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What You Should Know Before You Pitch Your Company on Shark Tank (or Anywhere)

January 28, 2022 |  

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In 2013, Kate Field started The Kombucha Shop offering home-brew kits that people can use to make kombucha.

By 2018, the kombucha craze was in full swing, and Field was invited to pitch her business on Shark Tank. Field asked for $350,000 in return for 10% of her company which was generating around $1.2 million per year selling kombucha kits. Field got an offer for $200,000 in cash and another $150,000 line of credit in return for 10% of her company from Barbara Corcoran and Sara Blakely, the Spanx founder who was a guest Shark that day.

Despite her success on television, a series of surprising events led Field to walk away from the Shark’s offer and sell The Kombucha Shop the following year. This episode is a raw account of the highs and lows of the entrepreneurial journey. Listen and you’ll learn everything you need to know before you go on Shark Tank or approach just about any investor. You’ll also discover:

  • How Field financed The Kombucha Shop with just $800 of startup funding.
  • Why Field left Mark Cuban speechless during her pitch.
  • Why a one-time spike in sales could undermine your negotiating position when you want to sell.
  • The biggest mistake Field made in her first attempt to sell The Kombucha Shop.
  • Why Field equates selling a business to the grieving process of losing a loved one.

This episode was brought to you by Work Better Now. Work Better Now has helped match hundreds of businesses with talented virtual assistants. Reach more clients, expand your influence and be more productive – not busy. Work Better Now is currently offering Built to Sell listeners and readers $150 off per month for three months, just by mentioning Built to Sell.

Show Notes & Links

From The Kombucha Shop > Brew Q&A > Cultures:

“Healthy Cultures

A healthy kombucha SCOBY will have brown, stringy or blob-like debris attached to it (the yeast). It can be bumpy or smooth on top, and have clear dots or bubbles. When you drop your new culture into the brew jar along with the starter liquid, your culture can sink to the bottom, float in the middle, or float on top—all locations are just fine and will ferment your kombucha just the same. Here are some photos of beautifully weird looking (but healthy) SCOBYs in all their glory.”

About Our Guest

Kate Field

Kate is the Founder and former CEO of The Kombucha Shop, an e-commerce company that provides everything you need to brew incredible kombucha at home. She bootstrapped the company solo in 2013 with less than $1000 and built it to become the largest kombucha homebrew supplier in the world. In 2018, Kate took The Kombucha Shop into the Shark Tank, where she struck a deal with investors Barbara Corcoran and Sara Blakely. Her pitch was named the #2 moment of the season by Inc. Magazine. In June 2020, Kate made the decision to sell The Kombucha Shop to embark on new adventures and opportunities.

Today, Kate finds joy in exploring new business ventures, investment opportunities and advising fellow entrepreneurs on their journey. She loves all things design-related, real estate, trail running, and eating good food in ATX.

 

Connect with Kate:

Watch the interview

Transcript

Disclaimer: Transcripts may contain a few typos. With most episodes lasting 60+ minutes, it can be difficult to catch some minor errors.

John Warrillow:

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So, are you a fan of Shark Tank? Personally, I’ve always kind of wondered what happens behind the scenes when people prepare and eventually pitch the Sharks. Well, my next guest, Kate Field, did exactly that. She started a company called The Kombucha Shop, where, guess what? They sold kombucha. But they sold kits for making kombucha at home, which was a novel concept at the time. She pitched the Sharks. She won a $350,000 investment in return for 10% of her company. She got her money. And surprisingly, she decided not to take it. I’ll let her tell you the rest of the story.

You’ll learn a ton about preparing to pitch your business, whether it’s to the Sharks or just about any investor in this episode. It also takes you through the highs and the lows of the entrepreneurial journey. And I think it’s one of those episode you can put your earbuds and just sit back and listen to the stories, revel in all of the twists and turns that take place on this journey we’re all on. And I think you’ll take away a lot of lessons embedded within Kate’s story. Here to tell you the entire story itself is Kate Field

Kate Field, welcome to Built to Sell Radio.

Kate Field:

Thanks so much for having me, John.

John Warrillow:

The Kombucha Shop. First of all, did I pronounce it right?

Kate Field:

Yes. You got it.

John Warrillow:

Good. Well, that’s important because I’ve seen the bottles in Whole Foods and I’m like, “What on earth is this toxic [inaudible 00:03:06] stuff?” I’ve never picked it up, but I’ve always wondered how on earth do you pronounce it. So, I’m glad that I got it right.

Kate Field:

Yes.

John Warrillow:

Okay. So, how did you get into this business of kombucha? Tell me the story.

Kate Field:

Definitely. So, I can’t believe you’ve still managed to not try it yet. That’s impressive.

John Warrillow:

I’m virgin. I haven’t touched the stuff. I promise you. I promise you.

Kate Field:

Yeah. So, that was for a lot of people when I started the company. It was back in 2013. I was living in Washington DC at the time. And it was pretty much people who were just really into health and wellness, like, very hip. Everyone was drinking it in places like LA and New York, but when I moved to Madison, Wisconsin, where I started the business, it was very much back to a teaching level of what this product is.

So, yeah. When I was in DC, I was working for a non-profit and was making non-profit wages, so not bringing in a very big salary. But I loved kombucha. I’d fallen in love with it, like a lot of people do. You taste it and you’re just like, “Oh it’s sweet. It’s sour. It’s fizzy.”

John Warrillow:

It’s also got health benefits, right? As I understand.

Kate Field:

Yes.

John Warrillow:

Like, there’s good, like-

Kate Field:

Yep. Yeah. It’s chock-full of probiotics and B vitamins and other beneficial acids that help with digestion and enzymes and things. So, yeah. It has a little bit of a health benefit that kind of, I think, makes people feel it’s a better alternative to soda, which it very much is. Just there’s a little bit of sugar still in kombucha that is remaining, but compared to a soft drink type of beverage, it’s vastly better.

