Ready to sell: How CPG brands can ensure a successful exit strategy

For nearly two decades, I have had a front-row seat to the exponential growth of many new companies across the consumer brand universe. It has been thrilling to watch small, emerging niche brands become high-growth businesses that attract the attention from global strategics in the industry, along with venture capitalists and SPACs.

Working closely with these up and coming consumer brand companies and recruiting for their leadership positions has also allowed me to hone in on success factors for founders seeking to successfully exit a business. You can have the trendiest product in the universe and still fail to scale, missing the mark when it comes to reaching full potential. That can be a costly mistake. 

So what do you do if you have a consumer brand that’s growing and are thinking about your long-term growth strategy? Here are four main success factors for exiting a business.

Be taxwise. Selling your brand isn’t something that happens overnight. To make the most of what you’ve got, you need to play a long game. As a founder, that means you’ve done your homework to set yourself — and your business — up in such a way that maximizes your profit from a liquidity event and minimizes tax liabilities.

Don’t scramble to restructure the company just before ink is dry on the contracts. Planning should instead take place far in advance, as soon as you’re contemplating this kind of move and at least one or two years prior to selling.

Determine your goals and what you intend to do with the profits as these details can help inform financial decisions. There are pros and cons associated with each of the many tax structures available to you. Consult with tax professionals, estate planners and your CFO to start planning a financial roadmap that leads your brand where you want it to go.

Spot strong leaders. Before you can make plans for the next endeavor, ensure that your leadership team is poised to take over the reins of the business. There must be no qualms about your team’s readiness to lead the brand’s charge into a new global era.

Finding the best people and placing them in the right roles can take time and diligence, but it pays off in the long run. You have to be able to trust them, and so would any potential strategic buyer.

Take a close look at the primary roles in the C-suite: Who is filling them currently? Are there any gaps? A president or a CEO skilled enough to navigate the company through a successful integration is vital. The heads of operations, finance, revenue, people and marketing are equally important. If your house isn’t in order on these five roles, it’s time to make some big decisions and possibly connect with some new talent.

Make staying sweet. You have a world-class team and the utmost faith in their ability to move the brand forward through the first few years post-acquisition. But there’s a catch:  Do they want to stay on? Have you incentivized them enough to remain?

These are key considerations as you develop the future of your company, your role and those that your C-suite will play. Advance planning empowers you to understand each individual’s inclination to stay or go. Your buyer will want to know, too.

An excellent incentive package (LTIP) will encourage retention and allow you to discover the must-haves and the nice-to-haves of your most valued employees. Salary, bonuses and stock options are timelessly persuasive. Especially during the pandemic, factors like opportunity for advancement, work-life harmony, wellness and flexibility have significant appeal.

Continuity will play a large part in the brand’s success as it moves under the umbrella of a much larger corporation. You must deliver a team who will deliver that continuity to the buyer.

Design for value. To position the sale as a desirable one that benefits your buyer as much as possible, think through every detail of an organizational design structure. This priority project should see the brand through acquisition with no outward disruption in the business for external stakeholders, like suppliers and consumers.

Don’t delegate this process. The founder must drive and lead the change management strategy, with input from the C-suite, who will be executing much of the post-acquisition vision.

From the start, establish what the specific and expected deliverables are, along with objectives and anticipated outcomes, so that there is clarity across the board. How long will your brand remain independent before it becomes fully integrated with the parent company? Line up the hierarchy of leadership and staff, changes in job roles and responsibilities, and weigh how the policies and procedures of the purchaser align or differ from your current modus operandi.

Whatever decisions you make, and whatever organizational structure you ultimately design, it should be detailed, specific, and well-communicated to the people it will impact. This pre-planning will facilitate a smooth transition to the buyer.

Once you’ve sketched out a complete picture, building in the appropriate tax structure, the best team of executives, and an optimal organizational design that paves the way forward, you’ll have an attractive package to shop around. If that picture looks strong, clear and thoughtful, you’ll have a situation where everyone feels like it was a good buy and a good sale. That’s just good business.

Source