November 08, 2023

Hitting Pay Dirt: The Selling of an Ag Empire

Please enjoy the inaugural edition of the Leith Wheeler “I Built This” Series, in which we plan to profile the journeys of remarkable entrepreneurs.

It’s a grey day on the Naramata Bench, a lovely wine region perched in the hills above Penticton, BC 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 grape vines rustling 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 John’s last 40 years: hard work and smarts that yielded beautiful results.

John 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 probably snagged something from Valleybrook’s catalogue of thousands – or you may recognize some of the branded favourites they sold only to independent garden centres like Jeepers Creepers, Rock Stars, and Backyard Fresh.

He hit $12-13 million in revenue per year when in separate transactions in 2017 and 2019, John sold his business. He agreed to talk to us about the good, the bad, and the ugly of that process, including what he learned along the way – and what entrepreneurs should consider when building and selling their business.

False Starts Proved to be Blessings in Disguise

Selling a business is not always a one-and-done exercise and for John, 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 John 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.

2002. At its peak Valleybrook had farms in Abbotsford, BC (90 min east of Vancouver), Niagara-on-the-Lake, ON, and in the US state of Maryland. With currency pressures working against them, the Maryland farm was struggling to turn a profit. John again considered finding a buyer who’d be interested in all three farms but, finding none at that point he just shuttered his US operation and continued operating his Canadian farms.

2008. This year marked the first serious attempt to structure a sale. Unfortunately, after attending a selling-your-business conference and investing the time and money into getting ready for sale 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 undoubtedly been frustrating at the time but in hindsight, they stopped John from selling either from a place of weakness or before the real value of his business could / 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. By 2017, after a few years of growing revenues and excellent prospects on the horizon, Valleybrook was in a prime position to find interested buyers. It was time to get professional advice.

His first stop in 2015 was contacting VEER Business Advisors (Value Enhancement & Exit Readiness) in BC’s Lower Mainland, 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, John tapped Sequoia M&A in 2017 to help with valuations and negotiations. They told him something unexpected out of the gates: we may not want you. “They said they only take on a small proportion of those who come to them because their goal is to sell every company that they take on as a client,” John says. “When somebody says, ‘Well, we're only going to take you on if we think that you're good enough,’ of course, that just makes you want to be good enough.”

They also didn’t pull punches, but John was willing to take unflattering advice. “[Sequoia] said, ‘Your website’s terrible and we're not going to take you on if you have a website like that,’” John 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 2017, John sold the entire Ontario operation (the process didn’t surface a buyer interested in both Ontario and BC). He included the land in the sale but carved out the valuable brands he’d built over 30 years.

Brand Value

“In '86, we came 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,” John says. “They would be recognizable, and someday there would be value in the brands.”

This is one of the key pieces of advice John 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 – John built awareness and brand loyalty among consumers.

In addition to the headline brands, John holds a registered trademark on the use of blue pots to sell plants in both the US and Canada. The acquiror of his Ontario business also pays licensing fees to use a custom Enterprise Resource Planning (ERP) System John and his team built, and he maintains industry website perennials.com, which continues to generate ad revenue for him.

By retaining the trademarks on all Valleybrook brands, the accompanying licensing fees have created an income stream for John after retirement. It was a case of making a conscious decision to serve goals for his exit. “Here we are 30 years later, and I collect royalty checks four times a year.”

Cautionary Tale

2019. John had multiple priorities with the sale of the Abbotsford property, most notably a desire to retain the land and sell just the business. With three homes on the property housing himself and two of his daughters and their young families (and a belief 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, 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 smiled.

“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 John 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.”

John Schroeder and his youngest daughter summiting Mt Kilimanjaro, 2023

These days, John is enjoying what the success of his exits afford him and his family. In addition to his elegant hobby vineyard in BC’s wine country, this summer he took all 21 members of his immediate family on an African safari, including hot air balloons over the Maasai Mara and a hike with his youngest daughter to the peak of Mt. Kilimanjaro.

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, patience, and hard work, John’s done just that.

Schroeder and family on African Safari, 2023.

This article was first published in coordination with the Business Transitions Forum. It can be found here.