John Warrillow:

Right. So, how did you get into the business? So, you’re working at the non-profit.

Kate Field:

Yeah. So, I’m working at the non-profit and I’m drinking kombucha and loving it, but it was $4 or $5 a bottle was very standard back in 2013. So, GT’s was kind of the main kombucha brewer at the time and their bottles were still roughly $4. No one had gone through a massive scaling yet. Like, Health-Ade and all these other companies didn’t really grow large enough to bring the cost down until just the last couple years. So, it was much more cost beneficial at the time to brew it at home because you could brew kombucha for basically the cost of sugar, tea, and water. So, all you needed was a kombucha culture and someone to teach you how to do it.

And so, back then, I was working at the food bank and a lot of my co-workers had started brewing it to save money. And so, I had a friend teach me how to do it. And as we’re going through this process, I was like, “Wow, this is kind of complicated and a little bit intimidating. The culture is kind of gross-looking,” If you’ve ever Googled a kombucha scoby, they’re-

John Warrillow:

We’ll put that in the show notes and you can have a [crosstalk 00:06:08]. Think, like, the brain that you used to look at in science class in grade eight.

Kate Field:

Yes.

John Warrillow:

It’s sort of that kind of vibe.

Kate Field:

It’s very similar. And so, I had a manager who came into a meeting one day and was like, “Hey, try my kombucha. I brewed it at home.” And I was like, “Oh, who taught you how to brew?” And she was like, “No, no, no. I ordered a kit online.” And my mind was just blown that someone had thought about packaging and selling all of the supplies to brew it at home, instead of having a friend bring over the stuff in a Ziploc baggy and go to thrift stores to get all your other stuff.

So, I immediately just took to Google and was, like, kombucha brewing kits and doing all this market research. And basically, the only folks who were out there doing it were not catering towards a young millennial crowd. Because I was in my mid-20s and everybody that I knew who was brewing was very young and liked well-branded packaging, but everything that was currently out there and being sold was more towards kind of a ’90s hippie branding. So, I just saw this huge gap and opportunity. And I didn’t really have any business background to speak of, but it was more that I could see that kombucha was going to be really big and I wanted to carve out a little piece that I thought I could nab.

John Warrillow:

And so, you started creating your own kits because what you saw was easily… you could do a better job.

Kate Field:

I thought… yeah. Within five minutes, I was like, “Wow, I could do this so much better.”

John Warrillow:

How does a lady working in the food bank? Not a customer, but working in a food bank, which [inaudible 00:07:46] not terribly well-paid, come up with the money to start a direct-to-consumer brand?

Kate Field:

Brand.

John Warrillow:

This sounds like a very expensive endeavor.

Kate Field:

Yeah. Which is what I love about my story because it wasn’t. I decided… I had no money. I literally had $800 to my name. And I took everything and I built the company from that. I literally bootstrapped it with that money and-

John Warrillow:

Okay. Explain that. Okay. What’d you spend the $800 bucks on?

Kate Field:

Yeah. Oh gosh. This has been so long, but this is what I did. I bought just enough supplies, so glass jars, all these other little things, sugar, tea, pH strips. I bought just enough supplies to sell, I think, and package 10 or 20 kits, something like that. And I hired a student designer because I, of course, could not afford an actual designer, but I thought, “Hey, a student designer is going to graduate in a year or two and be charging $70, 80 an hour. Why not… and they want to build their portfolio.” So, I tracked down some student designers and picked the best one and we were kind of off to the races. And she charged me, like… I think it was like $150, $200. But it was enough. It was enough to make our very rudimentary first logo, which I turned into a sticker that went onto a plane.

John Warrillow:

How did you sell it? How did you sell it?

Kate Field:

Okay. So, I got everything put together and then I built a Squarespace website. That was it. I had no background in coding or anything like that.

John Warrillow:

How did you get people to your Squarespace page? Was it all word of mouth in the beginning? Or what was [crosstalk 00:09:30].

Kate Field:

Yeah. So, I released it right before Christmas. So, I launched the website. And it wasn’t by any means even close to perfect, but I tried to not let perfect be the enemy of good and just get out of my own way and just launch it. And I sent an email to friends and family and was like, “Hey, I have some news. I left the food bank. And I started this new company. And I would love it if you had anyone on your gift list that you were still thinking about. I’d love your support and thank you so much.” And everyone was so supportive. And I sold through the 20 kits. And it was really off to the races from there. I took the money from those proceeds and went and I bought the next to make 50 kits.

And the way it just started very organically. The first kind of 6 to 12 months was just word of mouth, a friend posted on their Facebook page. It was a lot of guerrilla marketing in the beginning. I just asked people like, “Hey, I’m a new, young company. Could you rep this on your Facebook?” Because Instagram barely existed then. It was just starting. And so, yeah. And it went from there.

John Warrillow:

So, scrappy guerrilla marketing tactics in the beginning and then reinvesting all the profits. At some point, you got on Shark Tank. Explain that. How did you get on Shark Tank?

Kate Field:

Yeah. So, it was 2018 and I got an email from someone who claimed to be a producer at Shark Tank. And I didn’t believe it at first because it was just a super rudimentary email. And I was like, “This is a scam.” Anyone who owns businesses knows you get emailed all the time by people trying to hit you up. And so, I didn’t respond, but he followed up and was like, “No, really. We’re really interested. We love what you’re doing with the tHE Kombucha Shop. We think you’d be awesome on Shark Tank.” So, we got on the phone and he kind of explained the whole process. And I decided to apply maybe a month or two later because I really had to think about like, did this make sense for my company?

