Navigating Business Exits: Eric Malka's Journey with The Art of Shaving
Disclaimer: Ryan Kolden is an investment advisor representative of RPG Family Wealth Advisory.Kolden Wealth is a DBA of RPG Family Wealth Advisory. The opinions expressed by the host and or guests in this podcast do not necessarily reflect the opinions of Kolden Wealth or RPG Family Wealth Advisory. No information on this podcast should be construed as as investment, legal, tax, or financial advice.
Ryan Kolden: Today on the show, we have Eric Malka. Eric is an entrepreneur, brand builder, investor, and author with more than 30 years experience in luxury consumer goods. Eric founded his business, Art of Shaving, in 1996 and successfully completed an exit to Procter & Gamble in 2009. Eric recently published his business memoir, On the Razor's Edge, which details the story of the art of shaving. Currently, Eric is the managing partner of Strategic Brand Investments, where he focuses on supporting purpose-driven brands that emphasize high quality ingredients as sustainable business practices. Eric, great to have you on the show and welcome.
Eric Malka: Thank you. Thanks for having me.
Ryan Kolden: Of course. So Eric, I want to start first by hearing your story. How did you get to where you are today?
Eric Malka: Well, it's a journey, as you know. I started my journey as an entrepreneur at the age of 17. Living in Montreal, I decided to come to America on a Greyhound bus. Arrived in New York City at the age of 17 with no green card and no education. about a hundred bucks in my pocket, but full of hope and trepidation. 24 years later, my company was acquired by Procter & Gamble and Gillette. And the book details those 24 years in details to try to extract some of the lessons I've learned along the way. Some of the pitfalls I avoided and some of the lessons I'm trying to teach other entrepreneurs who are trying to achieve the same thing.
Ryan Kolden: Very cool. And what was the inspiration to found the Art of Shaving? Why not start a HVAC business or roofing business? What particularly inspired you about Art of Shaving?
Eric Malka: Well, when I moved back to New York with my now wife. In 1995, I got a job in the men's grooming industry by coincidence. I started working with a distributor of English brands. I was sent to London as part of my job. to deal with the brand that we were working with there. They had barbershops, sold all these cool accoutrements. There were probably a dozen of these stores out in London. And I thought to myself, well, there's nothing like that in the US. And I'm sure a store like this would do well in New York with that consumer, the affluent consumer at least. And like that, on a whim, my wife and I decided to open a tiny little store. We had enough money by selling our car to miraculously open a tiny store on the Upper East Side of Manhattan. I could get products from my job and my wife would be the store manager. You know, it wasn't a brilliant business plan with a strategic, you know, market research behind it. Just a couple of kids saw an opportunity, decided to lean in and, you know, and then we get carried by the wave, you know.
Ryan Kolden: And at what point into you founding the business did you start to realize, oh, this thing has some real traction?
Eric Malka: I think it was really six months in when the New York Times wrote a two-page article about our little store in the metro, Sunday metro section on a Sunday. And the next day, our business just blew up. We were doing every day what We realized that we hit a chord and that allowed us to open a second store on Madison Avenue, much more prominent location. And that store did extremely well. We were doing well over a million dollars in the first year. So we realized right there and then that we had stumbled onto an interesting business.
Ryan Kolden: And what was your thought process into scaling the business? Did you ever have in mind that you wanted to sell it for a multiple at some point in the future or did you kind of just?
Eric Malka: Yeah, actually it was a paralyzing aspiration that I've had since leaving Montreal at 17 is to become a very successful entrepreneur. And one way to do that is to build a great company or to sell a great company. So early on, I think it was probably around less than three, four years after starting the business that I was already talking in my head about the exit strategy, by when, how much and how I thought we could get there. There were a lot of twists and turns, but we went from kitchen table to strategic acquisition in 12 and a half years, which is really, really short for a brand that had become recognized almost around the world.
Ryan Kolden: Yep. And the kind of the focus of the show in general is business owners. And so I want to kind of transition next into how business owners can best prepare themselves to sell their business. Just from a high point, in your opinion, what do people need to be focused on or know about before they exit their business?
Eric Malka: Well, I think you have to start thinking about that early on because it does take time to prepare. And it's important to look at it from the acquirer's point of view. What are they looking to acquire down the road? What kind of business? What kind of metrics? And for me, the lessons I've learned in my business is that IP is the most valuable piece of your business. So your assets, your profitability, It's all great, but really what the buyers pay the most amount of money for is technology, trademarks, patents, proprietary products, you know, things that you own intellectual property of that nobody can get except from you. And to build that, you know, it requires a mindset to build a brand versus building a company. Building a company can get you very far and create a great company. But if you really want to have that big, big exit, for me, the branding world and the creating intellectual property is the best way to get there. And that takes time too.
