After eight years of growing her baked goods delivery business Dr Dough Donuts, owner Kristy Valentine has sold the business to food manufacturer Bob & Pete’s, for an undisclosed sum.
But she’s not walking away. For Valentine, acquisition was just the next logical step in growing her business.
“I sold because I believed in what this brand could evolve to with the partnership,” she said in a statement. “I wanted to see Dr Dough become something even bigger, and I knew that meant partnering with a larger organisation with the resources, infrastructure and reach to take it there.”
Speaking with ISB this week, Valentine shared all the steps she took to get Dr Dough acquired. Here’s the playbook that took the brand from launch to acquisition.
Starting with the end in mind
Valentine said she was planning to sell the business from the start – something she thinks is crucial for any business owner with an exit in mind. This approach influenced everything from the business’ governance to its systems.
“I think it is really important that if you do want to exit one day, you need to start implementing some of those practices from the beginning,” she told ISB. “Having an exit plan in place, or understanding that that will happen at some point, formed the governance, how we ran the business and our finances.”
Aside from having the right systems in place, Valentine was laying the building blocks for future growth from the beginning, making sure the venture had promise for future investors or buyers.
An example is the business’ online-only model; though the business currently only delivers in the Sydney region, its online platform already has the building blocks in place to expand to other states. Dr Dough also traded in Melbourne for a short time to test wider rollout of its platform.
“So we’ve got the logistics platform [and] set up website ordering for customers to be able to order via postcode in different states,” Valentine explained. “So that’s probably the biggest thing we did to be able to scale easily.”
Prioritising financial foundations
Valentine made it a priority to find the right accountant – and keep her finances in shape – from day one.
“There are lots of areas to be creative in business, but finance isn’t one of them,” she said. “One thing that I will say is make sure that you do not have a cowboy as an accountant. You need them to be setting up your business the right way from the beginning.”
The business owner advised asking your financial advisors as many questions as you can to make sure you understand the exact position of your business. She also sought a second, and third, financial opinion as the business grew, bringing on both a CFO and external accountants. The former helped shape the financial future of the business and look at expansion opportunities. The latter served as an extra check that everything was functioning as it should.
Having squeaky-clean financials meant that, when it finally came to selling, Dr Dough was well-positioned for a lengthy and intense due-diligence process.
“[Due diligence] is a huge process, and no stone is left unturned,” Valentine explained. “It’s definitely not something that can be turned on at the end. You bring it in from the start, and you maintain those practices, or you won’t be considered for acquisition or investment.”
Investing in governance and mentoring
Shaping Dr Dough toward an eventual sale wasn’t something Valentine did alone.
As the business scaled, she built up an internal leadership team who regularly reviewed the brand’s strategic direction. She also leaned on the advice of multiple mentors, including one whom she worked with at another company; as a second job, Valentine chairs the board of a coworking space called Work Inc. She told ISB her experience running this with the founder, an experienced entrepreneur himself, was “the equivalent of doing an MBA”.
“It has not only been somebody who is sort of coaching and guiding [me], but I was responsible for running his business and putting those things into practice there and also in my own business,” she recounted. “So I would definitely say that, you know, mentorship is so important. A lot of people do want to give their information and help entrepreneurs and business owners. It’s just a matter of you actually asking.”
Finding the right buyer
From the beginning, Valentine knew she didn’t want just any buyer. She came into the sale with two non-negotiables: continued growth for Dr Dough and job security for the team.
“I wanted to keep the same DNA but with more resources and a really supportive, collaborative environment where they would allow us to remain in control and work with them to continue to grow the business,” she explained.
As it turned out, Valentine’s eventual buyer had been working with her for most of Dr Dough’s lifespan. She ended up selling the business to a supplier of seven years: food manufacturer Bob & Pete’s.
“I approached this company to speak to them about whether they would be interested in acquiring us and it was received very well,” she revealed.
Bob & Pete’s was not only interested – it agreed to meet Valentine’s two non-negotiables, too. The new ownership will also allow Dr Dough to expand its product range and service area. In turn, Bob & Pete’s will get access to 20 delivery drivers with daytime, business hours availability. Valentine added that both businesses will get access to new customer networks.
Reflecting on the acquisition, she said that understanding your business’s value to a potential buyer is crucial.
“Understand what your value is and how that would fit with a potential buyer,” she said. “Because [acquisition] needs to be a two way street.”
