[EP 287] The Blueprint for a Successful Trade Sale: Insights from Leanne Faulkner

Transcript below!

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Joanna Oakey [00:00:25]:
Hello and welcome to another episode of the Deal Room podcast, a podcast proudly brought to you by our commercial legal practice aspect, legal. Today, Leanne Faulkner joins me. Leanne wears many hats and brings with her incredible insights. And on today’s episode, she shares how she left a busy corporate background to enter the world of soap making.

Joanna Oakey [00:00:52]:
After slowly taking over her house, her.

Joanna Oakey [00:00:54]:
Soap business took her from door to door sales to over 2000 retail stores, including Maya and David Jones. And with that, an international outlook. In this episode, you hear how she grew the brand with minimal marketing budget, how she shifted from startup to crazy growth. And you’ll also hear the impact of an economic downturn on her as a small business owner and entrepreneur. Leanne, in this episode, shares very honestly what triggered the eventual sale of her business. And I interestingly, how she went through that sale, having already had an exit strategy in mind while she grew, which is actually rare in my experience, because many business owners don’t know how, when or the structure they’d use to exit while they’re growing, and sometimes even when they’re at that point of exit. So look, this is such a wonderful, genuine conversation full of insights and what the path to exit and the world of small business ownership really looks like. I can’t wait for you to hear it.

Joanna Oakey [00:02:03]:
So without further ado, here we go with Leanne Faulkner and the Deal Room podcast.

Joanna Oakey [00:02:09]:
Leanne, thank you so much for joining us on the podcast today.

Leanne Faulkner [00:02:14]:
Oh, thanks, Joanna. I’m just so excited to be here. Thanks for having me.

Joanna Oakey [00:02:19]:
Oh, my absolute pleasure. There is nothing I like more than drilling into stories of business owners who built businesses, sold them, and had all those learnings along the way. I think it’s just so helpful for any business owner who’s building a business, maybe to ultimately sell or whatever, just get a bit of an insight into that story of other people before them.

Leanne Faulkner [00:02:41]:
Yes, I agree. And there’s nothing more beneficial than hindsight, really, is there?

Joanna Oakey [00:02:46]:
Oh, absolutely. That is such a true statement. Leanne, why don’t you tell us a little bit about Billy goat soap, how you got started and your journey?

Leanne Faulkner [00:02:58]:
Yeah, sure. Look, I had a corporate background, a very strong, long corporate background in, what.

Joanna Oakey [00:03:04]:
Was your corporate background in?

Leanne Faulkner [00:03:06]:
In human resources, change management, that sort of thing. And I met my husband, realised I was more to life than just work. And he had three kids from a previous marriage and then he and I had twos together. So we’re well and truly reconstituted or blended or whatever you want to call us. Anyway, back in the day, many years ago, the youngest of ours, Liam, the youngest of the five, was born with asthma and eczema and we thought it would be a walk in the park to help him because the other kids had that, so it’s pretty easy. But nothing seemed to help. So it was just lucky I happened to have some dairy goats. I was already a keen, mad dairy goat person.

Leanne Faulkner [00:03:46]:
Crazy, I know, and I was milking them. I heard that goat’s milk soap is supposedly good for people with eczema and thought, I’ve got goats, I’ve got milk, I’m gonna make soap. So I made some very bad soap for a very long time and eventually made something that seemed to help Liam. So I started in the kitchen, I would make soap on a Saturday night while everyone was watching the footy and then moved into the garage and then moved into the games room as the business grew and really just started going from door to door with health food stores, initially with soap in my boot door knocking, asking if they sell the product. Eventually, like years and years later, had grown the business to over 2000 retail doors around the country and was establishing the brand internationally as well. We had, look, zero marketing budget, but we had very good eye for pr, so we basically chased any free media that we could get. So what happened was there was a lady up in Queensland, an elderly lady who’d gone to her usual bank teller one day, had a breakout on her skin, and that Teller wrote on a deposit slip, Billy goat soap, and said to her, go and buy a bar of this. She did it, it cleared her skin.

