We recently asked some friends and clients who have successfully sold their business to share lessons they learned as they navigated the process from initially considering a sale, all the way through to the closing table.
Belinda DiGiambattista is the founder of Brooklyn-based Butterbeans Kitchen, a contract food service management company that provides meals to schools and other organizations throughout the tri-state area.
Belinda recognized the need for healthy school meals when her children were in preschool. She founded Butterbeans during her final year studying for an MBA at New York University, and spent nine years building the company before making the decision to sell the company. Hughes Klaiber represented Belinda and Butterbeans Kitchen in the sale process.
Below, Belinda discusses how she prepared for the sale to increase valuation, and shares some of the challenges and key takeaways from the process to exit her business and start a new career.
Sally Anne Hughes: Why did you decide to sell Butterbeans?
Belinda DiGiambattista: I started my business with the goal of founding, growing, operating and selling a company. A sale was always part of the overall plan so I picked a time to sell when the business was doing really well and we had steady month-over-month cash flow growth. I was also working a lot, often on weekends, and I had young kids. I was ready for a new career, where I could spend more time at home.
Sally Anne: How did you prepare for the sale?
Belinda: Two things, it was all about educating myself on the process, and also getting the business to the point where I could sell for the valuation I wanted. I read articles, spoke with other people who had sold their companies, and attended some presentations on selling a business. Our initial meeting was helpful in understanding the valuation drivers for a company like mine, and when we first spoke, the business was not at a point where a sale would meet my valuation goals.
I spent the next 18 months driving revenue and income growth. Everything was based on EBITDA, and I focused on that one metric to get the valuation that I wanted. The business was ready to grow, but the goal of a sale helped me drive it to the next level.
I focused on business development, and we were able to bring on several high-profile, long-term, recurring-revenue contracts in the 18 months before the sale. I have an accounting background, so our financials were already clean and organized, but I did work on getting all our processes documented and accessible.
"The business was ready to grow, but the goal of a sale helped me drive it to the next level."
Sally Anne: What was the biggest challenge you faced in the selling process?
Belinda: The biggest challenge was not knowing if I’d find a buyer who wanted to pay my price. I was not going to take a low offer, because I had great cash flow and a business that would continue to grow. My Plan B was to reorganize internally before selling for less than what it was worth. Also, juggling the day-to-day responsibilities of the business, while also driving more growth, and meeting with buyers, was basically like taking on a second job, and that was difficult.
Sally Anne: Was there anything that surprised you?
Belinda: I was surprised (in a bad way!) by how low some of the initial offers were. A few buyers offered me a low price and asked me to stay on to run the business for two years. Why would I give the buyer all the upside? But I ended up selling to a great buyer who saw the value in the business, and was willing to invest in what I had built. But on the flip side, I was pleasantly surprised by how fast it all went. The deal took nine months from the time we actively started looking for a buyer to the time the deal closed. If your company is generally saleable, and if the market is reasonably strong, then you should have a similar experience.
Sally Anne: What were some of the key takeaways from the process?
Belinda: You need experienced advisors to help drive the process. They can help achieve your goals with a buyer by negotiating in a very professional way that is not possible between the buyer and seller directly. There's no way that an entrepreneur can be their best self in negotiations, there's too much nuance on both sides. The buyer and seller are emotionally involved in the transaction, and that alone can derail a conversation unexpectedly, and unnecessarily.
Sally Anne: Would you have done anything differently?
Belinda: At one point we discussed structuring a deal that included an ESOP or cooperative, where the employees could purchase the company instead of finding a buyer. At the time, I didn’t seriously entertain that. As I consider the importance of all people being given an opportunity to have ownership in a business, in hindsight I think I could have explored that option more seriously.
Sally Anne: What are you doing now?
Belinda: One of the most important parts of planning to sell a company is thinking about what you'll do after the sale. It’s hard to push through with a sale if you don’t have a personal plan for after the sale. I started thinking about that well before I sold the business. I initially wanted to be a business coach to help business owners succeed the way I had, so I actually took on a client about a year before I sold. Fast forward four years, and after coaching a few dozen businesses, I've noticed that many small businesses lack a clean set of financials. I now offer Controller Services, as well as more hands-on consulting services. I’ve just launched my new website (www.belindadigiambattista.com) and I’m excited to continue to build out my business model for this work, while helping other business owners.
"One of the most important parts of planning to sell a company is thinking about what you’ll do after the sale."
At Hughes Klaiber we assist entrepreneurs with all aspects of the process to sell or acquire businesses. Email us at firstname.lastname@example.org with questions or to discuss any aspect of mergers and acquisitions.