Business Advice

Exit Strategies for Baby-Boomer’ Owned Businesses: Part I

You’ve been hearing the rumors for years about the huge bubble of people born after WWII through the mid 60’s quickly approaching retirement. The Baby Boomers. You’ve probably heard the numbers:

  • Over 78 million people closing in on retirement in the next 10 to 15 years.
  • Boomers own over 65% of businesses with employees, totaling nearly 4 million companies.
  • Retiring business owners selling or bequeathing $10 trillion worth of assets by 2025.
  • This generation controls roughly 80% of all U.S. aggregate net worth.

Those rumblings you hear could be an avalanche of Boomer sellers of unheard proportions, crashing headlong into the U.S. economy, covering the business landscape, and suffocating many would-be affluent retirees along the way. Or not. With all those companies owned and assets generated, what could be the problem? Who will purchase all these businesses and what does this mean for Boomer pet company owners?

Some business will sell to employees; a select few companies will be absorbed by private equity groups; some will be acquired by fellow pet companies (aka as a strategic buyer). That leaves the Gen X, Millennials or other Boomers on the “buyer” side of the ledger, an 11% smaller group. And this imbalance between buyers and sellers will continue for the next 15 to 20 years.

But Boomer business owners are not rushing to sell for several reasons. Foremost, they are living longer—an average of 30 years longer than a century ago—and retiring later. Second, why sell your company when you get to work in one of the fastest growing, most enjoyable industries in the world? As an investment banker in the pet sector, one thing I have noticed is that owners truly enjoy working in the pet industry and for the vast majority of people I meet, selling is not at top of mind, which has created a shortage of businesses for sale and kept valuations at a premium. Also, most businesses are not large enough to fund retirement. SBA statistics show that 85% of Boomer businesses have less than 9 employees and 53% had less than $500,000 in revenues.

What about those businesses ready to sell in the near future? 100% of all retiring Boomer business owners will not be business owners forever. The vast majority of these owners have never exited a business before and even though many plan on selling their business in the next ten years, only a small percent have identified how they will exit and even fewer have put those steps in writing.

Facts about Baby Boomer Business Owners:

  • 80 percent of owner’s wealth is tied up in their companies (an illiquid asset)
  • 60 percent of business owners between the ages of 55-64 have not discussed their exit plans with their spouses or business partners.
  • 78 percent of baby boomer business owners do not have plans for how they will exit their companies.

If you are a Boomer who owns a pet company, what can you do to increase your chance of selling your business for optimum value? Should you get a jump on the plethora of Boomer businesses that are likely to hit the market in the next 10 years? And where would you even begin to start the process?

All of these questions and more will be answered in my next month’s column where I will interview Pamela Dennis, PhD. Pamela is the author of the just-released book Exit Signs: The Expressway to Selling Your Company with Pride and Profit. Exit Signs is about both the tactics of selling and the transitions of leaving your business. It gives you a step-by-step map for selling your business in a way that produces the profit you’ve dreamed about. Her clear and concise advice will help bring you confidence on how to execute one of the most important decisions of your life. Stay tuned!

Carol Frank of Boulder, CO, is the founder of four companies in the pet industry and a Managing Director with MHT Midspan, one of the nation’s premier middle-market investment banks, where she specializes in Mergers and Acquisitions in the pet sector. She is also a principal at BirdsEye Consulting, the pet industry’s premier consulting group. BirdsEye advises in the areas of M&A, strategy, and licensing. She can be reached at

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A “Frank” discussion with Cat Expert Jackson Galaxy

The Journey from Passionate Cat Lover to TV Star and Celebrity Licensor

Jackson Galaxy is the Host & Executive Director of Animal Planet’s hit show My Cat From Hell, New York Times best-selling author, and has over 20 years of experience as “The Cat Daddy”. He first found his calling while spending the better part of a decade on staff at an animal shelter.

Jackson has come a long way since cleaning cat boxes at the Humane Society in my hometown of Boulder, Colorado. I first met Jackson in 2010 through mutual friends and was immediately impressed with his knowledge, passion, and commitment to cats. He had some innovative, unique ideas for cat products and we discussed ways to get those ideas from his head to pet store shelves. I’m happy to say that he has accomplished that and so much more! I recently sat down with Jackson to learn how he launched his multi-million dollar licensing business with Petmate:

I heard you speak a few months ago at the Humane Society of Boulder Valley fundraiser. Your story of how you went from working as a shelter employee to being a TV star is incredibly inspiring. Can you share the abbreviated version with my readers?

