How To Rethink Your Business Like A Lobster
“There are many golden nuggets within this interview, one of which is the advice provided by business owner Joshua Dick, who explains how to select a M&A advisor once you are ready to sell,” states Sam Thompson a Minneapolis business broker and president of Transitions In Business. “Another point made by Joshua is the fact that when you increase your EBITDA you will be increasing the multiple which in turn will provide a much higher selling price.”
It’s ironic that Joshua Dick lives in Italy, one of the country’s worst hit by COVID-19 deaths. He moved to Italy with his family as a reward for selling his business, Urnex Brands. Urnex was in the unglamorous business of selling cleaning supplies for coffee makers. As is often the case, the least attractive companies are often some of the most profitable, and when Urnex ticked passed $5 million in EBITDA, Dick decided to sell.
This episode is full of great wisdom for business owners right now:
The “molt” is on: Dick, who is also the author of the book “Grow Like A Lobster” uses the analogy of a lobster’s lifecycle as a way to describe a business’ evolution. Its hard shell protects a lobster, but once it grows to a specific size, it must shed its shell and develop a new, larger protective layer. During this “molting” process, it lays itself vulnerable on the ocean floor while a new hard protective layer forms. Many owners feel unprotected right now, which is why — just like the lobster — now is the time to retool and build a more durable business.
Focus: When Dick took over the family business, there were seven unique product lines, and he decided to jettison six of them to become the world’s most significant supplier of cleaning materials for coffeemakers. That gave him Monopoly Control allowing him to beef up margins and grow more quickly.
The secret to selling is not having to: Dick loved his company and employees, so he knew that for him to sell, he would need to be offered a double-digit multiple of EBITDA. Being willing to walk away gives you the ultimate poker hand.
Market to your customer’s goal. Instead of saying, “we have better cleaning supplies,” Dick marketed his cleaning supplies as enabling them to make their customers happy by making better tasting coffee, not more sanitary machines. A subtle, but essential twist.
There are several key takeaways from this interview, including:
- How to gracefully manage the transition of a family business
- How to structure your business so that it’s not dependent on you
- Why hitting $5 million in EBITDA opens up a new world of possibilities
- How to avoid customer concentration
- How to structure a phantom equity program
- How to pick your M&A professional
- A definition of reps and warranties insurance