6 Different Exit Strategies, Which One’s Best for You? With Scott Deetz CEO of the Northbound Group

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6 Different Exit Strategies, Which One’s Best for You? With Scott Deetz CEO of the Northbound Group

Scott DeetzScott Deetz is the Founder and CEO of the Northbound Group, a Minneapolis-based financial advisory firm, providing strategic finance, corporate development, and merger and acquisition services to the e-commerce industry. After selling his first business, an eight-figure brand, Scott realized his passion for helping entrepreneurs and companies sell their businesses. Northbound’s 30-plus-members team is dedicated to the firm’s mission of helping e-commerce entrepreneurs achieve life-changing events. Before founding the Northbound Group, Scott was the Owner and CEO of the Amazon business Entrepreneurial Advantage.

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Here’s a glimpse of what you’ll learn:

  • Scott Deetz explains the different types of business exits and buyers
  • What should sellers focus on before exiting a business?
  • Scott shares case studies that business owners can use to prepare for an exit
  • The four pillars for making a platform company
  • Core management roles entrepreneurs should invest in
  • Why you should start building a data room today
  • A horizontal organization structure vs. a vertical organization structure
  • When should a business owner reach out to an exit strategist?

In this episode…

When an entrepreneur is ready to sell his or her company, an exit strategy should already be in place. This type of strategy gives the owner the option to liquidate their stake in the business, limit loss, or make a substantial profit. So, if you’re planning to exit your business, what should you be doing now?

Business leader Scott Deetz recommends starting with the following tactics. First, start building a data room today. A data room is simply a series of folders that will allow your potential buyer to get a quick overview of your company. Second, implement strategic financing, which gives you a better understanding of your company’s valuation. Lastly, start organizing your accounting.

Want to learn more? Tune into this episode of the eComm Breakthrough Podcast where host Josh Hadley welcomes the Founder and CEO of the Northbound Group, Scott Deetz, to discuss actions to take before exiting a business. Scott shares the various types of business exits and buyers, an exit case study, and when it’s time to contact an exit strategist.

Resources mentioned in this episode:

Special Mention(s):

Related Episode(s):

Sponsor for this episode…

This episode is brought to you by Ecomm Breakthrough Consulting where I help seven-figure ecommerce owners grow to eight figures. Of course…

I started Hadley Designs in 2015 and grew it to an eight-figure brand in seven years.

I made mistakes along the way that made the path to eight figures longer. At times I doubted whether our business could even survive and become a real brand. I wish I would have had a guide to help me grow faster and avoid the stumbling blocks.

If you’ve hit a plateau and want to know the next steps to take your business to the next level, then go to www.EcommBreakthrough.com (that’s Ecomm with two M’s) to learn more.

As a special bonus to my podcast listeners, this month I’m giving away one $10,000 comprehensive business strategy audit session at no cost. Email me at josh@ecommbreakthrough.com with the subject line “Strategy Audit” and tell me why your business should win the free audit for the chance to win and don’t worry, if you don’t win the free strategy audit this month, you’ll automatically be entered for future months.

Episode Transcript

Intro 0:04

Welcome to the eComm Breakthrough Podcast. Are you ready to unlock the full potential and growth in your business? You’ve already crossed seven figures in sales, but the challenge is knowing how to take your business to the next level. Join Josh Hadley and eight-figure e-comm. Business Owner and investor as he interviews highly successful business owners get ready because you’re going to learn specific actions you can take today to help your business reach its full potential and leave a lasting impact on the world.

Josh Hadley 0:37

Welcome to the eComm Breakthrough Podcast. I’m your host Josh Hadley, where I interview the top business leaders in E commerce. past guests include Kevin King, Howard Thai, and Roland Frasier. Today I’m speaking with Scott Deetz, the founder and CEO of the Northbound Group. And we will be talking a lot about actions you should be taking today before you think it’s time to exit your business. This episode is brought to you by the eComm Breakthrough Consulting, where I help seven-figure companies grow to eight figures and beyond. Listen sky, I started Hadley Designs back in 2015. And I grew it to an eight-figure brand in seven years. But there were a lot of stumbling blocks that I ran into along the way that made the path of getting to eight figures take a lot longer than it really needed to be. There were times where I doubted whether our business could be a real brand, I doubted whether we could have the you know, the cash flow in order to continue growing the business. I wish I would have had a mentor or a guide along the way that would have helped me overcome a lot of those stumbling blocks that we ran into. If you have hit similar plateaus and stumbling blocks and want to know the next steps to take your business to the next level. Then go to eCommBreakthrough.com. That’s e-comm with two M’s to learn more. And as a special bonus to my podcast listeners. This month I’m giving away 110 $1,000 comprehensive business Strategy audit session at no cost. All you need to do is email me at Josh at eCommBreakthrough.com. And in the subject line, say Strategy Audit and plead your case as to why I should choose your business as the business to work with for the Strategy audit. And don’t worry if you don’t win this month because you’ll be entered for future months to come. Today. I’m super excited to introduce you to Scott Deetz. Scott helps Amazon and e-commerce entrepreneurs unlock growth and profitability bottlenecks in their businesses and then exit for a top valuation. He also advises on other strategic transactions, such as improving cash flow through partner supplier negotiations, debt financing, or my no minority equity investments. After selling his first business for eight figures, it became a passion for Scott to help other entrepreneurs get the right valuation for their company. Scott is the founder and CEO of the Northbound Group, a leading strategic finance corporate development and sell side m&a advisory firm, low focused on Amazon and e-commerce, physical goods and SAS businesses. Northbound has more than 30 full time team members dedicated to the mission of helping ecommerce entrepreneurs achieve life changing events. So Scott, welcome to the show.

