At Hughes Klaiber we recently asked several clients who have successfully sold their businesses to share their perspective on the process to build and sell a business.
Holly McWhorter is a co-founder of organic skincare and bath brand PLANT Apothecary. Holly and her husband Bjarke Ballisager started PLANT Apothecary in 2012. After running the brand together for seven years, they sold to Rare Beauty Brands in 2019.
Read on for Holly’s thoughts on starting, running and selling a business – including things she and Bjarke learned along the way, advice for other entrepreneurs considering an exit, and how COVID is impacting business sales.
Sally Anne Hughes: As you built and sold PLANT Apothecary, were there things you learned through experience, that you wished someone had told you in advance?
Holly McWhorter: Yes -- many, many things!
A key point is to make sure you have, and take, time for strategic planning as you build the brand. Running any business, especially a consumer products brand, requires a lot from the founders. It’s easy to find your time completely consumed by day-to-day operations of the business. But even a business built on great product is hard to grow if your team’s efforts are all used on just keeping it running. Planning can give you the structure to know what to pursue, and what to walk away from. Potentially great growth opportunities, such as placement in a national chain, can pop up. But if there hasn’t been time for ongoing strategic planning, it’s hard to tell what’s truly a good opportunity, and what is not.
Planning can give you the structure to know what to pursue, and what to walk away from.
As you grow, think through your role in the business. Understand your personal strengths and what you like to do, and develop a plan to hire employees to fill roles you can’t or don’t want to play. Bjarke and I are both creative, and enjoyed that side of the business, but neither of us was excited about the administrative aspects of running the business. We learned to do it, but if we had delegated more of the administrative responsibilities earlier, I know we would have not only been happier but also able to grow the brand faster.
Invest in a good bookkeeper and get your financial records organized from day one. If you’re running a brand, hire a bookkeeper who understands accounting for a product-based business. Every little number will be scrutinized a thousand times when you try to borrow money, take on an investor, or sell the business, so it’s important to have sound financials. You also need accurate financial information to manage your business and drive profitable growth.
Finally, think and plan carefully before expanding your product selection. A tight product assortment can be a challenge when the PR engine and retailers are looking for newness to spark fresh media coverage, but ultimately, a larger-than-necessary product assortment can spread resources – both financial and human – too thin.
Sally Anne: What did you learn from the process of selling the business?
Holly: It’s very helpful to understand the mergers and acquisitions process in advance! Study the growth and exit strategies of other brands, and speak with advisors as you grow the business. It’s really helpful to have an educated sense of how things may play out, rather than just rolling with the punches. If you understand the sales process, understand who buys brands and why, you can plan to build the business accordingly, which will increase your valuation and make the process easier when you’re ready to sell.
It’s really helpful to have an educated sense of how things may play out, rather than just rolling with the punches.
Sally Anne: We’re seeing more interest from larger companies interested in acquiring smaller brands. Why?
Holly: Smaller brands are often better able to authentically tap into niche sectors of the market, for example certain ethnic group or followers of a certain type of lifestyle. They can also recognize and leverage new distribution channels very quickly. It’s generally easier and quicker for a large company to buy those capabilities, than to try to build them inside a large organization. While that’s driving acquisitions, bear in mind that in order to sell a small business to a large company, you need to demonstrate the buzzword of all acquisitions: scalability. Can the larger company take the foundation of your smaller company and build a skyscraper on it? Can it be done quickly, with reasonable investment? The more you can readily answer these questions with a “yes,” the better.
You need to demonstrate the buzzword of all acquisitions: scalability. Can a larger company take your foundation, and build a skyscraper on it?
Sally Anne: How do you think COVID will impact M&A, specifically larger businesses’ appetite for smaller acquisitions?
Holly: So many things that impact the consumer and the economy – politically, socially and practically – are in flux right now. COVID is changing consumer behavior and purchasing patterns, and consumers are looking for brands they identify with, and trust. At the same time, market factors that have been driving the growing appetite to acquire smaller brands before COVID, like growth of online retail and quest for small business “authenticity” have not gone away. In this environment, it’s definitely easier and less risky to acquire an already-successful brand, than to start from scratch. For those reasons, the search for brands to acquire will expand. I also think that it will bode well for acquisitions of smaller brands, because right now, a smaller acquisition is less risky than a big-bang acquisition that might falter.
Sally Anne: How has your career changed after the exit?
Holly: After a transition period at Rare Beauty Brands, I’ve been working on an assortment of writing and design projects. The most recent is a short book on science-backed, affordable natural remedies for helping your body fight off viruses, available on Amazon.