It was actually 20 years ago this month that HSBV hired me to help out around the shelter. My boss at the shelter listened to my crazy ideas. I was passionate about animals, and I had the imagination of an artist, so there were a lot of them. We need to be like my boss was then: If we want to get to no kill, we have to listen to the guys who might be scooping litter.

I left the shelter to start my own cat, body-mind consulting business called Little Big Cat and I worked together with holistic vet Dr. Jean Hofve on Spirit Essences. Back then, flower essence therapy was just as fringe as cat behavior therapy!

I moved to California to live near the beach, and while I was scoping out the animal scene I stopped at an adoption events. In no time, I had a crowd around me, listening to me talk about cats. A guy who worked at a production company saw me in action and called the next day. I had a show within a year when Animal Planet caught a video clip on You Tube. That’s what started the whole TV thing.

How did you connect with Petmate?

I was in Austin for just two hours doing an Animal Planet event at South by Southwest. Someone from Petmate came up to me, said he was a huge fan, and gave me his card. Four months later I called him.

What are some advantages of licensing your name and product ideas?

The product line has been a lot of work. One of the great things about the partnership with Petmate is they know that this is a fluid experience. As the cats give them feedback, they change the product. The worst mistake they could make is not listening to the cats. Petmate has been very flexible about the changes. I won’t be happy until the cats are happy.

If you have strong ideas and can present them in a concrete manner, you can use them to solidify your brand. I’m so excited that some of my ideas for helping cats have come to fruition.

I’d love to be seen as the trusted messenger between cats and cat guardians. When people think of doing something great for their cat, I’d love them to think of me.

You have to be aware that in order to make the brand what you want it to be, it’s a LOT of work. If you aren’t overseeing every aspect of it, and aren’t careful, all of a sudden there will be a bad product with your name on it!

People are under the impression that cat people don’t spend money. But the fact is, they just haven’t had as many products to buy! I’m out to change that.

Why do you think there are so many cats with behavioral problems?

There are more cats than dogs in America. Therefore, there are more cat problems. Plus, cat behavior problems are more documented than dog problems. If the cat pees in your shoe, you will hear about it. But if everyone understood the basic intrinsic needs of their cats, there wouldn’t be nearly as many problems.

What are you favorite products that can help ease behavior issues?

Some of my favorite products include Comfy Cocoon, Comfy Cabana and Comfy Clamshell. But all of my products should increase mojo. My products go one step beyond environmental enrichment. I honestly believe they will keep cats out of shelters.

What are some steps that pet industry leaders can take to enhance the quality of life for pet cats?

Now that it can be proven that there is an ROI on pet products, I’m looking to further the cat movement. The audience is there! Part of the problem has been that we can present toys to cats – but we must work to get their attention and people didn’t realize that. Few people who have cats really know cats. Let’s ratchet up the cat culture! Dog people demanded more products, and they got them. Cat people can do the same.

What’s next?

We’re constantly revising our products. Over the next year, we’ll also have a lot more new products targeting both the environmental enrichment and behavior niches. I’m also working on a number of different TV shows and am busy with public appearances, all with the larger goal of helping fund my foundation ( The Jackson Galaxy Foundation works to make real changes in the rescue and shelter world.

From my first day at HSBV, it’s been all about making changes to the quality of life of cats, it’s about the welfare of the animals.

What advice would you give a budding pet industry entrepreneur with some creative ideas but limited resources?

Make your theories rock solid. Make sure your products work. We’re in a very unique time right now. The demand is there. We’ve barely scratched the surface – it’s an exciting time!

Carol Frank of Boulder, CO, is the founder of four companies in the pet industry and a Managing Director with MHT Midspan, a premier middle-market investment bank, where she specializes in Mergers and Acquisitions in the pet sector. She is also a principal at BirdsEye Consulting. BirdsEye advises in the areas of M&A, strategy, and licensing. She can be reached at

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5 Key Elements of a Successful Pet Products Company Sale

As many of you know who have been reading my APPA columns over the years, it’s a great time to sell a high quality pet business. However, selling your company will require about six to nine months of intense effort, so it’s vital to have your house in order beforehand.

The pet industry is a fast-growing, $60 billion sector that is evolving rapidly. As consumer preferences and trends continue to evolve, the space has caught the attention of both private equity and strategic investors (many of whom have excess cash on their balance sheet) and deal volume has surged. While the companies and situations in the pet space are varied, I’m almost always asked the same question by shareholders and management: “What does it take to sell my company?” The answer is both simple and complex. In a nutshell, we like to think of the ingredients for a successful sale in five broad categories.