Ryan Kolden: achieve. So I do want to cover this at the kind of kind of towards the end of the show, what you do with strategic brand investments. But I know you currently do a lot of work with other founders and business owners, and you've probably seen some exits yourself. What are some of the most common mistakes that you see with other people you're advising or consulting on when it comes to selling their business?
Eric Malka: There's a few things that come to mind. First of all, it has to be said that most entrepreneurs, including myself, I'm not prepared. I wasn't trained for M&A. So I was an entrepreneur, I was building my business, you know, and I call it in my book, On Train to Slay the Dragon, right? It's a little bit, the analogy I use is you find yourself being the quarterback at the Super Bowl, but you've never played football. going to win this game. You're against professionals that have done this their whole life. So you're already starting at a disadvantage. Then probably you're looking for people to advise you that are incentivized by selling your company to a person or a strategic or financial institution that they've done business with in the past. So are they really on your team? Are they really giving you the advice that serves you best? I'm not saying that they have malicious intent, but there's an inherent conflict of interest there. Keeping your eye on the ball when you're selling. I mean, selling your business can be a very distracting thing to your business. In my case, I wasn't expecting the financial crisis to hit during my due diligence. You have to be ready for anything, you know, and the name of the game is to get the deal done fast, quick as possible. If you have a buyer, you have a seller, make that deal happen as fast as you physically can. Don't play games, don't drag it out. We had our bankers play games and dragged out the process. thing you know, the financial crisis hit and everything went into a tailspin. So we had to sell our company in the middle of really a crisis. We did well, not as well as we would have without the crisis, but we did well, but it was not before really enduring some heavy stress. So expect the unexpected. Keep your eye on the ball, run your business like you're never going to sell it until you ink that contract. Make sure you have the best people around you, including someone that has no incentive about upsides if you sell the business, because that advice can be jaded. Make sure that You understand that these processes, whether it's a million dollar transaction or a billion dollar transaction, a lot of them have the same elements to it. And it's not uncommon for deals to go hot and cold and hot and cold before they get inked. So that could be an emotional roller coaster. You have to really be centered. You have to be emotionally strong. You have to keep your cool. Any mistakes can be very costly. And most importantly, I would say that you need to know your price. You know, a lot of people think they know their price because they think their price is the price they want. That's not the price I'm talking about. The price I'm talking about is that price that if you get there, you say, fuck you. Sorry, I didn't mean to. You know, it's your fuck you prices, you know, if you go there, I'm out of this deal. I'm literally walking away from this transaction. And people don't realize, you know, I hear people say, yeah, my price is 100 million, right? That's a common number. And then I say to them, does that mean that if they offer you 95 million, you're not going to take it? How about 90 million? Are you gonna take that? How about 85 million? What's that price where you say, hell no, I'm not going there, right? So you need to have that conversation with yourself. Where can I get, where's my red line, real red line, where I would say, I'll go down with the ship before I sell for that price. So these are some of the things I would think about. And also one more thing, please try not to be a small fish in a big pond. If you hire a bank that makes your transaction feel like it's petty cash. you're not going to get the right treatment. Get a bank where your transaction is meaningful to them, or at least somewhat meaningful to them so you get the attention you deserve.
Ryan Kolden: And looking back at your specific transaction, so I know we just covered what you see with other people, but looking at your transaction, knowing what you know now, is there anything that you would have done differently?
Eric Malka: Yeah, 100%. And I would have never done it at that time. I would have made a deal with the president of P&G over dinner when he asked me if I wanted to sell our company in the back of a napkin. I would have made $20 million, $30 million more on my deal. And I would have gotten it done in three months. But there is no way in hell back then that I would have known how to do that, thought about doing that, or thought it was a good idea to do that. So sometimes bankers screw everything up. Sometimes they make magic happen. Every situation is different. And really, you need to have some wisdom in your corner to guide you through this process.
Ryan Kolden: And Eric, just so I can clarify on what you meant by there for everyone, are you saying that you would have preferred to have just done a direct deal with the company that was acquiring you rather than going through a bank?