Leanne Faulkner [00:05:04]:
And that story went to a current affair. Get out of here. I know, it’s incredible, isn’t it? People ask me, did I ever pay to go on a current affair? That’s so foreign to me. Like, that was just not the experience. So anyway, current affair contacted us and said they’d like to do a story, which they did, which was an amazing story to help tell our story. And the response from that apparently was so great that they came back two other times in the next four or five years to do follow ups on it. That definitely helped. And we did a lot of landmine and anything really that we could and grew the brand.

Leanne Faulkner [00:05:43]:
So really we were growing. It was crazy. Joanna, I have to say it was crazy growth, like at least 40% year on year, which is unsustainable, to be honest. So it was very hectic, very frantic. Work was 24/7 so anyway, this is a long time ago, but anyway, at the very end of the GFC, way back when, the economy had slowed significantly, retailing had slowed significantly, and felt that because retailing had slowed, we weren’t getting the numbers. We were so used to getting that clearly that was my fault and that I was doing something wrong. And even when I think it was Kevin Rudd gave everyone, what, $700 or something to spend, nobody woke up and said, I’m going to buy soap today. Everyone went out and bought tvs or whatever.

Leanne Faulkner [00:06:32]:
So that really didn’t help. I felt like I was a failure. I had to have very hard conversations at work, and that actually put me in a downward spiral to depression, actually. And so I got to the point where I couldn’t go to work and I would sit at my computer and type in small business owner not coping, entrepreneur feeling stressed, a whole range of things to see what was out there for me as the business owner, there’s a lot out there for employees, which is great, and there’s a lot out there for the general public. But if you own the business, when you own the business, the journey is different, right? We’re entrepreneurs and we’re small business people, so there’s a lot of stakeholders depending on us. So the journey was different. So I really wanted something that spoke to me. There wasn’t anything at that time.

Leanne Faulkner [00:07:19]:
So that put me on journey, which I’ve been on the last ten years. I sold Billy goat in back in 2012, put me on this journey in the last ten years to really address and better understand and advocate for the mental health of business owners as opposed to employees or general public, to really look at us as a special group. And that’s been my journey in the last ten years. So I think I was meant to have the Billy goat journey, to be honest, in more ways than one, and tell me.

Joanna Oakey [00:07:49]:
So we’ll quickly talk about that sale because that’s a of clicks that we talk about here. And then I want to move on to some of those bigger messages now, but just back to that sale. So you sold in 2012 and was that at the point that the business was just too much for you? Is that what the trigger for the sale was?

Leanne Faulkner [00:08:10]:
Look, certainly my mental health was got us talking. I actually had an exit plan. So I had, when I started the business, I had an exit plan. I knew what I wanted and I. So this is a one, we’ll get onto this later. This is one of the reasons why I love your book because I just, I read it, nodded my head, because you really do talk about, let’s begin with the end in mind. And I can’t tell you how many times I said that to my students when I’ve been teaching at uni in small business growth. What’s the end game? Where are you going to get to? So that business plan, I actually had a ten year business plan that said I would do a trade sale in ten years.

Joanna Oakey [00:08:53]:
I love it.

Joanna Oakey [00:08:55]:
So actually that planned, wow. I love it.

Leanne Faulkner [00:08:59]:
And that was really important because having that exit plan helped to determine the decisions I would make along the way. So, for example, I loved being in Maya and I love being in David Jones. Right. But I loved it because I knew that the distribution channel would help me with my trade sale. Being in Meyer and David Jones at that time, it’s probably different now, nobody come after me. But being in that at that time wasn’t actually particularly profitable at all. It was more about having the distribution that I knew would help to give the brand credibility in the eyes of a prospective buyer, for example. So an exit plan became really critical in all the decisions that I made along the way about how to get there.

