“Successful exit”. For many business owners and entrepreneurs, this phrase evokes visions of pina coladas overlooking sparkling beaches; it is the epitome of the journey, the goal towards which many are striving, the thing that makes all the hard yards in startup land worth it.
But of course, nothing worthwhile comes easy… and cocktails on foreign beaches are far from guaranteed!
The path to exit can be a rocky one, and it’s not for the faint-hearted. My husband and I have now sold three businesses over the years, with our most significant being our ecommerce business MTB Direct.
In late 2020, we set out to find an investor to help us take MTB Direct to the next level. Over the next few months, blood, sweat and (literal) tears went into the process, and by March 2021 we had successfully inked a deal with a private equity firm. We worked together with our new partners for a few years, before all founders made a complete exit in mid 2023.
Things have panned out really well for us, and I have absolutely no complaints. What I do have, however, are a few words of caution and advice for those considering embarking on the same path:
1. A successful exit is years in the making
I’m sorry to say that you can’t just wake up one day and decide ‘it’s time’ and set the wheels in motion on an investment or sale. If you want a successful exit (one that puts an appropriate value on your business and gets you the kind of terms you are after) you’re going to have to be preparing for this for a long time.
We had “exit” in the back of our minds for many years, and as a result we did do a bunch of things that set us up well, such as:
- Ensuring our systems and processes were well-documented (a buyer doesn’t want to pay a premium for a business if only you or some other key person knows how things are done)
- Taking ourselves out of key roles to prove that the business could run successfully without the founders
- Getting our financial records in good shape, such that an investor could look at them and make sense of them!
One thing we were less prepared for was the abundance of questions you face during the due diligence process (where the investor/buyer goes over your business with a fine tooth comb!). So picture yourself in a room full of accountants, advisors, investors and lawyers trying to recall and explain what happened to your COGS line in a particular month three years ago; or what this anomaly in your web traffic from two years ago is about; or why you spent so much on marketing that particular period.
To get your ducks in a row for this one, I’d suggest making sure you have excellent historical data for as much of your business as possible. Keep a paper trail of key decisions (a simple google doc is fine – you can keyword search it later), and make use of tools like Google Analytics and the ability to add annotations (make notes for when you do big sale campaigns, a system change or other key moments).
Trust me, start doing this now and it will make your life a lot easier at the pointy end!
2. The exit process is all-consuming
You thought starting a business was hard? You thought you put in a lot of hours growing and scaling your business? You’re not wrong – but let me tell you, the process of preparing a business for sale, liaising with potential investors, and then going through due diligence is something else!
I don’t say this to scare you – I just think it’s important to go in with eyes wide open.
You will spend considerable time working on preparing the business for sale – ensuring everything is in shape below the hood, then preparing a presentation to go through with investors. You’ll identify investors and then hopefully have a chance to pitch your business to them. You’ll do meeting after meeting, spruiking yourself and your business over and over. It’s time consuming and mentally exhausting.
On a personal level, if you’ve got kids and other commitments, be prepared to engage support during this period, which will likely last many months.
From a business point of view, you should be prepared for the fact that it is very difficult to actually run your business while going through this process – ironically, the process of finding investors and trying to exit can jeopardise the health of the business itself! Make sure you have a solid team who are able to take the reins while your energy is directed to the business sale.
3. You will need to think carefully about your team
This point is two-fold. Firstly, you’ll want good people in your corner to guide you through the (all-consuming – see above!) process. We engaged some incredible M&A and legal advisors; while not cheap, they were worth their weight in gold and I cannot imagine going through the process without them. Seek out referrals from people who’ve gone down this path before and chat with a few advisors before settling on your team. I was in contact with our M&A advisors for years, getting to know them and their approach so that when we decided to sell, it was an easy process of getting started.
Secondly, give some thought to who you are going to bring into the exit process. It is very uncertain – you cannot guarantee that you are going to find an investor or buyer, nor that you will end up with the sorts of terms you ideally want.
This means you need to consider how you message this time of potential change to your team. Some considerations:
- You will need to get your senior team involved at some point – investors/buyers will want to meet with them, so they are best to bring into the discussion early.
- You will want to think about how you let your broader team know about your plans. Consider how this might make them feel – they may be worried about their jobs, or whether or not you are going to be sticking around. If you can give them some certainty on these sorts of points, then do so as early as possible.
- How will you manage the sentiment within your team if a deal does not eventuate?
When you bring different people into the process really depends a lot on your personal philosophy – we didn’t really like asking our senior team to ‘keep secrets’ so we went broad with our communications with our team early. There is always a risk that this results in information about your desire to sell/exit being shared outside your organisation, so you need to weigh up whether this is a concern for you. But for us, this felt like the right approach.
As I said, things have panned out well and I have absolutely no regrets. Exiting MTB Direct marked the end of a huge, challenging, but very rewarding period of my life, for which I am very grateful. And no, it’s not all pina coladas – but it is nice to slow down a little and reap the rewards of many, many years of hard work!
Co-Founder & Former Owner
Jen Geale is the co-founder and former owner of MTB Direct, Australia’s largest retailer of parts, clothing and accessories for mountain biking. Jen was recognised as one of the Top 50 People in E-commerce in Australia in 2018 and 2019, and regularly shares insights from her experiences in keynotes, panels and workshops around Australia and the USA. The online business is entirely remote, with Jen based on the Gold Coast and all customer service, marketing, administrative and tech team members working from home across Australia and the world. Jen currently serves as Vice President of the Board of Directors of Retail ROI Australia, an organisation enabling the Australian retail community to support the work of various grassroots organisations improving the lives of children and orphans around the world.