At Cincy Brands, exit preparation is one of the most essential things founders should start thinking about. Often, exit planning should occur 12-18 months before you want to exit. When you are making business decisions, you should always have the exit in the back of your mind.
We have spoken with hundreds of CPG brand founders – from bootstrapped to those that raised a small amount of equity. Every founder’s motivations are different. Based on those conversations, we recommend that all founders take time to reflect and write down the most important things to them in an exit.
Below are ten thought-provoking questions founders should ask themselves when planning their exit strategy:
- Am I mentally ready to sell? How much of my personal and professional identity is tied to the business? Am I ready to move on?
- What price do I want to get for my business?
- Have I researched recent valuation multiples for businesses comparable to mine? Am I ok with those valuations?
- Are my valuation expectations realistic? Temper expectations to your current size. If you read that X Company doing $100MM in revenue and $25MM in EBITDA sold to a BigCo for 6X revenue, it doesn’t mean a $4MM revenue company doing $400K in EBITDA is worth a 6X revenue multiple.
- Do I want to take care of key employees, suppliers, or partners during and after the transaction?
- Am I willing to accept an earn-out or retain a minority % interest in the brand as part of my compensation?
- Who is the ideal acquirer? Does the ideal acquirer have a strong track record of growth?
- Do they have references for other brands they acquired that had a smooth M&A and DD experience?
- Do I like the acquirer, do I trust them, and would I want to work with them (in the case of an earnout)?
- How would the acquirer grow my brand? Do they have the capabilities to grow in multiple channels?
We'd love to chat and offer advice if you're considering an exit. We're actively acquiring better-for-you consumer brands in beauty care, personal care, baby care, pet care, health/wellness, and home care. Even if you're not considering a sale, we're building long-term relationships for the future. Let’s talk.