Eric Malka: Yeah, once they asked me if I wanted to sell my company, I said, great. Let me go back to my people. My investors told me you have to hire Goldman Sachs. I said to them, they're too big for me, even though our transaction size was pretty hefty for my taste. And they said, no, they're the right people. And I felt my investors knew what they were doing. That was their world, M&A. So I listened to their advice. I became a very small fish in a huge pond. They gave me one of their junior teams to work on my deal. And a junior team as Goldman is not as good as a senior team at a mid-sized bank. So they screwed it up not once, but twice. I had to fire them. So yeah, a lot of stories around the campfire with the 15 months of the sale of my company.
Ryan Kolden: Kind of the next thing I want to dive into, Eric, is wealth preservation post-transaction. Unfortunately, it's uncommon enough for entrepreneurs to have a fairly large exit and then for them to go on and manage their family's wealth. in the same manner post-exit as they did pre-exit. Can you briefly explain how you just think about managing your wealth post-transaction? Are you taking the same types of risks now as you did when you were running your business?
Eric Malka: I didn't really take that much risk when I was, you know, I think entrepreneurs are given more credit for risk-taking than they actually do. No, I don't take that much risks with my portfolio. I'm in kind of a unique camp where I manage our family's asset myself. And I wasn't trained to do that originally. I had to train myself after exit. I went back to school, if you will, to become an investor. But I try to keep alive the entrepreneurial spirit that worked for me my entire life. while adopting a mindset of an investor because the investor mindset and the entrepreneurial mindset are at odds with each other. So in my case, I decided early on that I was going to manage our own assets for two reasons. One is I didn't really subscribe to the whole model of wealth managers out there that take a big bite. You know, we think 1% of your assets on their management is a small fee, but it could turn to be 40, 50% of your returns over your portfolio lifetime. So I felt that I wanted to manage my assets myself. I've always wanted to be an investor. And I had nothing else to do, take care of my kids, take care of my health, and take care of my assets, right? So that became, I realized that became my job. I need to be the chief investment officer of my small family office. So I went back to school and learned to be an investor. I take bigger risks on a small portion of our assets in the area that is more of a passion project to support young businesses with strategic grant investments, but otherwise, I have a broadly diversified portfolio. you know, ETFs, bonds, international, US, some private equity, your basic, your basic, your basic portfolio setup and trying to keep cool. The only risk of managing your portfolio yourself is having that, that button that you can sell at any given time, usually at the worst possible time. So you need to know yourself. I have friends that say, I don't trust myself. I need somebody to be there for me, hold my hand. And that's perfectly okay. I've learned that I have the ability to withhold, you know, anxiety when the markets go a little bit irrational and I stay the course, but it's not for the faint of heart.
Ryan Kolden: Have you, speaking of friends and other people that you've consulted on post-transaction, have you seen any large mistakes when it comes to running wealth?
Eric Malka: 100%. I mean, the statistics are horrendous. I mean, the statistics are basically, if you don't lose your own wealth, your kids will do it for you, right? It's like 98% chance the second generation. I think the biggest mistake I see is that And the watch out, the red flag is your own ego. Post-transaction, you know, your ego is pretty inflated in most cases. You've just had a major, major win. You won the Super Bowl and now you think you can walk on the field and win the next Super Bowl. Ego can be your greatest enemy. And how that manifests is people writing checks and making bad investments, looking really at the short term, being impatient, wanting high returns, wanting to create lightning again and again, and chasing that lightning. And that whole ego play can really be a big problem for entrepreneurs. So I would say, you know, keep your ego in check, take a deep breath and, you know, take time to figure out what you want to do. What is the purpose of the wealth you've created in your life? Is it to, you know, I think that's a, that's a question that's very hard to answer. And, you know, if you're lucky enough to generate assets, I think you're I mean, everybody has different values and I would say I would never give a blanket advice to how to manage money because everyone is a unique individual because of their situation, their aspiration, their values. Some people just want to drive a basic car and go live on a beach somewhere in Thailand. Just lay back or give their money to charity. Other people want to give their money to their kids. Other people don't want to leave money to the kids. Your personal values play a very important part into your objectives with your wealth. You know, some people are spending. care if they die with nothing. Other people want to preserve and accumulate multigenerational wealth. Depending on what your aspirations are, whether you're trying to create wealth or preserve wealth, that is the starting point. You know, what do you want long term and then back up into it? Because if you want multigenerational wealth, you need to take higher risks. You need to invest in certain asset class that are going to generate 10, 11, 12 percent in order to If you just want to have enough money to live comfortably for the rest of your life, maybe 5 or 6% is enough for you. If you don't care that inflation is going to erode your wealth, once you understand what you want, you can create a strategy to get what you want. But if you're just creating strategies just out there without really thinking through what the end game is, you might have some surprises along the way.