Companies are a reflection of the people who work there; the more good people at your firm, the better. A great team will also make it easier to sell your company. But if you have a problem, like a management void or a bad employee, you’ll need to deal with it in advance of going to market. Otherwise, the new owner might address it in a manner you don’t like, or they might pay you less than you had anticipated for their share of the business.

We recently sold an organic food company that, while innovative and growing rapidly, was unprofitable and will require millions in future investment. While this dynamic would normally limit a company’s appeal, the founding management team was appealing on an absolute basis and relative to their competition. So, the buyers paid a highly attractive revenue multiple to partner with them.

Much like a house needs a strong foundation, your company must have infrastructure in place in the form of processes, controls (financial, credit and quality) and precedent. Buyers (strategic and financial) are almost always interested in growth, and without the structure (or processes) in place, growth is unsustainable, if not impossible. Infrastructure is needed to scale a business. Again, you can sell your business without the proper infrastructure, but if significant investment or a bulked up SG&A is needed and you’re relying on your new partner for this, they’ll pay less.
Additionally, there is a multiplier effect. If you’re selling your $2 million EBITDA company for $20 million (10x multiple), but the buyer views your SG&A as $500,000 a year below what’s needed (perhaps for a VP of sales and a new IT system), then your EBITDA on a pro forma or adjusted basis just declined to $1.5 million, and the purchase price decreased from $20 million to $15 million, if all is else equal.

Several years ago, we sold a leading branded consumer company that operated on a bare-bones budget; its cost structure helped it generate industry leading EBITDA margins. We anticipated that interested buyers would factor in an additional $1 million or more in SG&A to account for a CFO, a VP of international sales and a much needed upgrade of IT. Indeed, the buyer made this adjustment, and the deal closed uneventfully, because our client was expecting this reaction.

The report card of any business is its financial statements. If you can’t explain what has been happening to your business, produce a real-time view of what is happening and articulate a view of the future through a budget or projections, you are unlikely to sell your business. The importance of accurately reported numbers is of paramount importance to a host of parties in a transaction: Buyers require them for gauging strategic fit, valuation, management talent and accretion/dilution; lenders require them for determining acquisition leverage levels and working capital lines; attorneys will reference them in transaction documents.

The better your company has performed historically and the better it continues to perform throughout the selling process, the better the chances of a sale at an attractive multiple. Performance not only encompasses absolute revenue, profit and associated margins, but it also speaks to non-financial metrics. For example, customer concentration—not uncommon in early stage companies or in more mature companies with a presence in large-format retailers—can suppress buyer interest, valuation and, in rare cases, kill a deal. SKU, salesperson or supplier concentration also can dampen interest. A history of innovation and a pipeline of fresh products are critical. It is important to buyers that there be plenty of growth opportunity left on the table when they take over.

Selling your company (whether a majority or minority stake) will require intense effort for about six to nine months. Maintaining your company’s performance, while at the same time undertaking what can feel like a second job dealing with transaction details, can try even the best of management teams. It’s vital to have your house in order (people, process, reporting) beforehand and retain advisors who know how to shepherd you through the process and across the finish line.

Markets move on supply and demand. Understand where your market is from a customer/consumer perspective and a merger and acquisition perspective. If demand outstrips supply—as it does right now with too much money chasing too few quality deals—you’ve got a good situation as a seller. And while you know your day-to-day business, you may not know the landscape regarding financial and strategic M&A appetite, lender leverage levels and/or the Wall Street IPO pipeline. A good investment banker will. Understand this and the macro environment; use it to your advantage.

We recently dealt with a company that sold an organic product for which supply was massively lower than demand. Because of this, big box retailers were not able to exert the usual leverage on vendors, and the company enjoyed outsized growth and margins. Will this supply-demand imbalance last forever? No. Is it better to sell now into that dynamic than wait? Unambiguously, yes. A lot underlies these five points, but awareness of them and addressing them should lead to an easier, more enjoyable and more successful transaction.

Carol Frank is a Managing Director at MHT Midspan, a Middle Market Investment Bank, specializing in the pet industry. Prior to her investment banking career, from 1987 to 2007, Carol founded and operated retail, distribution, and manufacturing companies in the pet industry. Carol has an MBA from Southern Methodist University and a BBA in Accounting from The University of Texas at Austin.

Craig Lawson is a Managing Director at MHT Midspan and has over 20 years of sell-side and buy-side experience. He brings deep experience with consumer products and leads MHT Midspan’s Consumer/Retail industry practice. He has a particular focus on the pet space, having closed several deals over the past few year. Prior to co-founding MHT Midspan Partners, Craig served as a senior banker in the San Francisco office of Harris Williams & Co. Craig holds an MBA from The Wharton School at the University of Pennsylvania and graduated with a BA from Tufts.