Leanne Faulkner [00:09:55]:
I ended up exiting earlier, though, because of my mental health. So I wasn’t able to. I did a return to work plan. I came back to work and worked, but really it wasn’t the same. And secondly, in some of the lessons that I’ve learned around growth and being able to sustain growth, so as we know, growing a business is, actually takes a lot of money. You have to have very good cash flow forecasts, you have to have a lot of capital in the business if you want to go to that next level. And we were ready, the brand was ready to go to that international stage and we were not able to fund the growth of the brand to that point. So it became critical to look at a sale.

Joanna Oakey [00:10:41]:
And how did it go in that sale process? Was it hard to find a buyer? Was it easy to find a buyer? What did you find feel about that process once you’re in the sale as well?

Leanne Faulkner [00:10:50]:
Again, I actually think that it is something that should be put into the strategy, into your exit plan way back when. So I had actually reached out to various business people that I had admired that were, I saw them as quite successful, had much larger businesses than I did, and I was very hungry to learn from them. So I had some good relationships in the industry. I also had good relationships with suppliers as well. So suppliers knew my business very well. I maintained and nurtured those relationships. So suppliers knew my business very well and I knew them. So when it came time to say, look, it’s time to exit the business, I already had a number of connections that were interested in the business and who actually knew me.

Leanne Faulkner [00:11:45]:
So they were quite familiar with my business. But again, I think as part of that, I had to be very clear on what it was that I was actually selling. And you talk about this because for me, IP was absolutely, that was the sale, because what they were buying from me, and I understood that really well. So what they were buying from me was my recipes, which were unique to my business. We had formulated those recipes and they were very well received by consumers. And secondly, the process. So what we had taken was essentially a craft based business. You might buy soap at your local farmers markets, for example, somebody who makes it on the weekend.

Leanne Faulkner [00:12:33]:
We took a craft based business and stayed true to the values of that craft. So handmade, quality products, very managed ingredients, we stayed true to those core values, but we found a way to mass produce it in a way that was still handmade. And in my sector, that was almost unheard of. Everyone was just using soap, noodles and melting down things, ingredients that they’d imported from India, and turning it into soap, whereas we stay true. So understanding that was really what we were selling. We really knew what our ip was and what made the brand so valuable, combined with all the sales, the sales funnel and distribution. And I actually started planning that years before we made a sale, to be honest, because I knew that’s how I wanted to exit, so quite often.

Joanna Oakey [00:13:29]:
So the majority of business owners I deal with, you know, don’t know. And in fact, that’s why they.

Joanna Oakey [00:13:36]:
I wrote the book, right?

Joanna Oakey [00:13:37]:
Because they don’t know these things that you’re talking about in the beginning. They only find out right at the end. But it sounds like you, you built the business with this knowledge. So where did that come from?

Leanne Faulkner [00:13:48]:
Okay, so do you want to know the truth?

Joanna Oakey [00:13:50]:
I do.

Leanne Faulkner [00:13:51]:
I didn’t want. This is absolutely the truth. I didn’t want any of my children to feel like they had to become soap makers and had no other option but to run the family business. So I knew. I don’t know why, but I just felt that it was important that all five of them walk their own journey in whatever that happened to be. And I just didn’t think. And my husband’s the same. We just didn’t think that soap was part of their story, to be honest.

Leanne Faulkner [00:14:23]:
And I also think I was not.

Joanna Oakey [00:14:24]:
Ready for that answer. Leanne, I love that. Fantastic. Love it. So good.

Leanne Faulkner [00:14:30]:
So my husband, who is just the most amazing, I love him to death, but he’s had experience in small business and selling business as well. So it was not unusual to think we’re going to exit.

Joanna Oakey [00:14:43]:
Yeah, love it. Love it. And just one last question before we move on, or two. Two last questions. One is, I find many business owners don’t fully understand how to structure their exit, like the tax side and how that’s going to work best, those sorts of things. Like how did you navigate that area?