John Warrillow:

What were your annual sales in the kind of 12 months leading up to the on-air screening of Shark Tank? When Mark Cuban says, “What are your sales?” what was your answer? I haven’t watched the show, but your last 12 months.

Kate Field:

Yeah. At that point, we were probably… so, I went on 2018. We were probably doing about, like, 1.5, maybe 1.2 in revenue probably at the time of going on Shark Tank, I want to say.

John Warrillow:

[inaudible 00:12:09].

Kate Field:

Like, trailing 12 of going onto Shark Tank.

John Warrillow:

What’d you ask for? What was the valuation you pitched?

Kate Field:

So, I valued it… I ended up valuing it at 3.5 million because I basically talked with a lot of different people. I know.

John Warrillow:

That’s, like, three times revenue.

Kate Field:

It was ridiculous. But everybody I talked to said, “For Shark Tank, you’re undervaluing your company.” And at that point, I was kind of in a growth stage. So, 2016, I had done 800, a little over $800,000 in sales. 2017, 1.2. And then early 2018, we had had a very good Q4 in end of 2017. So, when I went on, the numbers were looking like things had been growing pretty well.

John Warrillow:

I see.

Kate Field:

Yeah. Things were healthy and there was… and the big thing that made our company valuable was that I never actually put money, any large amount of money to speak of, towards digital advertising, any kind of digital marketing. It ended up, over the years, just ended up staying organic growth because we became the leader in the market really quickly basically because of that brand differentiator. I was the only really attractive, cute, modern brand. And so, we were able to swallow up all of the organic traffic just because [crosstalk 00:13:38].

John Warrillow:

Just when you say organic traffic to be, just to make sure we’re not confusing terminology, we’re not talking about the product being organic, although I think it was [crosstalk 00:13:46].

Kate Field:

Yes, it was.

John Warrillow:

We’re talking about-

Kate Field:

No, I mean, like, non-

John Warrillow:

[Crosstalk 00:13:49] people Googling.

Kate Field:

Yes. Non-paid.

John Warrillow:

[crosstalk 00:13:51]. Yeah, yeah.

Kate Field:

Yeah. Non-paid search.

John Warrillow:

Got it, got it. So, you were getting a lot of natural sort of traffic through that.

Kate Field:

Yeah.

John Warrillow:

That makes sense.

Kate Field:

So, I knew going into the show that there was this enormous upside that hadn’t been realized yet by the company. And I talked to a few different people and I was telling them I was going to originally value the company at 2 million. And they just said, “Shoot for the stars. Why not?” Mostly, I think the biggest reason, and I still think it holds true today, is that I was 100%, bootstrapped the company, there wasn’t a million other investors to divvy up the equity with. So, I was able to kind of come in and ask for a really large valuation. But yeah.

John Warrillow:

What was that like in the minutes leading up? Like, when you’re in the green room and you’re about to go on, what’s that like?

Kate Field:

It was terrifying. It was scary. Yeah. I mean, the Sharks are… when you get in there, they’re just as scary, if not scarier, in real life because they’re so close to you. They’re eight feet away. And you have these really hot lights just pounding down on you. And yeah. It was scary. I spent, like, eight hours locked in a trailer before I walked out because you’re not allowed to see anything or see anyone or talk to anyone beforehand. They keep you really secluded. So, I was just basically sat in there trying to listen to pump up playlists and Tony Robbins and other ridiculous things to stay calm.

John Warrillow:

There’s nothing about Tony Robbins that would make me stay calm, but that’s all right.

Kate Field:

I guess the confidence-building, the inspiration of like, “Yeah, you can do this.” And at that point, I had practiced for three months, like, intense preparation. So much work had gone into it. And I knew I couldn’t have prepared anymore. I literally left everything on the field, so to speak. So, I felt pretty good going in, but it was nerve-wracking.

John Warrillow:

What was their reaction to your presentation?

Kate Field:

It was great. It was really good. It ended up being like… I think Inc. Magazine ranked it the number-two pitch of the season.

John Warrillow:

Wow.

Kate Field:

Yeah. It couldn’t have gone better.

John Warrillow:

So, what’d they say?

Kate Field:

So, well, if I remember correctly. I haven’t seen it in years at this point, but Kevin came out with the first offer and valued it… he thought the valuation was ridiculous also. And he came out and offered… I think he wanted to take 30% of the company. Basically, really, I didn’t pay attention to it.

John Warrillow:

30% of the company in return for, I think you were asking for 350.

Kate Field:

For $350,000. Yeah.

John Warrillow:

Got it. So, he was valuing it at about a millionish.

Kate Field:

Yeah. So, really just cut the valuation down. But it was very apparent that throughout, Mark Cuban was loving it. From the very beginning, he was just like, “This is an amazing story. You’re an awesome entrepreneur.” So, I knew he was probably going to come in with something. And then Barbara loved it. And so, what ended up happening is her and Sara came in-

John Warrillow:

And we should be clear, Sara Blakely, the founder of Spanx, an amazing entrepreneur, was kind of guest-starring. Was it the whole season or just that episode?

Kate Field:

Just that episode. So, they have guest Sharks come on with some regularity now each season. And so, Sara Blakely was the guest Shark for my pitch. And her and Barbara ended up giving me exactly what I asked for. They valued the company at 3.5 million for 10%. And both of them were going to come in. So, I was going to get two Sharks basically for the price of one at what I was asking. So, I didn’t bat an eye. And I was just like, “Yes, I will take that deal.”

And the way the editors spun it is that they panned to Mark. And Mark just was devastated. He was really bummed he didn’t get-

John Warrillow:

Left at the alter, so to speak.

Kate Field:

Yeah. So, but he was the one who taught me from watching the show for so many years, a bird in the hand. He’s one of the big… he gets mad. He gets really frustrated when entrepreneurs don’t take a good deal. So, I wasn’t about to let that happen.

