Building a company from scratch is a lot of work, and a successful exit often hinges on finding the right buyer and a deal that aligns with your objectives. Or does it? After 10+ years of building and running my company, I decided to wind it down—a decision that proved profitable and enjoyable. Here’s how I did it.
When the pandemic hit, I'd been running my luxury sleepwear brand for about 8 years. A few years in, I made the decision to move to my husband’s home country of Sweden while continuing to run my Canadian company from abroad, necessitating regular travel but otherwise fairly manageable. The Sleep Shirt was a small, boot-strapped premium sleepwear company with a few prestigious wholesale accounts and a loyal, but small, online clientele. It will come as no surprise that an online store selling pyjamas and loungewear is a good business to have during a pandemic. The business grew substantially during COVID, and on top of this surge in orders, we were also incredibly lucky that our sourcing and distribution were virtually unaffected by the pandemic. With minimal operational impact during the pandemic and a surge in sales, the company was doing well.
The pandemic meant that I was traveling less, but my incredible team was able to step in and take care of all the in-person tasks I was missing out on due to the lack of travel. As the business continued to grow, it became clear that there were incredible opportunities for expansion. My business partner (a minority owner in a strategic role) was motivated to capitalise on this unexpected success. But it quickly hit me — I lacked the energy and desire to pursue further growth. I didn't want to hustle to grow the company, and in fact, I didn't want to continue with the company at all. The years of travel and stress of managing a business overseas had taken its toll, and I have reassessed my priorities.
My partner would have liked us to try and grow the company and attempt a lucrative exit. However, I knew that I didn’t have the energy to go that route, and if our growth plan wasn’t successful within a few years, I’d be exhausted and no better off.
We decided to try to sell the business. My partner set up a ton of meetings and it quickly became clear that no deals were appealing or lucrative. A family business wanted us to merge, allowing us to take a one-off payment and then continue the brand under a new organisation, with the aim for aggressive growth. I was selling $200 nightshirts ethically made in Canada and sold at some of the best retailers in the world, and they wanted me to get the prices down to $29 by manufacturing in China, and selling the products in Costco. Producing cheap, throwaway clothing was against everything we stood for as a brand, and I was also not willing to start a company with a bunch of people I did not know. That option was ruled out.
We then spoke to a few companies that specialised in acquiring Shopify stores. These were more straightforward but were coupled with a much lower payout. Different models had different exits, ranging from 2 months to 2 years, but again, nothing appealed. Being based in Canada complicated matters during negotiations, and I was frankly not interested in having a tech bro as my boss.
In the end, there wasn't a single deal on the table that was appealing. So I proposed to my business partner that we strategically wind down. It took a bit of convincing, but in the end this was a great call. It allowed us to wind down the company on our own terms and quite profitably.
Our business operated on a seasonal basis, with four main seasons (deliveries a year.) Development began around 18 months prior to the goods being available for sale, which meant a wind down had to be prepared well in advance. In order to ensure we would maximise sales throughout the wind down, we need to operate business as usual for as long as possible. A few months into the decision, we had to tell the staff, as I couldn't take any major wind down actions without them noticing.
My partner and I prepared very generous packages and guaranteed them all their current jobs for at least four months. We also offered them a nice retention bonus if they stayed on until we stopped needing them, and we would support them in transitioning to a new job. Staying on once they had already found a new job simply meant that they needed to be available for tasks that no one else could do. This ended up working really well, as the tasks were few and far between, and could easily be done in a few hours over the weekend. In exchange for the retention packages, all of them agreed to stay on.
To ensure we were left with the minimum amount of leftover fabrics, we had our factory make all the fabric remnants into nightshirts in our last production order. This was something they were accustomed to, as we often did “remnant collections” allowing us to reduce fabric waste.
We started to tell our contractors, giving them ample notice. We did our best to look like it was business as usual for our suppliers, but it became tricky at the end. Our retailers and factory were told that I was taking a season off to spend time with my family, but I am sure people had their suspicions. We shut down the office in mid-2023, using a storage locker for the archive and staff bringing home the small amount of materials they needed for their daily work.
