In a recent episode of the Negotiations Ninja podcast, Michelle Seiler Tucker—a mergers and acquisitions master intermediary, a senior business analyst, and the best-selling author of three books—outlines her 6 P method that any business owner can use to exit rich.
P #1: People
Everyone’s likely heard Zig Ziglar’s quote, “You don’t build a business, you build people, and they build the business.” It’s no cliche—it’s 100% true. You can’t sell a business if it’s 100% dependent on you. Entrepreneurs need to focus on their strengths, hire out their weaknesses, and focus on the right area. You have to determine who should be filling the roles around you. You should never be next to the “who.” The goal is to grow a business that can run without you. You need a COO, CFO, and other management in place. Buyers also want employment contracts and non-competes for those you do hire.
P #2: Product
If you have the wrong product, you could be dead overnight. A lot of industries are failing because of COVID, and a lot of industries are thriving because of it. Where do you fall? Are you on your way up or on your way out? Are you an Amazon or a Blockbuster?
If you’re a Blockbuster, align yourself with an expert who can see things you can’t. Ask three transformational questions:
- What business are you in?
- What do you do really well, better than anyone?
- What business should we be in?
Those three questions transformed Amazon from a small bookseller to the multi-billion-dollar conglomerate they are today. If your product is failing, you need to pivot and innovate.
P #3: Process
Most businesses don’t think about their process until something is wrong. You need to think about processes from the beginning. In the 40s, the McDonald’s brothers wanted to open a fast-food restaurant. They had a mission, vision, and desired customer experience. They designed a process to achieve the customer experience. Their goal was to deliver great-tasting food in two minutes or less. They tweaked and nailed the process. Michelle notes that processes have to be designed with the customer experience in mind. It must be well-documented, and you must have SOP checklists. You won’t sell a $20 million business without your processes documented.
It can’t be easier for you and difficult for your customer. People wonder why they don’t have customers. It’s because they forgot about them!
Michelle ordered a jewelry box from a huge retail chain, and they shipped it to her instead of her client. Michelle’s assistant tried to give it back to UPS to ship to the right address—but they don’t do that. They send it back to the warehouse of the retailer. It was the last jewelry box, and Michelle asked them to get it back but was told in response that they don’t do that and the product will go somewhere like TJ Maxx or Marshalls. What a terrible process.
P #4: Proprietary
Proprietary is the highest multiple driver. It can take you from a 5 multiple to 10x quickly. What are Michelle’s six pillars of proprietary?
- Branding: Are you well-branded and relevant to consumers?
- Trademarks: Have you properly trademark your business name, podcast, slogans, etc.?
- Patents: Have you patent your designs and products? It’s what every Shark looks for…
- Contracts: Make sure you have contracts in place for everything: manufacturing, vendors, clients, etc.
- Databases: Do you have a client database? Hundreds, if not thousands of users that bring value?
- IP Real Estate: Have you cornered your market on an online marketplace like Amazon, Wayfair, Etsy, etc.?
All of these factors drive value for your business.
P #5: Patrons
You can’t have a business without clients. 80% of your business accounts for 20% of your clients. If you lose a client, you could be out of business. You want customer diversification and constantly balance the 80/20. Michelle worked with an advertising agency that was worth $10 million—but only had five clients. Their five clients were casinos. During the valuation process, they lost two of the five.
P #6: Profit
We are all in this to make money. Michelle points out that profit is never the problem. A lack of profit is a symptom of not carefully watching the other five P’s. Some of Michelle’s clients hadn’t watched their people or their process. Someone Michelle worked with was embezzled three different times. They didn’t have a process in place to closely track their accounting—or to hire the right people. If you’re not profitable, go look at the 6 Ps to exit rich and see where you’re lacking.
To learn more about Michelle’s 6P strategy to exit rich, listen to episode #205 of the Negotiations Ninja podcast.
Have questions about a negotiation? Text me at 587-315-5948 for negotiation advice!