Leanne Faulkner [00:15:04]:
That was an absolutely steep learning curve that I really knew very little about. And in hindsight, that would be an area that I would have been much, much more familiar with and understood much more clearer before we got to the sale point, because that was a massive realization for me in terms of structure and what are we actually selling? And that discussion didn’t happen until we were about to sign the form.

Joanna Oakey [00:15:36]:
No, really? And so what was the consequence of that then?

Leanne Faulkner [00:15:40]:
Look, we’re going back a few years. I’ve got to stop and think. But we actually took some, we took a step back and we said to the other party, we just need a bit of time to reconsider what the offer is here and how that works. And then we went back into a negotiation and got to an outcome that actually worked for us. But I had no idea about that. In hindsight, I would have done that. I would have. If you had your book been around, I would have Readdez.

Leanne Faulkner [00:16:03]:
I would have read your book for sure.

Joanna Oakey [00:16:08]:
Your story is definitely not unique from that perspective. So many people go through the same process, but at least your buyer was still there. You collected your thoughts and then played with you in terms of finding that ultimate way for the sale because that.

Joanna Oakey [00:16:24]:
Can be the real risk.

Joanna Oakey [00:16:25]:
You run through this whole, this fire that is the sale process, and then suddenly realize the issues, realise you’re about to pay a whole heap of tax because you’re doing it this way rather than that way.

Leanne Faulkner [00:16:37]:
Yes.

Joanna Oakey [00:16:37]:
Then as you’re trying to rework it out, the bio discipline.

Leanne Faulkner [00:16:40]:
Yes. And kama. So I think the other thing that kind of helped us, though, along the way was that we had extremely good systems, well documented, and we had everything recorded, everything validated. So you talk in your book about due diligence. We actually had a the buyer come and spend a week in our business and go through everything with us, even down to calling our clients to double check that our trade agreements that we have with, say, Meyer or David Jones were actually valid and real. So I think documenting every process, every procedure, everything you have from the get go definitely helped us with the sale because they would ask us a question, we’d say, yeah, we’ve got that here. And then they would take it and go and compare it to operations because we had people making soap for us in our factory. So they would take our recipe and our procedures and go and watch and say, is that following what we’re buying off her? Yeah.

Joanna Oakey [00:17:42]:
Wow.

Leanne Faulkner [00:17:43]:
And I think that helped.

Joanna Oakey [00:17:44]:
Yeah. Clearly they had become very comfortable and so therefore they were willing to sit when go through the process for you to rework out what that structure of sale going to be.

Leanne Faulkner [00:17:54]:
Yeah.

Joanna Oakey [00:17:55]:
Wow. Fantastic. Sounds like you played really well. I guess before we just leave that topic, is there anything you feel like you learnt through that process that we haven’t talked about or something that, you know, whether you did or didn’t do it initially? Like, what’s the sort of key thing you think business owners as they’re ultimately preparing for a sale, to bear in mind.

Leanne Faulkner [00:18:20]:
Oh, God, there’s so many. But I think the key one for me was it took much longer than we thought it would take. So that negotiation we didn’t get. We most, I think also being clearer why you’re selling and why you’re exiting at that point. So we definitely exited earlier than we had originally planned to. And we didn’t. We didn’t secure this, I have to be honest here, and say we didn’t secure the sale price that we were really hoping for, but it was the right choice because of, say, my mental health. But we needed to be prepared to understand that the process can actually be quite long and involved.

Leanne Faulkner [00:19:02]:
It’s not as quick as I’m going to offer you this. Will you accept it? That was an eye opener.

Joanna Oakey [00:19:07]:
Yeah. I think it’s such an important point because it’s a long and emotional journey.

Leanne Faulkner [00:19:12]:
Very.

Joanna Oakey [00:19:14]:
So at least being aware, forewarned is for our.

Leanne Faulkner [00:19:18]:
Yes, definitely.

Joanna Oakey [00:19:20]:
Love it. Okay, so let’s then move on to where you went next. Because like, such an interesting. You’ve learned all of this and then how is it that you go and move into this next chapter? So tell us a little bit about what you’ve been doing since and what the key things are that you’ve learned or that you’re passing on to businesses now.