Our wind down announcement date changed a few times, but in the end, we settled for January 31st, 2024. Just in time to see that 2023 had been our online store’s best year ever. The last few months were tricky in terms of content. Without the October Resort collection delivery, which was our biggest season of the year, it was hard to come up with new stories and content for our weekly newsletters. I also misjudged the amount of time it would take to prepare all of the statements and graphics for the announcements, putting us in a tight position right at the end. But on the announcement day, the response was better than I could have ever imagined.
We were flooded with kind words from our customers and they came out in force to stock up. We did over a month’s revenue in one day. People were evidently very upset to see us close and they were keen on buying inventory to last them years. Though we hadn’t anticipated this strong of a reaction, we did know that a lot of customers would buy and wouldn’t need a huge financial incentive to do so. We started slowly, offering bulk discounts for larger orders, while having only half the store’s items individually discounted. As expected, a lot of customers were not willing to wait for lower prices, so they bought right away. And bought again, and again.
February brought in phenomenal sales, as did March. We had sold sixty percent of our pre-announcement inventory by the end of February, and another 15% in March. Naturally, sales slowed as the inventory dwindled but I was impressed with the number of customers who were placing orders on a weekly basis. A few initiatives allowed us to successfully move inventory and ensure a high average order value. First of all, the bulk discounts (15% off orders over $200, 25% off orders over $400, and 30% off orders over $600) were a very lucrative incentive. The jump from 15-25% was big enough to entice people to spend $400, and many of them figured it would be worth spending a bit more to get to 30% off.
Secondly, we offered well-priced mystery bundles. For customers who bought our classic styles, we offered nightshirt or nightie bundles (in a limited size range: One Size, Plus, and X Plus) in cotton or linen fabrics. With sleepwear, people are less picky about colours, so it was easy to push these bundles as they were guaranteed to get one of their favourite shapes, only the fabric was a surprise. This allowed us to clear out some of the less popular fabrics, or the classic materials we didn’t want to discount publicly, but for which we had a lot of stock. We also offered sized bundles - either 3 items of sleepwear or 3 t-shirts. I was worried about ending up with a bunch of the less popular styles in random fabrics or sizes, and these bundles solved that problem. When we noticed we had a surplus of size extra small, we created a new bundle for 5 items in that size, which also proved to be successful. Being clear with the discounting and giving the customers the option to shop by size without filtering made it easier for people to place orders.
I wrote a long statement on the website explaining my decision, and wanted to share one part for the Elpha community, as this was the paragraph that elicited the most reactions from fellow female entrepreneurs:
“Over the years, there were a couple of distinct moments that signaled it was time to move on. […] I was doing some freelance work at a local company, hot desking with another staff member – let's call her M. One Monday morning, I went into the office and saw that there was a laptop on our shared desk. I was shocked to see it there. Then it dawned on me: M had gone home on Friday and left her laptop in the office for the weekend. This might seem normal for some of you, but I have never had the luxury of leaving my laptop anywhere. I have brought my laptop with me on every weekend, every trip away, and every vacation for over a decade. It has never been an option to completely switch off, even for a whole day. I was back at work, part-time, just days after both my kids were born. I wanted a life where I could turn off my computer on Friday and not turn it on again until Monday.”
Since the announcement, I have been flooded with kind messages from customers. Many were also entrepreneurs and mothers and shared their own stories about juggling a business with family life.
With all of our debts having been paid off long before the wind down announcement, and our overheads being massively reduced, my partner and I were finally able to start taking our long-awaited bonuses. As I write this, we’ve started on our final markdowns and plan on closing the doors in the summer. I’ll take the rest of the year to organise our digital files, and I’ll clear out our storage locker when I am in Canada the following year. The wind down has meant we still own all of our IP, so the option to stage a comeback, or sell the IP is open to us.
Since I made the wind down decision, there’s been so many other small brands who have announced their closures. Unfortunately, many of them sounded like they weren’t optional, either due to financial pressures, business struggles, or personal issues. Every story like that reminds me that this could have been my future, too. Making the decision to wind down profitable, on my own terms, was the smartest move I’ve made. This summer, I plan on taking some real vacation, where I won’t check my email every day.
