It’s estimated that one in three women-owned businesses is actually a mother-owned business. For many women, the need for flexibility can be part of what drove them to become entrepreneurs. So what happens when it’s time to sell the business? Nicole Ewing, Director, Tax and Estate Planning at TD Wealth, joins Kim Parlee to share the story of Mabel’s Labels and the importance of preparation in finding an exit strategy that works for you.
- Mother's Day is this weekend. And did you know that one out of three women-owned businesses are actually mother-owned businesses? And for many women, the need for flexibility is what drove them into entrepreneurship. So what happens, though, when it's time for them to exit or sell the business? For Julie Cole, who's from Hamilton, she founded Ontario's Mabel's Labels. She leaned on her team for support and end up finding a sale that worked well for her. Let's have a look.
- When Mabel's Labels started, we were making labels in my sister's basement a couple of nights a week, from about 8:00 PM, when the kids went to bed, until 2:00 in the morning. I wanted to leave the traditional workforce and be able to have a little bit more flexibility that I thought entrepreneurship would bring me. So I spoke to my three co-founders, who happened to be my sister and two friends of ours from university. And I said, maybe now's the time for us to go and do our label company. And they're like, let's do this. And there was no turning back.
I think one of the things that we always thought was a real turning point was when the last of the four partners quit her day job. And we're like, wow, we're now drawing enough of a salary for each of us that we don't have to go back to our day jobs. And that felt very significant.
Since the basement now, we have grown significantly. We are now in a 14,000 square foot facility. So that holds our production facility, where we actually make our labels, our customer service team, our IT team, finance, marketing. We all live out of our Mabel's Labels headquarters. And we have labels going out that door constantly. And we do approximately, I'd say, about $13 to $14 million in sales a year. So that's a lot of labels going out the door.
I think when you have a business, you need to always be thinking about what your exit strategy is, whether you're going to use it as a legacy business to pass on to your children or if you want to sell it. Having said that, we didn't exactly prepare. As it turned out, we were approached. And the timing ended up being good.
We were reached out to by Avery, who are, obviously, label giants. And they said, let's have a conversation. And we said, hmm, no harm in that. And the conversation went well. And things progress from there. And we ended up closing a deal with them.
There are a couple of things that really worked for us. You want to have your housekeeping in order because once you get the offer, then they're going to come in. And they're going to-- no stone will be left unturned. They're going to go through due diligence. They're going to see your contracts. They're going to see your numbers. They want to see everything.
I think another important thing to remember is that these things can take time. And you can be left at the altar. And it is not a done deal until it is a done deal.
I make labels. I'm an entrepreneur. I don't know. I'm not really a financial expert. And that's why you need to tap in to the experts.
They will help you with your planning. They will help you know what needs to go where. They will help you-- it's just-- I always feel like sometimes, entrepreneurs make the mistake of trying to do everything themselves. And in doing that, they don't bring on the experts to help them. And they end up losing money.
In the end, we ended up selling for $12 million. I have stayed with the company. And that was a condition, to stay for a year. And a lot of people will want you to stay on because you've got a lot of industry knowledge and you know the corporate culture.
So I stayed on for the year, and one of my other partners as well. And after the year, it was just going well. So I was quite happy. And they were happy with me. And it was still a fit. So now I'm just a regular, old Mabel's Labels employee. And I'm still loving it. And I will stick around as long as I do.
- Well, as we heard from Julie, there's a risk you could be left at the altar when selling a business. Joining us now with some ideas and how you might be able to avoid that is Nicole Ewing. She's director of tax and estate planning at TD Wealth. Nicole, it's great to have you with us. Maybe we could just start with what are some of the big roadblocks for women owners when they're planning to sell their business.
- Some of them, Kim, are simply the idea that we are-- so much of our identity can be filled by what we do every day. And when we're building something incredible, like our own businesses, to lose a part of that identity can be a scary prospect. And also, these businesses can form part of our community engagements. We can take great pride in watching the contributions that we've made to our community. And we want to see them continue to grow. And it can be a challenging idea to let that go and to pass that on to somebody else.