Leanne Faulkner [00:19:40]:
Sure. I’ve been working in this space as a small business mental health advocate for about ten years now. So I am well and truly the person you, you don’t sit next to at a networking event because I’m really boring. It’s pretty much the only thing I talk about.

Joanna Oakey [00:19:56]:
That’s not true, leanne, we have discussions.

Leanne Faulkner [00:20:01]:
Anyway, as I mentioned earlier on, I noticed there was really nothing there. So I’ve been fortunate in that I’ve contributed to and worked on quite a number of mental health programs that are now in place for owners. So there’s quite a lot of resources out there. There’s things like business in mind, which is fantastic. There’s the new Access program, program for business owners that is run by Beyondblue. There’s the small business debt helpline, which is a fantastic service. So there’s a lot of services out there now, which there wasn’t when I needed them. So I’m really proud that I’ve had some role somewhere along the way in some of these programs.

Leanne Faulkner [00:20:41]:
But the other thing I notice, and I’ve been teaching at university, small business growth and looking at established businesses and how do we grow them, not just startups, because I think that’s the easy bit. Tell anyone that I do, it’s established and keeping the doors open, that’s a challenge. So anyway, I’ve been looking at that along the way. So as part of that I decided that I would go back and do my PhD. And I looked specifically at the mental health of sole traders and micro business owners to really ask what’s going on here. Because even though I knew that there was a lot of resources out there now, which is fantastic still, you read in the Sydney Morning Herald or the AFR that small business owners are still stressed. Insolvencies are high, anxiety is high. So there’s something missing there because we have resources but we’re still stressed.

Leanne Faulkner [00:21:33]:
So when I went and did my PhD, I started asking people what was really going on. And what I found out was that if you don’t feel that you’re on equal footing with your clients or your customers, in other words, if you don’t feel you have the same control over work and the same level of power over work, then the chances of you feeling more anxious and stressed at work may in fact increase. So those micro business owners and sole traders who have things like good cash flow forecasts, they understand their sales funnels, they can see sales ahead of time, they understand their numbers, so they know what they’re selling is profitable. For example, if you have those things in place, they have transparent terms of trade, for example, so they had good client management systems. Those sorts of things help us to feel more equal with a client so that we’re better able to say yes or no to requests or changes or even proposals, quotes that we put in, in a much more equal relationship. If we don’t have that, then sometimes what ends up happening is you do work for Joe Smith and you hate Joe Smith, but you do the work because you need the money or you underprice yourself because you fear that you won’t get the job if you don’t have a cheaper rate. Or you can’t say no to someone who changes a deadline. And as a result you miss your kids soccer game or you miss going to the school awards because you’re working, because you don’t want that company to think you can’t do it.

Leanne Faulkner [00:23:14]:
All of those things demonstrate that we an unequal power relationship in the job. So the question becomes, what do I need to do so that I don’t feel that way, so that I still exercise control and power in my job. Not the doctor evil thing, the Oprah power. Really? That’s what I’ve been looking at and researching and, and that’s why you don’t sit next to me on a plane anyway.

Joanna Oakey [00:23:41]:
And you’re doing some other fabulous things as well. You’ve set up all, you’re in the process of setting up a business to support business owners with books. Or tell us all about that.

Leanne Faulkner [00:23:52]:
Oh, thank you for asking me about that. So I can actually see, thanks to my research, how important the link is between confidence and competency, skill, being able to do the job and not feeling stressed at work. So if I understand how to sell, if I understand how to set my prices, if I understand how to read a cash flow forecast, all of those things actually will make me feel less stressed at work. I decided to set up a new business. It’s called re readable. And what I’m doing is just selling business books for business people to help them feel more confident and competent at work. Part of the service is a, what I call a book concierge service. I think hotel concierge.

