and people would just send us their pnls and we'd just be like wow okay normally if you call a business say hey can we get your pnl like no um so this is this is interesting where people need to design this and really think pre-think um very much about how they're designing their business, what's going into it. What is, for people out there, an M&A advisor, and what are some of the most important questions to ask when choosing an M&A advisor or a business broker to work with? Yep, I also have in Exit Rich a chapter called the 10 questions I should ask, or the 20 questions I should ask an M&A advisor? Number one question is, how long have you been doing this? How long have you been doing this? How many businesses have you

sold? Are you the owner of the company? Because here's what happens. A lot of times owners will hire brokers and they've been there two weeks or maybe they've been there a year and sold one deal and you don't want somebody practicing on you. Plus, the owner decides where the budget goes. The owner decides whose money they're going to spend what on. So if you are going to hire a broker and you're not going to deal with the owner, that's fine. But make sure you have a conversation with the owner and get clear on what advertising budget is going to be spent on your listing. Yep.

And then I would also ask, how many buyers do you have in your database? And where do your buyers come from? I mean, do you have buyers from all over the world or do you just have buyers in one state? And I would ask them about, what do you do for me? What's your process? How do you evaluate businesses? Because a lot of brokers are just order takers. You say, oh, I'm going to sell my business for $10 million, and they're so excited to get a listing, they just sign it up. I have a friend of mine in Houston, and that's what she does. Because I went with her on some deals, and this was years ago, and she had a client sign one at $15 million, and she said, okay,

and just signed up the listing. I had them sign it, and I said, Mary, you didn't even do evaluation. Wow. And she says, oh, no, I let my clients do the education i said what do you mean and she said well i'll bring buyers and the buyers will tell them what the business is worth and i said but it's your job to tell the owner what the business is worth so a lot of brokers are just order takers and they just sign things up. We don't do it that way. When we do valuations, it takes us two to three weeks to do it. We evaluate your business using five different methods. And one of those methods is a 6P approach or six piece.

I've just took you through and we score all of our businesses on that six piece. And we know that if a company functions on all six piece's, we can get them more money for their business. So there you go. I would ask them, how do you behave with businesses? And then what kind of prospectus do you put together on my business? Because a lot of brokers just put together a one sheet. Well, one sheet doesn't tell you anything. I mean, we're selling a $60 million company right now, and the prospectus is 75 pages. Yep.

And then I would ask, how do you qualify buyers? Because a lot of brokers don't even qualify them. Yeah. A lot of brokers say, okay, send a nondisclosure agreement and doesn't even get their financials. So that's when you risk confidentiality. When you start telling a bunch of buyers about a business and don't even take the steps to qualify them, now you've got people knowing about the business that should never know about it because they're not qualified in the first place.

That was honestly why we got into that thing because I had some friends who were business brokers and the turnover at these companies was just crazy. It's some of the companies we saw, you know, and, and, and they were hiring just anybody who would fog a mirror. And, you know, they, like you said, they'd sign up anything. I've been a realtor. And so I know the importance of, if you're going to list a client, you've, you've got to make sure that you, like you say, do your deal, your due diligence and you, you, you don't have them overpriced out of the market because all you're going to do is just

have a listing that sits and, and doesn't sell. And then eventually they're going to get sick of waiting for you to sell their property. Someone else is going to come along and they're going to talk reality to the people and go, well, the reason your thing isn't selling is because you're way overpriced and there you go. And then you're never going to get that sale, of course. And then, like you say, if you're the seller, you're just wasting time. And if you're in a hurry, you're you're just wasting time and if you're in a hurry you've got a gun against your head uh you're probably going to hit the bankruptcy court

before you do it these are brilliant uh tips for people that are out there in the marketplace um anything more we should know about you and your book before we go out well there's so much to know but we do want people to buy the book and get the data. Everybody, like I said, you know, rather you're wanting to sell a business or not, you want to grow a business that makes money for you. And you'd be shocked about how many businesses just don't even make money. Yeah.

It's not so much about selling. It's about building a sustainable, scalable business. And when you are ready, it will be sellable. So all of the listeners, if they can just go to exitrichbook.com, just go to exitrichbook.com. And here's, so we put together this great package for pre-sales. Now, yes, you can buy the book on Amazon or Hudson or Barnes and Noble or Books A Million, but at exitrichbook.com, you can get it. I hate to use the word cheaper. Someone said less expensive. So you can get it for $24.79, which includes shipping $24.79. On all the other sites, I think it's $27.97. So for $24.79, includes shipping, you will get the digital download

immediately. Then you will get lifetime membership into Exit Rich Book Club. In that book club, all the things that I've been talking about here today, I go in and take a deeper dive and really explain these techniques and strategies and how to implement them. Plus, I have digital downloads. So if you've never seen an employee handbook or an organizational chart or a due diligence checklist or an LOI or a purchase agreement or closing docs. It's all there for you to review. And so we also give you a 30-day membership into Club CEOs, where it is a group of entrepreneurs, and we do hot seats, Q&As, masterminds to help you build your business.

So it's really good value. When the book comes out in January, then we ship it to your doorstep. So go to exitrichbook.com. Also text me at 888-361-0066. Text Michelle. And then you will see all my social media, all my websites. And of course, you'll see exitrichbook.com there as well. There you go. That's brilliant, Michelle. I love that deal that you're offering where people can get involved with the masterminds

and learn so much about their business and growing it and getting prepared for the sale. Yeah. Yeah. I decided to do that. Like I'm even then I'm even actually building an online course called build to sell because so many of these business owners really, really need help. So they have an asset that they can sell. And that's the biggest issue. I mean, so many of these business owners are just stuck and they don't know what to do next. So we do have this blueprint that will be coming out in the next three months that will take them step by step. But the book, Exit Rich, also takes them through a step by step process. There you go. There you go. That's awesome.

Michelle, it's been wonderful having you on the show and share this brilliant information with us. Thank you very much for coming by. Thank you, Chris. Thank you. My pleasure. Have a good day. There you go. And to my audience, be sure to check it out. I would say order it from Michelle because yeah, I am seeing it at $27.95 on Amazon. Sort it from Michelle and you can get involved in the masterminds and all that good stuff. It's Exit Rich, the 6P method to sell your business for huge profit coming out January 26th. You pre-order it today and take advantage of it and all that good stuff.

The one thing I forgot to tell you and your listeners is that the book is an ink original and it was endorsed by Steve Forbes. Steve Forbes says $ out of ten businesses don't sell oh wow yeah i forgot to say that but anyway it is endorsed by steve forbes cool uh to my audience go to youtube.com for just chris foss hit that bell notification so you get all the notifications of everything we do you can see the video version of this conversation you go to goodreads.com forward slash Chris Voss, and you can see all the books you're reading and reviews and stuff like that.

You can go to thecvpn.com or chrisvosspodcastnetwork.com and see all nine podcasts. You can also go to facebook.com forward slash thechrisvossshow. Thanks so much for tuning in. Stay safe, and we'll see you guys next time.