By the time Glen Knopp sold his business, Inland Tarp & Liner, in November 2020, he had actually been thinking about his exit for 15-20 years, and actively preparing for about ten.
It’s not that Knopp disliked his job and had always wanted out. On the contrary, he loved his line of work. He’d started his tarp and liner business after his own experience of searching for such products as a farmer. For the 40 years that he owned the company, Knopp deeply believed in his product and his people.
Rather, wise advisers had counseled him that even the most beloved business must be built to outlast its owner.
“I started [thinking about the exit] early on because I had some good advisers who said, ‘You know, you want to be thinking about the future and how to get good people in place,’” says Knopp. These advisors were people who knew his industry well: his accountants, attorneys, and a banker.
Knopp took their advice to heart. He not only made his business stronger, but paved the long and steady road toward an exit that would most benefit himself, his employees, and the company.
Laying the groundwork
Knopp’s advisers had encouraged him to build the business in such a way that it could one day thrive without him. Unsure whether any family members would want to take it over upon his retirement, Knopp had decided to prepare for the possibility of a third-party sale someday.
So, he focused on some best practices during his prime years with the company:
- Establishing strong core values.
- Retaining top talent. Growing a top-tier workforce made the company stronger overall.
- Building a strong management team. Knopp knew that the management team needed to be capable of holding the company’s weight without him.
- Delegating responsibilities. If the company were to thrive without his input, others in management would have to assume the company’s most important functions.
“I hired people who were smarter than me, and better than me in various areas, so they could improve on what [the business] could do,” Knopp says.
Dipping a toe in with “practice” deals
Thinking ahead gave Knopp plenty of time to peruse potential deals and learn more about how the process works before he committed to selling.
In fact, Knopp explored three potential buyers in the decade leading up to the actual sale. Though none of the three offered the solution he wanted, they taught him valuable lessons about what buyers want, and used that knowledge to strengthen the value of Inland Tarp & Liner.
Knopp also hired a valuation team during this time to give him insight into his company’s worth. The valuation team provided him with additional data on what business buyers are looking for.
Knopp is glad he had a decade of hands-on training for the sales process, because it made him more confident in navigating the experience when he finally closed the deal in 2020. “I knew what I’d heard from other people, but there’s nothing like firsthand experience,” he says.
Putting employees first: Choosing a sales structure
As Knopp learned more about his options for structuring a sale, he considered what would best fit his company values and his care for employees. He wanted to give back to the people who had invested years of work and enthusiasm into the company. It was also critical that the culture would continue long after the transition. Furthermore, he also wanted to avoid, if possible, the inherent risks to employee security that often come with changing ownership, like layoffs and major management shake-ups.
The more he learned, the more it seemed an ESOP fit his vision best. Knopp spoke with an accounting team to get an estimate on what price he could expect from this type of deal.
In the process of building their estimate, the accounting team asked Knopp questions that made him sit back and reflect: did Inland Tarp & Liner have a visionary leader who could carry the company forward?
Wanted: New head honcho
Knopp remembers being asked, “Do you have a strong leader that can lead the company in your absence— somebody you have confidence that the others would follow, that would be able to do the things that you’ve been doing?”
The team explained that ESOPs are most successful when there is an identifiable leader who loves the company and inspires loyalty in employees. And, if Knopp was honest with himself, he knew Inland Tarp & Liner didn’t have that.
But he wanted an ESOP to at least be an option on the table. So, he engaged a fractional employee to be CEO of the company.
Adding or changing out members in upper management always carries some amount of risk. Newcomers may not fit the team dynamic or love the business as anticipated. But right away, Inland Tarp & Liner’s new CEO fell in love with the company and the work it was doing.
Knopp knew he’d made the right decision in bringing on another leader. He was one step closer to the kind of exit he wanted.
The perfect time to leave
After more than a decade of thought and hands-on learning, Knopp finally felt he had everything in place to pull the trigger on selling Inland Tarp & Liner.
- His management team was stronger than ever.
- The company had an enthusiastic new leader.
- The economic situation in their industry was stable.
- Knopp, in his mid-60s, felt ready to leave.
- He had other interests and activities outside of work to fill his time.
It was the best opportunity he had ever seen to step out of the business. So, in March 2020, he began researching his sales options one more time.
Sifting through options
Several third-party buyers were interested in Inland Tarp & Liner, but Knopp was still pondering an ESOP. He needed an intensive round of comparisons to help him evaluate the deals presently on the table and the ESOP option in light of the company’s current situation. This was no longer a thought experiment; he was locking in his final answer.
However, these comparisons were difficult. Often, information online about types of business sales is created by companies and individuals with a vested interest in one type or the other. It can be hard to know if you’re getting truly neutral information that has the business owner’s best interest at heart.
Knopp, a member of the Christian CEO peer network C12, turned to the 3Ten Coalition for help examining his options. The 3Ten Coalition is a network of advisors, service providers, and capital providers created by C12 to help their members scale and transition their businesses with intention. The Trelus platform powers the 3Ten Coalition.
Trelus and coalition members helped Knopp sort through what each sales option would look like. Such advance preparation would eventually allow him to achieve the exit he wanted. Every choice came with pros and cons, but Knopp’s initial instinct to pursue an ESOP turned out to be right. By June 2020, he had reached the conclusion that an ESOP was a best-case scenario for his business.
By November 2020, the CEO of Inland Tarp & Liner became a full-time employee of the company, and the ESOP was finalized.
Two years post-sale, Knopp is pleased with the outcome.
“I’m so glad that I chose the ESOP option, because choosing that option didn’t damage our company at all,” he says. The company’s management team, along with its values and operations, has remained largely unchanged since the transition. Knopp was relieved that he didn’t have to worry about job security for upper management, or wonder what kind of difficult changes might be forced on the employees who had worked so hard for him. Customers have commented the service they receive is as good if not better than before the ESOP was formed.
Advice for other owners looking to sell
Knopp has several pieces of advice to other business owners who are thinking of selling their business.
- “Get very knowledgeable about the exiting process and about what you need to do to make your company strong,” he says. By researching options over time, he knew what would be best for his particular business.
- “Explore all the options. Depending on what’s important for you, there’s going to be a ‘better’ option.”
- “Really dig deep to find out people’s integrity.” Vet your advisors carefully. Is money their top priority? If so, they may not prioritize what’s best for your business. Knopp suggests finding advisers whose goal is to best serve their clients.
- “Don’t just try to patch over [problems with your business] and make it look like something different than what it is. You will be found out, and it will bite you back. I say that from having observed other companies: stay totally above reproach.”
- Business owners must be brutally honest with themselves about what their business might lack and either fix it or expect the price to be discounted at the time of sale.