John Warrillow:

So, where does it go from there? So, okay. The show’s over. You got your $350,000, I’m assuming?

Kate Field:

No. So, what a lot of folks don’t know about Shark Tank is that only about half the deals that are made on-air end up closing in real life. So, it’s kind of the opposite of an actual, of a typical business deal because you meet them for the very first time in person in the tank. They don’t know a thing about you or your business. And so, the due diligence really starts after the deal, the handshake deal is made. So, your lawyers and their lawyers get together. It can take anywhere from six to nine months. And actually, roughly around 50% of deals that are done on-air never actually close in real life. So, we were one of those deals that didn’t end up closing after the airing. And both-

John Warrillow:

And was that more your decision? Or was it theirs?

Kate Field:

Yeah. But both sides felt good about it. It just wasn’t necessarily what everyone was really looking for at the end of the day. And I’d come to realize maybe with the age of my company, it was almost like trying to take a partner on too late in the process because we were already… I’d been in business over five years at that point. And yeah. We just had sort of differing opinions about how to move forward. So, everyone felt really good that it wasn’t quite the right fit.

John Warrillow:

But in the end, you benefited tremendously because this national television exposure was priceless. You’d never be able to afford that.

Kate Field:

Yeah. It was incredible. And it really took our business to the next level. And it was kind of one of the more strategic moves I made in getting ready to sell was I knew, because we hadn’t put a ton of money into digital marketing yet, I needed something, a big boost, a big lift to help launch us to that next level pre-sale so that it would get buyers excited that there was something that they could really sink their teeth into like, “Oh wow. Yeah. We’ve had this national exposure.” And it ended up doing exactly that.

John Warrillow:

So, you were thinking of selling even before Shark Tank.

Kate Field:

Yeah.

John Warrillow:

That’s early, relatively early in your life, both your chronological life, but also in your company’s life. What triggered you to decide to sell so early?

Kate Field:

Yeah, yeah. I guess I was in my late-20s. Well, I started in 2013. So, it had been going on five years at that point. And I never thought I would be running this business even as long as I had been. So, when I started the company, I had no sense that I was going to be growing a 30 or 40 million-dollar business because I knew it was a niche market and that there were only so many people that want to home brew kombucha in the country, let alone the world. And even if this thing really took off, there was always going to be a cap to it. And that was a nice thing to be a big fish for a long time, but I knew that there was only so far this could go. And so, I had to have an end game in mind was kind of my thought.

Also, the fact that kombucha was considered by some people a wellness fad. And I knew that it was deeper than that and that it was really becoming its own category that was going to displace soda, at least in the natural grocery realm, which it very much has. But there was still this possible kind of time limit of, like, maybe it’s five years, maybe it’s 10 years, maybe it’s 20, but…

John Warrillow:

And what did you tell the Sharks? Because I know the Sharks, I mean, you can’t go on a Shark Tank saying, “Yeah, we’re a lifestyle business and we expect to be the same size next year or the year after that.” You’ve got to show them the hockey stick or tell some sort of narrative. So, what did you tell them that you thought was the addressable market or the size of market you might be able to go after?

Kate Field:

I knew that there was a lot of potential left in the business. And what I pitched was just that I didn’t have the expertise in digital marketing or really, truly the interest. I had gotten into this because I enjoyed teaching people how to brew kombucha. It’s kind of the classic, old school entrepreneur story. And so, I had sort of reached my capacity of what I thought as sort of a leader in the business. And that’s was why I was looking for a strategic partner. And that was the truth. And that, when I didn’t do the deal with the Sharks, was what led me down the path to sale even faster because I still felt that.

John Warrillow:

That desire to have… that you were sort of over your head, if I can use that? And those are my words. [crosstalk 00:23:25].

Kate Field:

Yeah, no, yeah.

John Warrillow:

You were feeling like this is growing to a point where…

Kate Field:

Yeah. It’s growing to a point where I had kind of maxed out that natural interest and that I was going to have to develop a really thoughtful, high-level digital advertising and marketing campaign that I just didn’t have the background in. And a lot of entrepreneurs… everything else in the business, of course, I didn’t also have a background in, but I had a natural interest, whether it was supply chain or scaling, even just building a company culture that myself and my employees loved to come to every day. All of those things in business, I was naturally very attracted to. The one piece that was missing was very necessary for a successful e-commerce company.

John Warrillow:

Were you tempted to hire a marketing agency or a professional services firm to help you?

Kate Field:

Yes. Definitely. I think what happened, though, was I had gone too far into the business that the burnout had already set in. It was very mild, but I knew what was coming. I had listened to plenty of people, podcasts like yours. It is the thing that you have to be prepared for. And I knew I’m not going to even have the interest to stick around and manage a company, an agency to do the marketing, that I was kind of already a half foot out the door at that point.

John Warrillow:

Got it. So, where do you go from there? So, the idea of selling has twigged for you. So, what next?

Kate Field:

So, yeah. So, we did Shark Tank. And it was phenomenal. And we had this huge boost in sales afterwards. I think we did something like six or $700,000 in sales in, like, the eight weeks following the airing, which was so high because it overlapped perfectly with the holiday buying season. It aired, like, a week before Black Friday.

John Warrillow:

Oh man, that’s amazing.

Kate Field:

So, we just got so lucky on so many levels. And so, we had this enormous growth in revenue. And that also boosted me kind of emotionally. It gave me that extra zest to really push out the next year and make it great and grow the business as much as I could because I wanted to, if I did decide to put the business up for sale, I wanted to go out on top. I wanted to still have the energy and excitement about the business so that I could really speak truthfully about how great the business is to a potential buyer and help with that transition and still have the energy to help the next owner thrive. So, that would’ve been 2019.