Scott Deetz 3:19

Hey, Josh got it. Great to be here. And I really looking forward to it.

Josh Hadley 3:22

Awesome, Scott, I know our paths have crossed numerous times at conferences. I’ve heard multiple podcasts that you’ve been on. But it’s a pleasure for you and I to actually sit down face to face virtually so to speak, and get to know each other better. And we had a great conversation prior to hitting the record button here. But Scott, I want to dive straight in here. To your experience. You have years of experience working with E commerce entrepreneurs, helping them scale their businesses and preparing them for exit. And I think the first conversation we need to have is let’s discuss the different ways that people can exit what are the type of buyers right you have aggregators, people have heard about private equity, people have heard about strategic exits, what are those? Just to kind of paint the landscape for people? And we’ll kind of go from there. Okay, yeah, that sounds great. Yeah. And, yeah, as you said, I think that the first place that I would start with that is that there’s a either a misconception or a myth that you build your business, and then you, you exit on one day, you collect a big check, and then you go move to the island. And that’s not the case. So the way that I like to think about it is that there’s actually six different types of lanes or we call them transaction lanes that you need to think about. And on one end of the spectrum, you would have something like a 100% exit, and you go away and then another one you would have actually raising minority equity capital to where you’re

Scott Deetz 5:00

Hold a portion of the company, or you’ve just brought money into the company, and you’re continuing to grow it. So I think the first way that and as you get to be a larger seller like this, the audience is, it’s far more common to think of it in terms of exits, plural, rather than single exit. And so the the different buyer types would be a private equity company is generally for people that have $2 million, at a minimum of earnings and above. And the easiest way to think about that buyer type is that they aren’t going to come run your company, they’re going to expect that you’re going to continue to run the company. And we can talk about then what’s the importance of team and you know, they’re investing in a different lens, and you’re going to stay on board and really drive things to the next level. And so a private equity buyer would be somebody that could either do a majority transaction where they buy more than half of the company, or some private equities will also do a minority investment where they’ll buy in for 30%. But you get to keep 70% of it. So there’s a there’s a lifestyle component to this, how long do you want to stay active in your brand, there’s also an economic component to it, how much you want to cash out today or tomorrow. And then there’s also the next thing is sort of what is the size and fit for you? The second biotype that I would say if you had private equity on one end of the spectrum, related to that is growth, equity. And growth equity is similar to private equity, and that you’re going to need to stay on. But it’s typically for earlier stage companies and most growth equity won’t buy a majority of your company, most growth equity is investing in you to scale up your business. But both all of those mean that you’re signing up for continuing to be the leader, I think it’s easier to go to the if that’s Lane one, I like to go to lane three, which is the typical exit that people have in their mind where they sell 100% of the company. And it is usually not 100% cash upfront. In fact, I would say that the worst thing probably is to sell for 100% cash up front, we can talk about that later. But that usually means that you you got you got sold to a under bidder, and you didn’t maximize the value. And so that is you’re going to work maybe you know, 90 days, six months a little bit, but you’ve sold 100% of the assets, you might have an urn out or stabilization payment, but then you’re gone relatively soon. The key part is that in today’s marketplace in e-comm, we’re doing a lot of transactions that I call they’re in lane two or Lane B, where you’re selling a portion of it today. And then you’re not saying on his long, you may be selling it to a strategic or to an aggregator you’re staying on in the middle range, think of it as one to three years. And you’re still having a chance for second exits. But you didn’t have to go build the entire company to sell a platform to a private equity company, you’re selling into a company that already has a platform. And let’s say I’m in the baby niche, and I’m selling to a strategic buyer and baby, or let’s say that I’m selling to an aggregator, a large aggregator backed by private equity that wants their founders to stay on board, because they realize that turns out these founders are quite important to the growth. So So those are the three lanes that I’d be thinking of. And then there’s different buyer types of for them. You’ve got private equity and growth equity on one side, you’ve got the lane two in the middle, and then you’ve got the traditional exit with earnouts and stabilization that most people think of when they think of exit, but it’s actually a broader topic than that.

Josh Hadley 8:43

Awesome, awesome. So Scott, I think those those three different lanes are super important for people to understand. Right. And maybe we could get into a few more of the details here. Because as you and I talked previously, the way you build your business needs to kind of be predicated on what kind of exit you’re shooting towards, right and what you’re preparing for. Because if you just want to leave the business 100% You’re like, Look, I just want to cash out and I’m done. Well, the way you build your business, that way is going to be different than Hey, I’m going to take on multiple minority investments, right? Maybe it’s private equity, and we’re rolling up for a huge payday one day, or it’s kind of that middle ground. So Scott, would you mind telling our audience a little bit more about, you know, who is what’s the best approach for people based on the different you know, lanes that you talked about?

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