For founders and entrepreneurs, there are few moments as exciting as selling your business. An exit represents the culmination of years of hard work, and the potential for significant financial reward. It’s easier said than done. An exit can be a daunting process and preparing your business for sale requires careful planning, execution, and surviving the emotional rollercoaster. Here’s the story of one founder's journey to prepare her company for exit and the key strategies she has used to help prepare for THE big step.
TechFW member, Meg Renninger, CEO and founder of Southside Plants, is successfully navigating the exit process. Her business began, as many do, after she searched for a solution to a problem. Her problem: cloning orchids. Through research, she found a cloning paste, but with her education in Environmental Conservation of Natural Resources, she realized she could create an even better paste… and her proprietary Crazy Keiki Paste was born.
After launching her product on her website and on Amazon, she sold 200 units the first month, 400 the next, and sales continued to grow monthly. She remained curious about her customers, continuing to research chances to expand her products and find inspiration from unexpected places. Her curiosity led her to trends in various industries – even unrelated ones, like dog cleaning wipes.
When opportunity strikes, an entrepreneur must strike, too. She leveraged the unexpected pairing and created plant cleaning wipes, a product that has gone viral on TikTok and Buzzfeed. Strong founders continuously ask themselves how they can innovate and continue to expand and grow the value of their business.
Meg, a self-described "micro, micro-trend hunter" shared, "One thing I learned with e-commerce is to find your niche and expand within that niche."
Meg set her exit plan from the day she founded the company, and after the last several years of building and growing the business, Southside Plants is now for sale.
Meg's experience offers valuable insights for other founders and entrepreneurs looking to prepare their businesses for an exit. According to Meg, the key to a successful exit is to plan ahead and understand when it's the right time to sell. This means setting a timeline and milestones and working backward from that goal.
For Meg, this timeline was three-to-five years from the day she founded her company. Every decision she made in the days, weeks, and years that followed was with the exit as her focus. By setting this goal early, Meg was able to build the business with a clear vision in mind and ensure that the company was well-positioned for sale when the time came.
How do you ensure that your business is ready for sale? Meg found insights in The EXITprenuer's Playbook. According to Joe Valley, the author of the playbook, there are four key pillars to consider: risk, growth, transferability, and documentation.
Risk is assessing the potential risks to your business. Are you reliant on a single stream of revenue? Do you have patents or trademarks in place? Are there any points of weakness that could shut down the business? By addressing these risks early, you can improve your risk profile and make your business more attractive to potential buyers. Southside Plants worked hard to diversify its revenue and introduce multiple product lines. This also included opening other channels, in addition to introducing a wholesale customer strategy.
Growth: Buyers want to see that your business is growing in the short term and over the long haul. This means demonstrating strong revenue growth, as well as growth in key metrics such as customer acquisition and retention. Showcasing multiple revenue streams and product SKUs helped Meg to show both monthly and annual growth for her company.
Transferability is a key factor. Buyers want to know that your business can be transferred to them and run just as effectively. This means having systems and processes in place that easily can be transferred, as well as building a brand that isn't solely dependent on your personal reputation. Meg worked with third-party contractors, prep centers, and manufacturers so she was no longer the nexus point for getting her products out the door.
Finally, documentation is crucial. Buyers want to see that your business has clear processes and systems in place. This includes contracts with vendors, as well as templates for email campaigns and customer service. It also includes any patents or trademarks that are part of your intellectual property. If someone will eventually be stepping into your shoes and taking over day-to-day operations for the company, Meg suggests ensuring your daily and weekly processes are well documented to allow for a smooth handoff.
By preparing your business early and focusing on these four pillars, you can ensure that your business is well-positioned for sale. Of course, every business is different and the exit process is never the same. But it’s always complex and challenging. By following these key strategies, founders can increase their chances of a successful exit and reap the rewards of all their hard work.