Leanne Faulkner [00:24:39]:
So you can actually complete, it’s a bit of a survey on, on the site. You can complete it. Tell me about yourself, your business and what your problem is and I will recommend a book that will help to address that problem for you. Yeah, I’m so excited about that. I really am, because I’m a book nerd. So I’m across pretty much most business books. So re readable really has happened as a result of my PhD and it’s launching very soon.

Joanna Oakey [00:25:05]:
Very soon. I love it, I love it, I love it. Now you’re going to have to give us the links. I feel like all of our readers, all of our readers, all of our listeners should become readers.

Leanne Faulkner [00:25:17]:
That’s right.

Joanna Oakey [00:25:19]:
All of our listeners should be jumping on there. When will this form be available?

Leanne Faulkner [00:25:25]:
It’s going to be available on the 1 July. So you’ll be able to check that you can actually register now on the website to get an email for when the site goes live. So you’re welcome to do that. You’re also welcome to find me online LinkedIn and connect with me there, of course. And then you’ll hear me shouting from the rooftops when it’s available.

Joanna Oakey [00:25:45]:
I love it. I love it. Okay, so tell us the website again and tell us how to find it and link.

Leanne Faulkner [00:25:50]:
Sure. It’s rereadable. So readable.com.au is where you can find me. Or sign up there and LinkedIn, it’s just me, Leanne Faulkner. You’ll find me on LinkedIn.

Joanna Oakey [00:26:04]:
Love it. And of course, if you are running along the beach at the moment or on your commute into work or whatever, and you can’t, you haven’t got a notepad and pen, that’s okay. Don’t worry, because we’ve got links in our show notes, so we’ll link straight through your LinkedIn page there, Lian. And fabulous to readable. Like, absolutely fantastic. Like, what a story, Leanna. Absolutely. So many super useful things in that for every.

Leanne Faulkner [00:26:33]:
Thank you.

Joanna Oakey [00:26:34]:
No, really, it is. And I love, I’m an avid reader myself. I absolutely love business books. So I just think. I think what you’re doing is just absolutely fantastic because it’s just, and it is one of those things where people, I want to read a business book, but which one? I don’t know. This. So it’s so.

Leanne Faulkner [00:26:55]:
Yeah, I. Exactly. And to have a dedicated site that’s just about business. So you’re not going through the general fiction, you’re not going through the kids section. There’s none of that. It’s just business because we’re all time poor. Right.

Joanna Oakey [00:27:10]:
Leanne, I just want to say thank you so much. Thank you for sharing your story and taking us through that journey. And thank you for being on the podcast. And a huge thank you for all of the service that you’re providing and a market that sometimes isn’t seen. And I think you’re absolutely right. Running a business is really bloody hard work sometimes, and just not necessarily understood by anyone other than other business owners who are in the same pit that yes, exactly.

Leanne Faulkner [00:27:41]:
Exactly. I love it.

Joanna Oakey [00:27:43]:
Leanne, thank you so much for coming on the show.

Leanne Faulkner [00:27:46]:
Thanks, Joanna. Thank you.

Joanna Oakey [00:27:48]:
Okay, well, that’s it for this episode of the Deal Room podcast. I hope you enjoyed this fascinating discussion with Leanne. I always find first hand insights the best to learn from, and this episode was certainly full of them, along with an incredible story of growth, entrepreneurship and resilience. Now, if you’d like to find out more about re readable or connect with Leanne, then head over to the show notification notes and you’ll find the links there. I highly recommend you check out Rereadable. It’s an incredible idea. Subscribe and share it with your networks. And as always, if you’d like to get in contact with us at aspect legal about making sure your business is sale ready, that your contracts and IP are watertight, or even to get a legal health check.

Joanna Oakey [00:28:34]:
If you’re not sure where to start, please head over to wwww.aspectlegal.com.au/thedealroompodcast and check out the show notes and our site. There’s resources, booking links, contact details, and our team at aspect legal are always happy to help. Well, that’s it from us. Until next time.

Joanna Oakey [00:28:57]:
See you later.