Follow your business plan

Welcome back to another edition of The Wise Exit!

I’m Brian Dukes, a Managing Partner at Exitwise. 

In today’s newsletter, I’ll cover: 

• 3 lessons from Victoria Tsai’s exit from Tatcha 💄 

• The importance of negotiation and buyer selection in M&A 🤝 

• My 12-step Seller’s Checklist 📜

Let’s dive in!

Featured Founder

Name: Victoria (Vicky) Tsai 

Education: MBA from Harvard Business School 

Founder of: Tatcha, a luxury beauty brand 

Noteworthy: Tasha was no. 21 on the Inc. 5000 list in 2015 for fastest-growing companies in America 

Fun fact: One of Tatcha’s first customers was Donatella Versace (followed by many other celebrities) 

In a nutshell: Tatcha was initially bootstrapped by Tsai in 2009, with early fundraising from family and friends. With further help from angel investors, sales exceeded $12 million in 2014. Private equity firm Castanea Partners made a minority investment in 2017 and within a year sales had grown to $70 million. Unilever acquired Tatcha in 2019 for a reported $500 million.     

___________

So, how did it begin?

Tsai was suffering from severe eczema on her face. A trip to Kyoto brought her into contact with geishas, who were using specific skin-care products that helped with this problem.   

She saw potential for bringing these products to the U.S. and sold her engagement ring, furniture and car – and worked 4 jobs – to finance the business at the beginning.  

M&A Lesson 1: Fight imposter syndrome

Although Tsai held an MBA from Harvard Business School, she was uncomfortable pitching herself too hard. She used the title Chief Treasure Hunter because she didn’t feel worthy of calling herself a CEO.  

And that view of herself remained through the lifecycle of the business. No matter how much success she created or the growth of the company, she didn’t see herself as the champion of what she was building.  

As part of the Unilever acquisition 10 years later, her fears came to fruition as she was asked to step down as part of the transition. She did. Looking back, she knows she should have believed in herself more. 

So when Unilever asked her to help them during Covid-19, she took back the reins and returned as CEO to turn the company around, eliminating her imposter syndrome for good.   

M&A Lesson 2: Follow your business plan

As Tatcha went into product development, Tsai started burning through all the money she had bootstrapped. After several rounds of (disorganized) fundraising from family and friends, she was able to raise $1 million to get through this phase. 

Yet even though her team consisted of several people with Ivy League MBAs, they didn’t follow their business plan or the primary mission of the company. “We should have known better,” she later said. 

Instead, they ran out of money over and over again. In fact, she spent 9 years without taking a salary herself.  

While building her company was overwhelming, following her heart (the primary reason for starting the business) and the business plan would have smoothed out that process considerably.    

M&A Lesson 3: Believe in your expertise

Before Tatcha products were sold in stores, Tsai started sending samples to makeup artists and key media to get the word out. Within days, she was fielding calls, one of them from The Today Show.  

The attention led to two acquisition offers. One of the potential buyers told her, “You have lucked into this amazing concept and the question is whether you love your baby enough to give it to someone who’s going to be a proper parent.” 

Although she seriously considered their offer, they pulled out suddenly without telling her why. Ultimately that failure was a blessing in disguise, because she realized it wasn’t luck that got her to where she was: it was her expertise.  

And it was this expertise that led to her successful exit.   

Featured Blog 📰

Negotiation and buyer selection play critical roles in optimizing the mergers and acquisitions process.  

I use Steven Cox’s experience of selling TakeLessons.com to Microsoft to emphasize the importance of finding a buyer whose internal objectives align with the seller's business, thereby minimizing the need for persuasion regarding compatibility.  

And I go beyond that to consider what the role of current employees will be post-acquisition and what specific assets are for sale (and what you might want to keep).  

Read the blog post: The Importance of Negotiation and Buyer Selection in M&A 

M&A Tips from Brian Dukes 💡

Are you thinking of selling your business? I’ve created a 12-step (plus a bonus) Seller’s Checklist to walk you through the process. 

It includes some self-reflection (make sure you have a compelling reason to sell), building your team, getting your ducks in a row, and finding out how much your business is worth. 

Then, make sure your exit strategy is clear, resolve any legal issues, and clean up your physical workplace to increase curb appeal. Use this as a guide as you navigate this tricky process.  

For more M&A tips from someone who’s been there, follow me on LinkedIn.

That’s all for now. 

Tune in next Wednesday for another set of M&A lessons, and have a great rest of the week. 👋

Best,

Brian Dukes, Managing Partner