John Warrillow:

[crosstalk 00:26:16] 2019 at, in terms of trailing 12-months revenue?

Kate Field:

Yep. So, I put the business up for sale right at the end of 2019, and we were right around 2 million in revenue for the trailing 12. And that was another… so, it was part of putting the business up for sale then was because I knew we would probably come off of what a lot of people call the Shark Tank cliff within the next six to nine months because you get such a lift in sales. It’s kind of like a double-edged sword. It’s great for business. You get so much exposure, you get this huge lift in sales, but it can start to look like you’ll have a down year if you don’t follow it up with massive investment in advertising and marketing to keep it going.

And because I knew I was going to be selling, it was like, “Well, I’m not about to dump a ton of money in to grow it if I’m not going to realize the profit.” So, it was a little bit of a time crunch to make sure I found a buyer and before things kind of evaporated in terms of that Shark Tank run. They re-air the episodes with relative frequency within that first year so you kind of get to see this continuous bump and growth from it. But yeah. So, we were about 2 million in revenue by the time I went to the brokerage that I found to sell.

John Warrillow:

Right. And what happened next?

Kate Field:

Things moved really quickly from there. And I wasn’t even 100% set on selling. And I think it went the way it was supposed to, but I really went into it sort of exploratory because I loved running my company still. I loved my staff. I had a great time doing it. It was just purely that I had been in startup mode for so long that I was getting exhausted, but it was still very emotionally fulfilling for me. So, I felt very torn. Do I sell or do I not sell? And it being my first business, it was very much like a baby. For better or for worse, I was very close with it. So, I really struggled with that. But in my heart of hearts, I knew, “I think this is something I need to do for myself.”But I told myself, “I’m just exploring. We’re just going to see what would people pay for it? This is just investigating.”

But once you get into it, it’s almost like the process takes over, as I’m sure anyone who’s sold a company knows. It’s like the train leaves the station and either you’re on it or you’re off. And it’s really hard to change the destination once you’re headed towards it.

John Warrillow:

I think people would benefit from hearing from you what you mean by that. I know what you mean by that because in my experience, when the broker, the banker gets involved, they sort of drive the process and you’re kind of holding on for dear life because their job is to drive a process. But I think people, having never gone through the process, would benefit from hearing from you, like, what does it feel like to have this thing take on a life of its own? What made you feel like it had a life of its own?

Kate Field:

Yeah. And that’s a really good way of saying it because the business sale process is an entirely… it is a life of its own. It’s almost like starting a second company. And the mission of that company is to sell your business. So much time and energy and effort gets put into the sale of the business that it becomes a sole focus. And it is very hard. Like, yes, you’re still working in your business and you’re still trying to make sure that your revenue is staying up, but it becomes the chief mission.

And all of a sudden, like you said, there’s so many people involved. You’ve got the bankers, the lawyers, your broker, usually your spouses are then the interested parties and they want to have their two cents. Because if you’re a founder, they’ve been along for this ride, if you’ve had an intimate partner with you during this time. So, my husband was very much kind of in an advisory role during this time. And yeah. It starts to grow and grow. And you get to a point where someone says, “I want to go under LOI.” And you’re like-

John Warrillow:

Stands for letter of intent, for folks who may not know that acronym. Yep.

Kate Field:

Yeah. So, they say, “Hey, we want to sign some papers that say, ‘We’re going to start an official due diligence with the intent to buy your business.'” And you’re like, “Well, we’ve come this far. We’ve put so much time and energy. And they seem great. I guess I’m doing this,” is eventually where it starts to… the doubts go away because they kind of have to. It’s like you’ve-

John Warrillow:

Did that happen for you? Did you get an LOI?

Kate Field:

Yeah. So, it all happened really quickly. So, we put the business up for sale with the brokerage. And I went to a brokerage that specializes in e-commerce companies, particularly with an Amazon bent. At the time of sale, about 70% of our revenue was through Amazon and 30% was from the website. So, we were very heavy into Amazon. So, I went with a broker who had a large list of interested buyers that were used to playing in that space.

And so, we put it up. And we had a lot of interest at first. And it was really that Shark Tank piece that ended up being something that everybody was attracted to.

John Warrillow:

So, back to the story here. So, you’re shopping the business. The broker’s doing a great job sort of getting interested parties. Are you getting multiple offers? Is the brokerage trying to coalesce around a certain offer date? How are they [inaudible 00:32:29].

Kate Field:

Yeah. The way they did it is it’s kind of a first come first serve, like, whoever wants to go under LOI first. But obviously, I met with maybe five or six people who put in essentially high interest that they wanted to start negotiations. And there were a few different… there was some private equity companies that didn’t make sense. A lot of them were just from New York and hadn’t really been in this, the e-commerce, home brewing space, and they had admitted that, but they were really attracted to… they were just trying to buy up Amazon products that that had a high profitability. And so, it seemed like they were a little more churn and burn. And I could have been wrong about that, but that was just my read. And because I cared so much about the company and our customers and my employees, it didn’t seem like the right route.

I really wanted to find another kind of small business owner type investor that was looking to just be a little more involved in the business. And so, that was who we ended up going under an LOI with, was a young guy who had bought and sold and grown a number of companies. He was a really good kind of cultural fit with the team. He wanted to turn the company into a B Corporation and put me on the board. And so, it felt a little more holistic.

John Warrillow:

So, what was his offer on a multiple of profit? Where were you at on [inaudible 00:34:25]?

Kate Field:

Yep. So, it was really interesting. The offer that he eventually put out had a really large earnout. We initially asked, when we put the business up for sale, we were asking 2.2 million. And that was on just under 2 million in revenue with the 500,000 profit.

