Discover more from The Business of Food
Selling your brand
Lately, I’ve had a rash of founders come to me for help selling their brands. If you need to sell, here’s some practical advice.
The reasons I’m getting these calls vary. Some founders have no more passion for the business, either because they’ve happily fallen in love with something else or because they are done with the slog. But sadly, most founders have to shutter because they are running out of cash.
We all know capital for early stage food brands has been tough to come by lately, and if you are not running at least at breakeven, your days are numbered unless you get funding.
This industry is hard and I have a lot of empathy for founders because I was one too. Having been on the founder side gives me a lot of perspective for not just growing a brand but for exiting one too, because I was also there once.
Here’s my practical advice for getting acquired even if your brand is big enough to hire an investment banker or broker.
The number one thing I wish most founders would do is come to the realization that it’s time to sell much sooner. This is because from start to finish, selling your business could take a year. During that year you have to still have an attractive asset. That means you need to keep shipping product.
Have something to sell
Understand that what you are selling is loyal customers. Period. You are not selling a formula or a process or anything product related. You’re not even selling brand equity – because at your size you don’t have much brand equity – you are selling a consumer base that repeat buys at a consistent point of purchase. That means you have to demonstrate repeat sales at your points of distribution whether they are physical or digital.
Resist increasing distribution
Please don’t try to goose your numbers by getting into more stores. If you already know you can’t support the existing business, you are hurting yourself by getting more business. Do the opposite. Sounds crazy but focus on your core and get out of everything else. Choose the most capital efficient customers and do what you must to increase velocity. Get the movement reports and show that with proper attention and investment, your products do well.
Hiring an industry specific investment banker or broker is ideal, but if you’re revenues are under $5m, there is a dearth of brokers and investment bankers won’t even talk to you. Listing your business for sale on websites is useless. An advisor or mentor could act as an M&A consultant to help you. Your greatest asset here is your network. Leverage the people you know. One of the biggest trends in CPG is vertical integration, so someone along your supply chain or manufacturers seeking adjacencies are great targets. The best people who can connect you are the people closest to you.
Don’t call your network blind. Collect your information, create a one-pager and rehearse your pitch. (Yes, you are still pitching, even when you’re getting out of the biz).
Next week, how to make an excellent one-pager and preparing for due diligence.
All my best,
Fundraising in real life
Spinster Sisters' won a NEXTY award this week at Expo West for their Face Serum Stick!
The business shows strong margins and growth. So why can't they find investors to help scale the brand? A New Hope article by Elliot Begoun
Are your products optimized for Instacart and Retail Online Platforms? Wider demographics are purchasing healthy foods online
The number of US households on SNAP benefits ordering groceries online has doubled since 2021 More than 150 retail chains, as well as Instacart, have received government approval to accept SNAP purchases made online. Quartz