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Raising Money through Venture Capital: The Second in a Series on Access to Growth Capital

dollar-symbolsRaising money for your growing pet company is a hot topic and one that I am addressing over a three pat series for APPA’s e-update readers. Following on to my last column on crowdfunding, I thought it appropriate to demystify the whole concept of Venture Capital (VC) and whether this could be a good avenue for your pet business. As explained in my 2014 column titled “The Difference between Venture Capital and Private Equity” VC is generally not available for traditional pet product companies. But if your product includes a technology play….now that is a different story! I have found that investors are hungry to put capital into any credible business that successfully marries a pet product with technology.

This is the case with, a website that connects dog parents with a nationwide network of dog lovers for hire, offering in-home dog boarding, dog sitting, and dog walking through their proprietary online technology. recently announced they had raised $25 million in VC, making the total they have raised in the last several years approximately $50 million. With that kind of success, I wanted to tap their CEO, Aaron Easterly, for his insight into how and why has continued to successfully raise capital for their rapidly growing pet-focused technology company.

Can you give us an overview of how started?

The idea for grew out of a negative experience co-founder Greg Gottesman had with his dog at a traditional kennel. He was on vacation when his dog, Ruby Tuesday, was injured at a high-end boarding kennel in Seattle. When his 9-year-old daughter said she would have paid to take care of someone else’s dog, Gottesman saw a business. He and his team pitched the idea for, a website connecting dog owners with dog sitters, at a 2011 Startup Weekend in Seattle and won top prize. He brought his idea back to the firm and brought me on as CEO. It was great timing since I had recently left Microsoft to work on start-up business ideas.

How did you get initial capital to launch the business?

Greg was a Managing Director at Seattle venture capital firm Madrona, and I was incubating marketplace business ideas at Madrona at the time. Consequently, the firm decided to give some seed capital.

At what point did you decide to raise Venture Capital and how long did the process take?

As we were nearing the completion of our beta, we decided that there was enough positive response to seek additional funding (a formal Series A, the first formal round of funding). Madrona was interested in participating, but we looked at securing other investors as well. Eventually, Madrona led the Series A with contributions from Rolling Bay Ventures, CrunchFund, Andy Liu, Scott Howe, and myself. The Series A process took about two months. Subsequent rounds have taken a similar amount of time excluding the legal/paperwork component.

How much VC money did you raise and why do you think Rover was successful raising that capital?

Our Series A was $3.3M. Greg’s and my roles at Madrona were critical in getting the Series A done. It was not an easy pitch more broadly. Many investors still associated the category with the failure of companies such as during the dot-com era. Interestingly, we actually received much more interest from Tier 1 investment firms than lesser-known firms.

Overall, we’ve announced about $50M in funding rounds. Each round had its own challenges. In the earliest rounds, market size and risk of disintermediation were investors’ most common concerns. To address these concerns, we presented data on repeat usage and the size of shadow market (people that use friends, family, and neighbors to care for their dog when traveling) instead of focusing on the current commercial market (e.g. kennels).

Investors we spoke to in the more recent rounds were much more focused on unit economics (the value of a customer relative to the cost of acquiring them), the scalability of marketing channels, and competitive dynamics. Online marketplaces are often perceived to have great economies of scale, so many investors get nervous about putting large amounts of money to work in a company that is not the clear leader. Fortunately, as we’ve zoomed by copy cat companies and accumulated a larger set of historical data to back our assertions, these conversations have become much easier.

Overall, I think our super analytical culture, depth of understanding of the business, and transparency during the fundraising process have been the reasons we’ve been able to successfully raise money to date. On the flip side, I wouldn’t consider myself to be a great pitchman. That probably made the earlier rounds more difficult.

The pet industry in general doesn’t seem to attract Venture Capital. Do you think the reason was successful is because it has a technology component?

Absolutely. Venture Capitalists have investment criteria. Although it varies from firm-to-firm, they generally want to see the potential to earn back a multiple of their investment (e.g. 5X) in some finite period of time. They also care about the defensibility of the business (How easy will it be for more competitors to enter?). Businesses that do not have clear economies of scale (aspects of the business get noticeably better as the business gets larger) are more difficult to grow, defend, and exit. Often times, but not always, getting strong scale economies require an important technical component to the business.

I doubt Rover would have been funded by the group of investors we have if it wasn’t for this technical component. In fact, Rover has a shockingly large amount of technical and analytical complexity behind the scenes. This aspect to the business is actually one of the items investors find most compelling.

