Next week brings the new book, Exit Rich, The 6 P Method To Sell Your Business For High Profit, by Michelle Seiler Tucker and Sharon Lechter.
Read this invaluable book if you are an entrepreneur or business owner preparing to sell your business.
Read this book even if you don’t plan to sell your business but want to learn how to operate at peak performance.
You’ll find answers to your critical questions and issues, including:
- When and how do I plan my exit strategy?
- What’s the best time to sell my business?
- What are the key factors in valuating businesses?
- How do I maximize the profits of my business?
- How can I optimize my customer and client base?
- How do I create an emotional connection between a buyer and my business?
- What are the mistakes that sellers make, and how can I avoid them?
Tucker and Lechter explain that buyers will pay top dollar for businesses that operate on the 6 Ps:
- People – leadership, team, relationships
- Product - deliverable
- Process – business systems, communications, marketing
- Proprietary – mission, legal, business systems, deliverable
- Patrons – customers, clients
- Profits – available resources
All six are essential components of any successful business.
Today, Tucker answered the following questions:
Question: Of the 6 essential components of a successful business, which one is typically the weakest going into a sale?
Tucker: There is not a one-size-fits-all answer to this question as this is very situational. The component that is the weakest for a business going into a sale can be dependent upon many different factors, such as the condition of the overall economy, consumer demand, or the business itself. For example, a business that is dependent on its owner will have People as its weakest component. On the other hand, businesses in the hospitality industry that are currently looking to sell may have products as their weakest component due to the current pandemic.
If I had to pick the most common, however, they would be People or Products. Many business owners do not have the right people working in their business and therefore end up working in their business instead of on their business, a huge mistake. They also do not have tenured management teams in place to run the business after the sale, leaving the buyer with a larger than desired responsibility. As for a business’s products, many companies make the mistake of staying in an industry that is dying. They fail to pivot with changing consumer demands. An example of this is Blockbuster. They saw how Netflix was disrupting the industry they were in and chose not to innovate to keep up with the times, leading to their inevitable bankruptcy. That is why it is important to AIM: Always Innovate and Market.
Weak people or products then leads to weak profits. Weak profits are never the problem, they are always a symptom of not operating on the other five P’s.
Question: Of the top ten mistakes business owners make when trying to sell their business, which one is the most common?
Tucker: The most common mistake that business owners make is not planning their exit strategy from day one. I have always believed that all business owners and entrepreneurs should be thinking about an exit strategy from day one. However, my reasoning for this has changed slightly over the years. In 2013 when I wrote my first book, Sell Your Business for More Than It’s Worth, I researched small businesses extensively and found that 85-95% of all startups will go out of business in the first one to five years. However, when I wrote, Exit Rich, in 2019 and did the same research, I found that the business landscape had changed dramatically. Now, only 30% of startups will fail within one to five years and a whopping 70% of businesses out of 27.6 million that have been in business for ten years or longer will fail.
This is why business owners should be planning their exit from day one, so they do not become part of this startling statistic. When business owners do not think about their exit strategy until they have to, due to an internal or external catastrophe, business is normally trending down and will be worth much less in the eyes of a buyer. This is why it is so important to plan your exit strategy from day one utilizing my ST GPS Exit Model®. We take all of our clients through this GPS system. According to Steve Forbes, 8 out of 10 business will not sell. The more time a business owner takes to think about their exit strategy, the easier it will be to sell their company for their desired price tag.
Question: How best does a seller cope with post-sale seller’s remorse?
Tucker: The best way to cope with post-sale seller’s remorse is to plan your exit strategy from the beginning and to know what you are going to do after the sale of your business. You cannot go through with your exit strategy if you don’t understand where you are beginning. You also need to understand your WHY. Why are you looking to sell your company? Are you looking to retire? Do you have medical bills you need to pay for or are you looking to get out of debt? Are you looking to enter a different industry? Understanding your WHY is one of the biggest ways to avoid seller’s remorse altogether.
Also, you need to be clear on your seller’s sanity check. Before you sell, and especially if you are retiring, you need to ask yourself how much money you need to live on and for how many years. You also need to ask yourself what you are most concerned with regarding the sale of your business. Are you most concerned about the profits on the sale of your company? Are you most concerned about ensuring the happiness of your employees or your clients? Or are you most concerned with the new owner continuing to grow your legacy and taking your company to the next level?
Planning your exit strategy from day one and truly understanding your WHY will help you to avoid seller’s remorse altogether.
Michelle Seiler Tucker is the Founder and CEO of Seiler Tucker Incorporated. She has sold hundreds of businesses to date and currently owns and operates several successful businesses. She has appeared in Forbes, Inc., CNBC, and Fox Business (starts at 8:35 minutes). She has also been a “celebrity judge” on “Pitch Tank” alongside Steve Forbes and Whole Foods CEO John Macke.
Thank you to the book's publisher for sending me an advance copy of the book.
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