Growth Decoder: Selling at peak value – Succession planning with VIP Soaps

Key takeaways: 

[00:09:00] When’s the best time to sell a business? It’s not when things are bad. A business owner should ideally sell when the business is at its peak to get the best value for their company.  

[00:15:30] Trust is the most important aspect of choosing the right buyer for your business. As a seller, ask yourself if their plans make sense – even if their valuation adds up – and make sure to do your own research as well. As Bozman says, it’s imperative to come to the table with some competitive insights and a true sense of what your business is worth before you make that final decision. At the same time, it also never hurts to trust your own instincts. 

[00:27:24] Being in business for over 25 years is like a roller coaster. It won’t always be smooth sailing. You're going to have highs and lows, and both may happen when you least expect them. Just remind yourself that you’re in it for the long haul.   

[00:44:51] In Bozman’s eyes, his biggest achievement in business isn’t the profits and the company’s successes (although those are important), but the personal connections he’s formed over the years. He’s proud of the positive and fruitful relationships he’s built with customers, employees, the community and CWB. 

A new captain at the helm helps founder sail into the sunset 

After you've put all your blood, sweat and tears into building a successful business, it can be hard to think of stepping away. Often that’s because succession planning is complex—regardless of whether you’re thinking about exiting your business through merger or acquisition, selling all or part of your company, or passing along ownership to the kids.  

Keith Bozman spent 25 years building Western Canada's largest privately-owned cleaning manufacturer, VIP Soap Products. In 2018, he sold the majority stake to a private equity firm but stayed on as Chief Revenue Officer and Main Principal. He certainly understands what it takes to build, maintain and then sell a business. “I always say that I have an MBWA – management by walking around,” he says. “I had a good relationship with all the staff and I made sure that I was on the floor every day for at least an hour, talking to people, helping where help was needed.” 

VIP Soap Products began operations in 1993 and reached its peak around 2018. The company had been steadily growing, expanding its manufacturing space from 8,000 to more than 190,000 square feet by 2018. 

“We had a lot of private label business down in the United States as well as here in Canada, and things were going really, really well,” he said. “It was pre-Covid, so we didn't know what was coming, [but] our sales team was really generating a lot of business.” 

At that time, they had about 60 employees at VIP Soap Products in Mission, B.C., plus another 25 in Kelowna at the company’s bottle manufacturing plant. A large U.S. contract increased its volume by nearly 35 per cent. 

Exiting on a high note 

There were low points too, as all companies experience. In 1996, VIP had a contract with a Japan-based company that allowed it to quadruple its staff, expand its manufacturing space and ramp up its workforce. Then that company went bankrupt, resulting in layoffs at VIP and a scramble to find other revenue streams. But VIP bounced back, providing Bozman and his team with a valuable lesson. 

“In this business, you gain customers, you lose customers, and that's just the cycle that happens. You have to be able to mitigate those highs and lows, mitigate your costs, and say, I'm not going to put all my eggs in one basket.” 

Even the pandemic provided something of a boom time for the company, despite some logistical problems. People suddenly found themselves at home, and that meant spending more time cleaning windows, washing dishes and needing VIP’s products.  

Despite all that forward momentum, exiting the business had been on Bozman’s mind for some time.  

“We realized back in 2015 and 2016, that we just got some new contracts, things were growing, and we were going in the right direction,” he said. “So, we started preparing—financially and with our employees—for an exit strategy.” 

Initially, Bozman thought some family members might want to take over. But while his sons and daughter had been involved, especially in the early days, they had all moved on to other things. 

So, he and his leadership went in a different direction. They spoke to two private equity valuation firms and eventually landed on one to help them make the sale. Bozman was keen to find a buyer that would not only value the business correctly, but would also buy it with an eye on continued expansion, an approach that mirrored his own.  

Finding the right buyer 

The process took six months. As it was underway, Bozman did his own research, looking into what similar firms might be worth and what their growth potential could be. He wanted to know whether the valuations he’d receive from the private equity firms made sense. Once the valuation process was complete, 27 companies were interested in buying VIP Soaps. Bozman and his team narrowed down the list to nine and interviewed each one. Then they further whittled the list down to three, and eventually landed on a Canadian private equity firm.  

The firm offered Bozman the chance to stay on a three-year contract, which he happily accepted. That turned into four-and-a-half years before a new principal was found, one that would treat the business and the employees the same way Bozman did.

“I stayed on to run the company the same way it had been running so that we would be able to show the private equity company that our numbers were right and that we're going in the right direction,” he said. “That gave me confidence that I'm dealing with the right people, and they were happy to have me stay on.” 

Bozman remains on the board of directors. Newly retired, he’s now able to look back and see a company headed in the right direction, but with a new captain at the helm. 

“I knew that my time had come and I knew that we needed somebody with a different vision to really take it to the next phase,” he said. “I'm going to start relaxing a little bit more and doing some traveling, and doing the things that, when you own a business, you don't necessarily get to do.”