Ryan Kolden: One of the things that you mentioned, Eric, in there was values, what values to you, like what matters to you as a person. So the kind of the last piece of the show I want to cover is what you're currently doing. So can you briefly explain what keeps you busy and what is meaningful to you post transaction?
Eric Malka: Well, it took me a while to understand that it didn't happen just, you know, post hands-on father because I had two babies my dad wasn't really that present for me and It was really important the universe gave me a gift to not have to go to work every day to be there for my kids So that was magical but as they grew up and I was thinking about what am I gonna do when I grow up? You know, I looked at various various things, but I'm of the school of Stay in what you know, right? Don't try to reinvent yourself in a whole different industry. Although you can, there's nothing wrong with that. A lot of guys go into real estate, but I love my industry. And I found that I have a passion for the underdog, for the entrepreneurs that are being overlooked. You know, we talk so much about people that have succeeded, right? We give a lot of attention to the small fraction of the population that had extraordinary successes. And we forget the 99.5% of entrepreneurs that are struggling out there. They are smart, hardworking, good ideas. They understand their industry. And five years later, they have no business left, right? So what I've come to realize is I have a deep passion for helping others and I have a deep passion for entrepreneurs and I decided to figure out how to put those two together. After writing my book last year, it brought a lot of great principles and methodologies to avoid some of the pitfalls that a lot of entrepreneurs fall into. And I decided to start investing and supporting the next generation of entrepreneurs in my industry of men's grooming, beauty and wellness. And that's what we do at Strategic Brand Investment. We We work with founders of young companies that we find have good potential. They're good people and they have an interesting brand. And with our support, with our expertise, with our resources and with our connections, we give them a higher chance of materializing their success. So that's what we do. And hopefully when they become highly successful, we get a piece of that. But that's not the driving factor, but long-term we'd like to benefit from those efforts.
Ryan Kolden: Yep, and Eric, I think that kind of. It's all the questions that I wanted to ask you, do you have any closing thoughts that you want to share. About anything that we talked about today, or that we didn't talk about.
Eric Malka: Yeah, I mean, one of my big subjects that I'm very passionate about is health as well. And less today than 30, 40 years ago, but we're still seeing it a lot. Entrepreneurs are giving up their health for pursuing their dreams. And I think that's something that needs to change. That's a message I'm trying to send out there that, you know, Being healthy emotionally, spiritually, and physically can be a huge driver of success and enjoying the ride much more. And post transaction, you know, you can enjoy the fruits of your labor for a long time, hopefully. So I'm a big proponent of natural health and meditation and enjoying life and enjoying the ride because it's uncomfortable to be an entrepreneur. And sometimes we forget to enjoy the ride that we're on because there's no destination, my friend. The only destination is the final bus stop out there. Everything else is a journey. So enjoy, enjoy the ride, man.
Ryan Kolden: Well, Eric, it's been such a pleasure having you on today. So what I'll do is for anyone who wants to learn more about Eric, I'll go ahead and put his information along with a link to his book in the show notes and description. But Eric, if someone wanted to reach out to you, say a business owner, entrepreneur about strategic brand investments, what's the best way for them to get in contact with you?
Eric Malka: ericmelke.com or strategicbrandinvestments.com, you can fill out a form and it'll get to someone in our office.
Ryan Kolden: Well, great. Well, I hope everyone appreciate Eric coming on the show. I know I did. It was a great interview. Eric, again, appreciate your time. And that's a wrap for today. Take care.
Eric Malka: Thank you, Ryan.
Ryan Kolden: Appreciate it. Hey, real quick before you go, thanks for listening. And please remember to hit follow on your podcast player. You won't miss any episodes and it helps support us bring you the show. Today's show notes and resources are available to you by clicking the link in the description. The opinions and views expressed here are for informational purposes only and is not tax, legal, financial, investment, or accounting advice. This material is educational in nature and should not be deemed as solicitation of any specific product or service. All investments involve risk and a potential for a loss of principle. Should you need such advice, please consult with a licensed financial, tax, or legal professional. Neither host nor guest can be held responsible for any direct or incidental loss incurred by applying any of the information offered.