And he had said, “I’ve looked at your financials. I’ve split them six ways to Sunday. And your business is worth 2 million. And there’s no other way around it.” And I was like, “Okay, you might be right about that, but there are things that make it really special. And so, I think 2.2 is still reasonable.” So, he worked in this earnout that eventually, over maybe a total of a seven-year period, I could earn up to 2.7. But the cash out front was only to start, at the close of sale, was only going to be 1.5 or 6, somewhere in that ballpark.

So, the reason why I was going to take it though, we went under LOI, I agreed to the terms, I was like, “This all sounds great,” because I had put so much trust in him and where he was going to lead the company, and this board seats, and I was going to spend the next two years kind of working with them still, and I was still really attracted to that idea. I wasn’t ready to cut the cord entirely because I felt really connected to it still. And so, I felt good about the deal.

So, we went in three months of due diligence. And then March… I’ll never forget the date. It was Friday the 13th of March, 2020. And I get a phone call, you know, there’s these things on… I live in Austin, Texas. And so, all of a sudden, I’m watching the news and it’s like, “South by Southwest is canceled.” And everyone’s starting to talk about the pandemic, but no one was calling it that yet. It was just the virus at the time. And I kept thinking, like so many people, “Oh, this is not a big deal. What? This will be a month tops.”

John Warrillow:

A couple weeks, a blip. Yeah.

Kate Field:

Couple weeks. Like, “Why are people freaking out?” And he calls me and he says, “Kate, I’m so sorry, but I’ve got to pull out of the deal.” And I just broke down because we were a week from closing. And he said, “I know you don’t… you probably don’t think this is true, but we’re about to have a global pandemic and the economy is going to screech to a halt, supply chains are going to be disrupted. This is going to last two to four years.” And back at this time, he sounded ludicrous. It sounded like he was being just a fearmongerer. I remember thinking, and I was like, “But why would you take that risk? And you’ve put so much time into this business deal.” But he was very steadfast. And he said, “I’m so sorry, but I got to walk away.” So, that was how that ended. Yeah.

John Warrillow:

That must have been tough.

Kate Field:

It was really hard. It was really hard. And I remember in that moment feeling like the floor had just been ripped out from under me. And everything you start planning for, the post-exist and what you’re going to do afterwards, it was just all gone in the blink of an eye. And so, it was really devastating. I was sad about it. And I didn’t know really what to do. So, the next-

John Warrillow:

Let me ask you a question.

Kate Field:

Yeah.

John Warrillow:

Before we go, I want to get to the next start or the next chapter in the story. Before we go there, I wanted to ask, the one-time sales blip or the kind of honeymoon or halo effect of Shark Tank, I think you called it the Shark Tank effect or something like that, did that come up in negotiations with this young guy? Did he say, “You got to lower your… because this is a one-time anomaly and you can’t expect this to go on forever”? I mean, did he use that as a negotiating ploy?

Kate Field:

He did. He definitely did.

John Warrillow:

Got it.

Kate Field:

But my counter to it, which was valid, was, yes, there was this one-time blip sort of in revenue, but it still leveled us up to a place of national recognition where store buyers were calling us that I could never get to pick up the phone. And now, they were calling me and saying, “Hey, we’d love to have your kits in the store.” So, there was all of this uncaptured value still from it that I kind of kept coming back to like, “You’re just seeing the revenue from the trailing 12 as this blip, but it’s not just a blip. It’s like a new baseline for the company.” And eventually, that is what kind of won him over that he saw the longer-term value for it. And yeah.

John Warrillow:

It sounds like you although negotiated hard, you also had a relatively good relationship with this guy. You were willing to be on the board. You broke down and cried at the news that he was not going to do the deal. It sounded like you had a relationship that was positive, that was not just a clinical, private equity kind of deal.

Kate Field:

Yes.

John Warrillow:

How did you manage to keep relations positive while, at the same time, negotiating for what you wanted? How did you do that? Seems like a really hard thing to do.

Kate Field:

Yeah. It was, and it wasn’t. Yeah. We became very close very quickly because we were similar people and similar entrepreneurs. When he said he wanted to turn it into a B Corporation, it was like, “Hey, yeah. We’ve been working towards that for… ” we basically were a Corp, but just without the status.

John Warrillow:

What is a B Corp, for folks who don’t… for me. For example, me. What is a B Corp?

Kate Field:

Yes, yes, yes. Yeah. It’s kind of a funny thing in that it’s not a real… I mean, I guess it is a real corporate designation. But it basically says that you are equally valuing people, planet, and profit, not just profit. So, there’s-

John Warrillow:

[crosstalk 00:40:58] bottom line stuff.

Kate Field:

Triple bottom line. Yep. Yeah. So, it means you’re taking care of your employees. You’re sourcing your product in a way that’s responsible. And all these other measurements for success than just profit.

John Warrillow:

Cool. Okay. So, let’s get you to the actual [inaudible 00:41:14]. So, Friday the 13th comes. The deal blows up. You’re back licking your wounds thinking, “What on earth am I going to do next?” Where does it go from there?

Kate Field:

Exactly. Well, it’s funny because your exact thought of, “You were so close with this person,” was my broker’s… was kind of a worry of his, that he wasn’t surprised when this thing imploded in the way that it did. If we were going to go back to the table after this, because he obviously called me a few hours later and we were talking strategy of, “Where do we go? What do we do? The pandemic is hitting.” The one thing he knew was we were not going what we did with the first buyer, which was get very intimately involved. My staff had known because it was such a sure bet, right? That was such a lesson learned from this whole process was nothing is a sure bet until that dotted line is signed, even though we were working so much like the business sale was inevitable. He was already talking with my staff. That was a big no-no that I had to learn the hard way, I think.

