Entrepreneurs are always thinking steps ahead. Sometimes, this means thinking to the end of the business that you want to create and the exit plan you have. How do you start and build a business to ensure that later on, your business will sell and be worth all the hard work that you’ve put into it?
Michelle Seiler Tucker, founder, and CEO of Seiler Tucker joins this episode of Making Bank. Michelle helped over 500 businesses grow and then later on sell for a high value. With closing 99% of the deals that she works on, she has experience in the field of building businesses and selling them.
Breaking down the six most important things that factor into the value of a business, Michelle gives her insider tips on how you can make sure your business is sustainable and worth a high price. She also talks about how to shape your mindset in business to reach your end goal.
Aspects of A Valuable Business
Buyers look for businesses that operate on what Michelle calls the Six P’s. These are the six things make up the infrastructures of the top businesses and companies and help them become successful and sellable. “You need to build a sustainable business. Even if you never want to sell, you should do this anyway to get a sustainable, scalable business. And when you’re ready, you’ll have an actual, sellable business.”
The first thing is people. The number one reason why some businesses aren’t sellable is because of their owners. If you take an owner out of the business, and suddenly all the success is gone because they are gone, the business won’t last. It wasn’t built on a team that could grow and changes with processes implemented to keep a system in place. You’ve got to have the right people in the right positions.
The second P that could hinder or help the business is the product. When it comes to the product, it’s your place in the industry and service. “You have to look at your industry and you have to ask yourself, is my industry/my product, on the way up or on the way out. Is it thriving or dying?” Product is one of the biggest reasons why a company goes through different lifecycles and allows the business to go through change.
Processes, the next P, is something that often gets overlooked. This is implemented by setting up an exit plan. Oftentimes, people who run businesses don’t always plan on leaving them – until something happens and they are left with no strategy. It’s also making sure that things are in place so that if something bad happens, there is a plan of action thought out rationally beforehand. “You needed to think about your processes from the beginning of buying or starting a business and create your processes with the customer experience in mind.”
Proprietary is another huge value driver for businesses. This means creating a well-branded business with the consumer in mind. This can also deal with endorsements and creating digital assets. Trademarking, copyrighting, and acquiring assets fall under this category.
The fifth piece is patrons. When it comes to operating a successful business, the customer base is loyal and diverse. It can’t just be concentrated on one specific type of customer, rather, it needs to have variety.
The last P is profits. “Profits is never the problem,” Michelle says. “It’s always a symptom of not running on one of the other five.” Profit problems are from people or the product, the other parts of the company not working together in harmony.
Creating a Business Mindset
When you’re trying to establish a business that is going to last, you’ve got to have the right mindset from the very beginning. This doesn’t mean that you’re building it intending to sell. Michelle says, “Most business owners treat their businesses more like a baby versus an asset that they need some bill to be sellable.”
This is starting with the end in mind. Know where you are going. So many business owners have no idea where they’re going, and they circle around and around. Failing to plan is detrimental, and your first goal should be figuring out your desired price tag for your company and getting it there. It might be too high, but at least there’s a goal in mind for you to work towards and see.
Sometimes, most business owners don’t have any idea how much their business is worth. Business owners need to be involved and know what is going on in all the important aspects. One of the biggest problems is that sometimes business owners don’t know their numbers.
If you’re not going to be in charge of your money, make sure you have someone else put in charge of the money. Believe it or not, a lot of business owners don’t understand their numbers until it is too late, and they are closer than ever to being out of business. The main goal with businesses is creating a steady source of profit that will last. Know what your business is worth and be sure to keep up to date with your accounts.
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