How will deploy the new Venture Capital? What are your growth plans?

Moving forward, we want to continue to expand our service offerings. Currently, more than 50% of sitters listed on Rover offer multiple services. The most common include: doggie day care, dog walking, grooming, training and cat care. Because of the segment of dog owners that use friends, family, and neighbors for their pet setting, many potential customers don’t currently search for a commercial solution. A chunk of our capital will be used to expand awareness of the offering. At some point, it is likely we will expand internationally. At Rover, our mission is to make it possible for everyone to have a dog in their life. Everything we do is aimed at achieving that goal.

Carol Frank of Boulder, CO, is the founder of four companies in the pet industry and a Managing Director with MHT Midspan, a premier middle-market investment bank, where she specializes in M&A in the pet sector. She is also a principal at BirdsEye Consulting, the pet industry’s premier consulting group. BirdsEye advises in the areas of M&A, strategy, and licensing. She can be reached at

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Raising Money through Crowdfunding: The First in a Series on Access to Growth Capital

“I have this amazing pet product that I just launched at Global Pet/SuperZoo. The response has been nothing short of fantastic and the orders are rolling in. We are still very small, and don’t have enough collateral to to qualify for a bank loan but I need money for inventory and infrastructure. Can you help me?”

As an investment banker for pet companies, I get access to many, many compelling, early-stage pet companies, looking to raise funds. It’s exciting that I am in an industry realizing such solid growth. Unfortunately, raising early-stage capital is one of the hardest tasks a pet industry entrepreneur will ever undertake. Why? Because Venture Capital is generally not interested in investing in pet products unless there is a technology component. The answer I usually give these entrepreneurs is this: “You have four options – friends and family, angel investors (which could also include friends and family), credit cards, and crowdfunding.” Over the next few months, my articles will cover the ins and outs of each of these fund-raising options, starting with crowdfunding.

Fortunately there is an organization that has embraced crowdfunding for consumer products and is significantly changing the options available to early-stage entrepreneurs. It’s called Circle Up and I’ve watched this company grow from a pure start-up just a few years ago to the premier vehicle for small pet industry entrepreneurs who need growth capital.

I originally met Circle Up’s founder, Ryan Caldbeck, several years ago when he was with Encore Consumer Partners, a Private Equity firm specializing in Consumer Products (they owned Zuke’s and still own Thunderworks). A Duke undergrad and Stanford MBA, Ryan came up against a lot of skeptics when he announced his plans to leave Encore and launch Circle Up. Lucky for the pet industry, Circle Up has been a raging success and has resulted in over $80 million being raised in the last 3 years. Not surprising, pet is one of their biggest categories.

I recently chatted with Ryan Caldbeck about his journey in founding Circle Up and what it takes to realize a successful crowdfunding raise.

What size does a company need to be before they will be considered for the Circle Up platform?

We typically work with companies with $1-20M in revenue but are open to pre-revenue companies if the entrepreneurs have prior relevant experience.

When and why did you start Circle Up?

I started CircleUp in 2012 after a career in consumer private equity, during which I invested in Zuke’s and Radio Systems (PetSafe). I wanted to start the company because I saw an entire universe of great entrepreneurs in the consumer space that were too small for private equity (typically less than $20M in revenue) and not the industry for Venture Capital, which tends to focus on technology companies. What I found is that the returns to investors in early-stage consumer and retail were historically very strong but it was just an very inefficient market. Hard for companies to find investors and vice-versa. I launched CircleUp to help entrepreneurs thrive by giving them the resources and support they need.

What are the criteria for being accepted onto the CU platform?

We focus only on consumer and retail companies. Important categories for us include pet, personal care, food/beverage, retail, apparel, household goods, etc. We look for exceptionally strong teams that are disrupting large industries that have historically experienced very little innovation. We accept ~2% of companies that apply to CircleUp.

What are common attributes for companies with the most success raising capital?

An engaged CEO. Whether you raise online or offline, the most successful CEOs are proactive and engaged. In our 3 years we have helped shorten the average time to raise capital by about 70%, but CircleUp as a platform and a tool only works if the CEO is engaged.

How much does it cost for a company to raise $$ on Circle Up?

We charge a commission on the capital that is raised. The commission rate depends on how much the company raises.

Carol Frank of Boulder, CO, is the founder of four companies in the pet industry and a Managing Director with MHT Midspan, one of the nation’s premier middle-market investment banks, where she specializes in Mergers and Acquisitions in the pet sector. She is also a principal at BirdsEye Consulting, the pet industry’s premier consulting group. BirdsEye advises in the areas of M&A, strategy, and licensing. She can be reached at

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