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Simply Eloped was started by Janessa White and her business partner in 2016 with the simple purpose of keeping weddings simple. The business was built to take care of the details for elopements and small weddings so that loving couples could focus on what was most important on their big day, without stressing over the hundreds of choices made behind the scenes. However, the business was started with the goal of being a valuable asset to The Knot, and, eventually, an acquisition target.
Over the seven years that Simply Eloped solved problems for over 14,000 booked couples, they worked diligently and with purpose to build their reputation, relationships, and market space, with their eyes on their future sale to their target buyer. They grew to serve 35 cities, making weddings intimate and affordable for their customers who just wanted to get married and not fight the process of getting to the altar. They caught the attention of The Knot, a global family of brands providing best-in-class products, services, and content to take celebration planning from inspiration to action. The two businesses meshed nicely, as they were designed to.
Here are seven points that helped the business owners go from start-up to buy-out, meet their goals, and prepare for their next pursuits, while achieving a $6 million exit.
The Hook for Strategic Buyers
Not everyone starts out with the intent of selling their business. If you know that is what you want, however, you should know who you want to buy your hard work and equity. Once you know who you want to sell to, you can know how to attract them. Revenue isn’t the only thing that makes a business valuable. Having a niche in an existing industry can attract competitors. Locations served can create interest from someone wanting to enter new markets without the typical start-up costs. The right facet to attract a prospective buyer will lead to adjustments in business strategy. Know that from the beginning, and you will be ahead of the game.
Survey The Market
A buyer may approach you for a variety of reasons, all with the intent of strengthening their own business. The buyer’s motive will depend on their business strategy, namely whether they are strategic or financial buyers. The strategic buyer will be looking to supplement their own business presence. The financial buyer will be focused on ROI. Do you want to see your business grow into something even bigger than you can achieve on your own? Then the strategic buyer will be your best option. If you want a legacy, build a solid business and sell to a financial buyer. Either way, you need to have a business that brings value to both types of buyers. White said that Simply Eloped was built to an operating margin of 50% before acquisition. That type of result, especially from a bootstrapped basis, will be attractive to any buyer.
Value the Relationships
If you start with a sale in mind, you will need to build strong relationships that are lasting and advantageous to attract the buyer you choose. In the case of Simply Eloped, that relationship started from day one, a seven-year involvement that made the purchase a perfect choice for The Knot, the eventual buyer. White knew from the beginning that The Knot was the business they wanted to sell to, so they nurtured that relationship by being an asset and by keeping quarterly check-ins over the last four years of the business. They also kept the suitor interested by building their business into a great one.
Build for Now, Not the Exit
Even though White and her business partner knew they wanted to eventually sell to The Knot, they didn’t rely solely on that purpose to fulfill their goals. They built their business into a valuable target through good business stewardship. They leveraged their niche standing and growing customer base to negotiate discounts with wedding vendors and event locations, reducing costs and increasing margins, resulting in 40-50% cost savings that were then passed on to customers as profit gains. One example was the engagement of a wedding photographer for $600, which would have normally been a $1000 fee for a single customer. Their ability to negotiate such a discount meant an automatic 40% gross margin, simply for being the facilitator who put a photographer with a couple to be wed.
Patience for the Long Game
When the fateful day comes that the buyer approaches, the real challenges will begin. There will be ups and downs, excitement and angst, and the only way to stay true to your original goal is to ensure you continue to deliver value as a business and remain flexible in the face of challenges that may arise during the acquisition process. You are a business owner until the acquisition is completed, so keep that as your beacon to stay focused throughout the arduous journey.
Rock Solid Preparation
To help ease and expedite the acquisition of your company, being prepared in advance is key. That means having your financials, customer base, and existing contracts all stipulated and recorded for quick review. In the case of Simply Eloped, this resulted in a move from an expression of interest by The Knot to an LOI in only one week. The Knot saw the value quickly because of the existing relationship and the business results. White knew how to package her business to meet the buyer’s needs. Together, it meant a quick purchase and an opportunity for the sellers to move on to their next pursuits.
Know What You Want Next
Knowing why you want to start a business is important. If that purpose is to build to scale and then sell, then knowing what comes next is just as important. A first-time seller will face moments of indecision and doubt about whether they have done the right thing. Knowing how to move on after the sale will determine whether your ever after is happy or not.
Simply Eloped was built through hard work, excellent insight into the market, and an understanding of their founders’ goals. If your goal is to sell, their case is worth reviewing.
Looking to start a business to sell? Give us a call to see how we can guide you through the process.