So, when we kind of went back to the drawing board, my broker was just like, “Well, what do you want to do?” And I said, “I don’t know. I’m so confused as to what makes sense with this pandemic,” because we were dealing with so little information. It was like, was this guy right? Or was he just overblowing this? So, my broker said, “Why don’t you just take a few days, clear your head.” And he said he was going to send out to a few people who had been kind of waiting in the wings and hoping that the deal was going to fall apart. He had a few people kind of lined up. And he said, “I’ll send them a message. And we’ll see if they’re still interested, giving the whole pending economic collapse.” So, I said, “Okay.”

So, the next day, I decided to go out and go mountain biking with my husband. He was like, “Let’s go just get some fresh air and take your mind off of it.” So, we went out to a downhill park that’s west of Austin. And who knows why this happened or if there is no meaning in the universe, but I ended up getting in an epic bike accident. And I ended up getting airlifted to the trauma center here in Austin. And I broke my collar… so, I ended up breaking my collarbone and two bones, two vertebrate in my back. And yeah. If you ever don’t want to care about your business or things falling apart, just go get in a life-threatening accident and it will put things in perspective. But yeah. So, it worked to do that.

And I remember talking with Brad or… well, I don’t know if I can say his name. But my broker, I called him from the hospital and I was like, “I’ve got myself in a bit of trouble and I thought you should know.” And we both just talked about like, what did this mean for the business sale? It was so many things coming to a head at once with the pandemic and this accident, it was just like, “Maybe I should just take the business sale off the table and just take the next few weeks to recover from this and figure out a little… we’ll get some more news on the pandemic.”

But I ended up doing the reverse. The accident just put in my mind, like, “Life is short. Anything could have happened today. And is this what I want to be doing, like, worrying about my business and dealing with this kind of thing?” it was just such a wake-up call. And it was like, “No, I want to go live. I want to sell this company. I want to go live my life.” That was what ended up sort of being the takeaway.

John Warrillow:

Well, I should be clear. Did you make a full recovery from the accident? I mean, did your [crosstalk 00:45:14].

Kate Field:

A hundred percent. Yeah.

John Warrillow:

Okay.

Kate Field:

Oh gosh, yes, yes, yeah. No, no, no. They were just little bones in my… they’re called spinous process bones. And they’re just like these artificial little tips. So, yeah. It was kind of a miracle. I literally walked away. After surgery, I’ve been totally fine.

John Warrillow:

Well, that’s good. So, you get through this horrific experience and it does nothing but galvanize your decision to want to sell. Now, you are motivated.

Kate Field:

Yeah. Now, I am like, “Let’s- ”

John Warrillow:

Super motivated.

Kate Field:

I’ve never been more motivated. Let’s get this show on the road. I don’t care about this virus that’s coming. And lo and behold, there was this buyer who had been waiting and, as he told me, praying that something would allow him to be able to be the one to buy the company. And he was in a hurry. He was very much like, “Let’s get this done.” He wanted to go under LOI ASAP. I got in my accident on a Saturday. I went into surgery that Monday or Tuesday. And I’m literally in the hospital and I have to give the verbal okay to go under LOI. And I remember my broker had… he was like, “Put Cameron on the phone,” my husband. And he was just like, “Is Kate of sound mind enough to be making this decision?”

John Warrillow:

Right. “How many Percocets had she had today?”

Kate Field:

Exactly. And the funny thing is, is now looking back, it’s like, no, I should have never been making that decision then. And I can’t believe that they let that happen. But they knew that where my heart of hearts was, was that even if I was on a large amount of morphine, I wanted to move forward. So, we went under LOI. And yeah. From that point forward, I think we closed definitely within 90 days, which was kind of a miracle.

John Warrillow:

What did he offer? Because you had, before the accident, before the pandemic, an offer of 1.5 million plus the potential to get it all the way to 2.7 with the earnout and the board seat. What was the duress or the I-want-to-get-it-done offer in relation to the previous?

Kate Field:

Yeah. So, the new buyer definitely used the risk of the looming pandemic to drive the price down. So, we were asking 2.2. He came to the table and said, “I’m not paying over 1.85,” was his offer. And I came back and was like, “Come on.” I really wanted 2 million. I thought it was super justified. And he was like, “No. The global economy could collapse within the next 12 months. I’m taking an enormous amount of risk.” And I said, “All right.” And I agreed to the 1.85 plus… with what ended up being some consulting time and inventory, the total… I ended up walking away with just about 2 million. So, I was happy.

John Warrillow:

Incredible, given the circumstances of what was going on in the world at that time.

Kate Field:

Yeah, yeah. It really was. And it’s easy now to look back and see that, but at the time… and that’s what’s so hard for everybody. It’s like back then, we knew so little about what was happening. But I still kicked myself, like, six months after the sale where I was just like, “Oh, I should have gotten more. I should have stuck my guns.” But now, being about a year and a half out from this, I have really good perspective on, no, it’s been an incredibly challenging time for businesses and the supply chain.

John Warrillow:

That’s really interesting that you have kind of gone through this almost full circle because we hear a lot on this show about a little bit of seller’s remorse. There’s that immediate high that you get from selling. And then there’s oftentimes a few months later this kind of lull and think, “Oh man, did I leave money on the table? Could I have done better?” And then there’s this sort of coming, I think, to terms with it, almost like a death of some sort, where you’re kind of like, “You know what? That was meant to be,” or, “That was the right outcome for me at the time, given everything that was going on.” So, it sounds like you went through that entire grieving process.

Kate Field:

I really did, almost to a T, which it’s like kind of embarrassing to think about. When you’re going through it, you feel so kind of alone and it’s like, “Oh, I’ve made all these mistakes.” But yeah. Once you start talking with more people who’ve sold companies, it’s almost the exact same time every time. And it’s very similar to grieving a loss. And yeah. You go through the same steps.

