It’s a grey day on the Naramata Bench, a lovely wine region perched in the hills above Penticton, B.C., and John Schroeder cuts short his fertilizing to head into the house for our Zoom call. He pans the camera outside to share beautiful views of Okanagan Lake with rows of grapevines in the foreground, then confesses, “I’ve just had to come in and wash chicken s— off my hands.”
It’s an amusing contrast, but one that captures Schroeder’s last 40 years: hard work and smarts that yielded beautiful results.
Schroeder and his wife, Kelly, started Valleybrook Gardens back in 1980, a commercial agriculture business that grows and sells potted plants to garden centres across Canada. If you’ve picked up seasonal plants at Costco or Loblaws, you’ve probably snagged something from the company’s catalogue of thousands.
Or you might recognize some of the branded favourites at independent garden centres like Jeepers Creepers, Rock Stars and Backyard Fresh.
Schroeder’s business hit nearly $13 million in annual revenue when, in separate transactions in 2017 and 2019, Schroeder sold it. He agreed to talk about the good, the bad and the ugly of that process, including what he learned along the way – and what entrepreneurs should consider when selling their business.
False starts prove to be blessings in disguise
Selling a business is not always a one-and-done exercise. For Schroeder, there were several points over those 40 years when he considered or pursued a sale, without success.
1988 – The first was in the late 1980s when Schroeder felt tired and finances were tight, so he considered bringing his employees in as partial owners. “I was running out of cash, and I thought maybe getting my employees involved via an ESOP [Employee Share Option Plan] would be a good idea,” he says. He got a business valuation at that point but in the end he decided an ESOP wasn’t for him. He didn’t do anything with it and just carried on.
2008 – Schroeder made his first serious attempt to structure a sale. But, after attending a selling-your-business conference and investing time and money into getting ready, the market turned. “I spent $60,000 over a number of months going through the whole process, and then the economic meltdown, financial crisis, hit, and nobody was buying anything.”
These setbacks must have been frustrating, but in hindsight, they stopped Schroeder from selling either from a place of weakness or before the real value of his business would ultimately be realized.
“I just kind of hung in there,” he says. “I told myself, ‘When we get two good years in a row and the prospect for the next year is looking promising as well, that’s the time that we’re going to look at selling.’”
2017 – After a few years of growing revenue and excellent prospects on the horizon, Valleybrook was in a prime position to find interested buyers. It was time to seek professional advice.
He started by contacting VEER Business Advisors in Coquitlam, B.C., where he says the founder told him, “So many entrepreneurs have sold their business for less than they could have, because they didn’t know what they were doing.” VEER works with entrepreneurs before they are in exit mode to ensure the individual is personally ready and that the business itself is structured the best way possible for a sale.
From there, Schroeder tapped Sequoia Mergers & Acquisitions in Vancouver to help with valuations and negotiations. They told him something unexpected out of the gates: “We may not want you.”
The firm also didn’t pull punches with their advice. But Schroeder was ready and willing. “Sequoia said, ‘Your website’s terrible and we’re not going to take you on if you have a website like that,’” he says. “So we got together and mocked up what a proper website should look like, and they showed me that in the presentation. I thought, ‘Okay, these guys are great.’”
In June of 2017, Schroeder sold the entire Ontario operation (the process hadn’t attracted a buyer interested in both the Ontario and B.C. holdings). He included the land in the sale but carved out the valuable brands he’d built over 30 years.
Brand value
“In ’86, we had come up with the first brand, and I was determined that the products that we sold were not just going to be a general agricultural commodity,” Schroeder says. “They would be recognizable, and someday there would be value in the brands.”
This is one of the key pieces of advice Schroeder offers to budding entrepreneurs: Be deliberate in creating value, and capitalize on the value when you’ve created it. In an industry that would otherwise stand in as the poster child for commoditized industries – potted plants – Schroeder built awareness and brand loyalty among consumers.
In addition to the headline brands, Schroeder holds a registered trademark on the use of blue pots to sell plants in both the U.S. and Canada. The buyer of his Ontario business also pays licensing fees to use a custom Enterprise Resource Planning (ERP) system that Schroeder and his team built, and he maintains an industry website, Perennials.com, that continues to generate advertising revenue for him.
The Abbotsford property – a cautionary tale
2019 – Schroeder had multiple priorities with the sale of his Abbotsford property, most notably a desire to retain the land and sell just the business. With three homes on the property that housed himself and two of his daughters and their young families – and a belief that the real value was in the land – he offered the operating business for sale with a tenancy agreement attached. He found a buyer, cashed the cheque and then started receiving both rent and royalty payments.
“For a while there, it was fantastic,” he says. “I was deriving more money out of the company than I was when I was working. I’d lost [the responsibility to manage] 80 employees, didn’t have to worry about customers, didn’t worry about anything. It was really, really great.”
Unfortunately, however, for a variety of reasons the new owner ended up filing for bankruptcy. “When things seem to be too good to be true, then sometimes they are,” he says.
It could be worse, of course, as he was able to sell the business he’d built and today he still holds the land.
Asked what’s next, he smiles. “If somebody reads this article and wants to take over a fully ready-to-go turnkey business, all they have to do is get their customers. It’s there. I’m ready to talk.”
No regrets
Despite the unfortunate turn in Abbotsford, looking back at his experience Schroeder has no regrets. The Ontario business continues to thrive, cementing his legacy.
“The buyer bought a company that made nothing but money. The customers continued to get the quality that they were used to. The employees all kept their jobs, and many of them got promotions. I got out of the business with the pleasant cheque. That’s really what the goal is, I think. If you have a transaction where all parties are successful, then that’s great.”
Reflecting on his family, he makes an apt comparison.
“Selling your business is a bit like having daughters that are going to get married, and you want to help them find the right suitor, and you want them to love your daughter and have grandchildren.”
With the right professional partners as well as patience and hard work, Schroeder has done just that.
Mike Wallberg, CFA MJ, is Principal, VP Marketing, for Leith Wheeler Investment Counsel, one of Canada’s largest independent wealth managers. With offices in Vancouver, Calgary and Toronto, Leith Wheeler manages more than $26 billion for individuals, families, foundations, Indigenous communities and institutional clients across Canada. A former investment banker, equity analyst, institutional portfolio manager and television news producer, Mike also hosts CFA Institute’s flagship investment podcast, Enterprising Investor, which is currently ranked in the top 10 per cent of business podcasts globally.
Please visit here to see information about our standards of journalistic excellence.