And of course, there's simply the idea of time. And if we're talking about mothers, we know that there's time constraints definitely there, just keeping the business running on a day-to-day basis, managing the family obligations. And so finding some time to ensure that you're planned properly for the eventual exit from your business can maybe take the back seat.
- Yeah. Time is everything. Absolutely. What about some selling tips, though? Speaking of time, when is the best time to plan for a sale?
- The best tip I can give you is be ready. Be ready for that offer to come. So plan for that sale now. Think about what you need to do to be in a position that if somebody came to your door-- that you are ready to answer the call. So your financials are in order. You understand what the value of your business might be.
Maybe you're thinking about who your potential buyers might be and getting some intel on what they might be interested in to ensure that you're maximizing the value. We don't want to be waiting until we're ready to sell. We don't want to be waiting till we need to sell if we need to retire or we need to-- if there's an illness that befalls us.
So being sure that you're ready to go when that offer comes and then if conditions change-- as we've seen, conditions are changing all the time. We want to ensure that we're ready to optimize the value of our business. And if we want to sell tomorrow, we want to ensure that we're ready to do that.
- I know that you've talked about the fact that you need to time it to your timing with your personal life in terms of what's happening in your life and make sure it works for them, too.
- Well, we do because there might be a time where, if the kids have now gone off to college and are-- maybe we're looking at caring for our elderly parents, there might be other things in our life that we want to devote our attention to. So ensuring that you are prepared and not waiting until that time because the sale can take some time-- and as we heard from Julie, they may want you to stay on and continue to be engaged with the business for some time. And so, keeping things as flexible as possible while making sure you're aware of your own personal circumstances that might impact on a sale would really be ideal for you.
- Julie talked about getting a team, a group of people, to surround you to help make the decision, and also streamline and optimize the decision. I think she pointed out the fact that often, entrepreneurs don't like to lean on others. They want to do it themselves. Tell me what's the importance of a team, and who should be on it?
- I believe that teamwork makes the dream work. I'm a big fan of that. I think that we all are specialists in certain ways at what we do. And when we bring all of that expertise together, we are bound to get a better result.
And so, from a business owner's perspective, bringing in your business evaluators, talking to a business succession advisor who can give you some tips about how to increase the value of your business. Working with a lawyer who specializes in the buying and selling of businesses, which might be a different legal advisor than you typically work with for other aspects of your business. Working with a tax accountant, who's, again, going to be able to help you maximize the value of the after-tax dollars that you're seeing.
And don't forget that we're not just thinking about the business advisors that can help us with this, but also our personal advisors-- so a financial planner, a financial advisor who can help us identify what we're going to do with those sale proceeds once they come in and make sure that they're ready to work for us in our next stage of life.
- And one thing I think that Julie talked about, too, is like these things can take time. It's not that you just snap your fingers and the business is sold. There's the time and preparing for it. There's the time involved and sure of-- finding interesting people, the right fit. So this could be a long, long process.
- It can be. And it can be as quick as a few months. It can take a few years. We certainly have seen-- being-- mentioned being left at the altar. You can get all the way through a process and then simply not close. And then you're starting that process again.
So it can take a long time, making sure that your financials are in order. Again, from a tax perspective. We want to at least two years to make sure that we are keeping as flexible our options as we can to ensure that we have some of the great tax savings opportunities available to us, finding those buyers. So I would be preparing myself mentally for a minimum of five months. It can be an-- upwards of two years.
And then, again, there is often that obligation or a wish on the buyer's part that you will stay on with them and help them through the transition, maybe train employees or train new management to ensure that the business continues to be successful. And depending on the terms of your sale arrangements, you may have a vested interest in ensuring that business does continue to grow and be successful. It might be forming part of your retirement savings and your retirement income.
So yes, be prepared. It can happen tomorrow. It can happen a few years down the road. But being as flexible as possible as you're going through your planning, keeping that team around you so that if something is happening very, very quickly that you have the people in place to be responsive to it, and that they can also help you through if there's going to be a lag. And maybe it's not selling as quickly as you thought, maybe conditions have changed, that you have those advisors with you, as well, to help you navigate those challenges as well.
- Nicole, always great to have you with us. Thanks so much.
- Oh, my pleasure, Kim.