And I especially had a really hard time with letting go of a business that I was so close with. And I had differing opinions with the new ownership of how the company should move forward. And so, we ended up parting ways really quickly after the sale. And that only made the depths of the buyer’s remorse that much worse because I felt I had made the wrong choice and was very much blaming myself for continuing to have the business up for sale in such a time of uncertainty and kind of making the choice from a place of fear instead of a place of confidence, which I know in business is just never great to do. So, I felt like I had created this mortal sin.

And it’s really taken me, yeah, well over a year to kind of come to full acceptance with it and now know and be able to look back and reflect and say, “No, actually, it was a great deal. And it was a good time to sell,” but it’s sort of like the story’s never finished being written. So, that was for me, if someone could’ve come down to me and said like, “Kate, just wait 12 months. You’re in the thick of it. You’re in this really low place, but you will come around.” And I did. And I’m really happy. And now, it’s great.

John Warrillow:

I have to ask, would you do the deal again? Knowing everything that you know now, if you could wind back the clock, would you do the deal?

Kate Field:

Mm-hmm (affirmative). Yes. Yeah. Which is crazy because 12… not… yeah. Less than a year ago, absolutely not. I would’ve not done it, was what I thought then. But I think I had to think more long term. I think when anyone’s in that place of sort of grieving, it’s so easy for the world to kind of close in and you stop sort of dreaming and you’re just fixating. And you’re in that buyer’s remorse phase that is so common after a business sale. And all you’re thinking about is the past, instead of thinking about the future and all of the businesses you get to start and all of the great things you get to do and the trips you get to take and the time with your family and the whole reason that you sold your company in the first place. It’s like you regress almost and you forget all of those things. And I did. And that’s exactly what happened. And so, now, looking back, I can say very much I would do the deal again and I’m happy that I did it. It’s just taken a long time to get to that point.

John Warrillow:

And so, what’s the next chapter going to look like for you? What can we expect from Kate?

Kate Field:

Yeah. So, actually, it’s really cool to be doing this now because I’m in a very full circle moment where I’ve kind of come to the end of this… what ended up with the consulting period after the sale, it’s really been about a year since that, and about a year and a half since the sale. And I’m going to be starting a new role with a small startup called Aampe, their personalization engine. And I’m going to be coming on as the chief of staff there and helping them scale their company. And I am so excited.

And it’s just one of those things where you can’t dream about when you’re in it and you’re especially going through that business sale process. You just know like, hey, I’m going to move on to something hopefully more exciting or be learning more, like you were in the beginning of your business because that’s what’s always driven me is I love learning. And so, I’m making a huge shift moving into a SaaS, tech-based company. And so, it’s going to be a massive amount of growth and learning that I’m looking forward to.

John Warrillow:

That’s exciting. So, there’s life after a business sale.

Kate Field:

Yes. Yeah. There very much is. And it’s always weird at first. Everyone always asks you like, “Oh,” when you’re an entrepreneur and you sell your company, “What’s your next business going to be?”

John Warrillow:

[crosstalk 00:54:35].

Kate Field:

It’s like when you get married and people go, “When are you going to have a baby?” It’s like the exact same thing.

John Warrillow:

It’s like a knee-jerk question. Everybody asks you. Yeah, yeah.

Kate Field:

Yeah. “What’s your next company?” And I knew when I sold The Kombucha Shop I had no interest in turning around and starting another business. I think that came from being a solo founder, that I was just a little drained and exhausted from that process. So, I was way more excited about the idea of joining a startup so that I could have mentors again because I had been kind of in that mentor role. But I think it’s really important to always have mentees and mentors. And so, I’m looking forward to being back in sort of the learning seat. And yeah.

John Warrillow:

That old expression, it’s lonely at the top, is true, I think, for a lot of entrepreneurs. It can be grinding by the end. You can feel really depleted and crave that feedback and that team.

And are you open to people reaching out to you on LinkedIn? Or is there social media that you prefer?

Kate Field:

Totally. Yeah. LinkedIn is great. Yeah. You can find me on there under Kate Field. And yeah. Always happy to connect with people and help, offer advice and things.

John Warrillow:

Thanks, Kate. Well, this has been a huge help for a lot of people listening. Your story is very real and it’s got lots of twists and turns, but it worked out in the end. And I’m really grateful for you sharing it.

Kate Field:

Awesome. Thanks, John. I appreciate it.

John Warrillow:

Hey, if you liked today’s episode, you’re going to love my new book, The Art of Selling Your Business. The book was inspired by the cohort of my guests over the years who have been able to negotiate an exit far better than the benchmark in their industry, sometimes two or three times more than I would’ve expected. I was curious to understand the tactics and strategies of these entrepreneurs and what they do differently from average performers. The result is a playbook for punching above your weight when it comes to selling your business. To learn more, go to builttosell.com/selling, where we’ve put together a collection of gifts for listeners who order the book. Just go to builttosell.com/selling.

Built to Sell Radio is produced by Haley Parkhill. Our audio and video engineer is Dennis Labattaglia. If you like what you’ve just heard, subscribe to get a new episode delivered to your inbox each week. Just go to builttosell.com.

Outro:

Thanks for listening to Built to Sell Radio with John Warrillow. For complete show notes, with links to additional resources, visit builttosell.com/blog. John is the founder of the Value Builder System. To find out how to improve the value of your business by 71%, visit valuebuildersystem.com. John is also the author of Built to Sell: Creating a Business That Can Thrive Without You, and The Automatic Customer: Creating a Subscription Business in Any Industry. Connect with John at facebook.com/builttosell or on Twitter at @John Warrillow. W-A-R-R-I-L-L-O-W. Thanks for listening.

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