Episode Description
Spencer Matthews helped take Microbe Formulas, a direct-to-consumer supplement brand, from zero to $50 million in revenue and a $200 million exit. As chief of staff, he spent nine months working hand in hand with the investment banker running the sale. Coming from sales and marketing, he expected buyers to dig into the ad accounts, the campaigns, and the retention engine. They barely asked.
Around 80% of due diligence went to finance, legal, and compliance. Are the financials accurate? Is every product claim substantiated? Is there a real moat in the contracts and IP? Not one buyer asked for access to the ad accounts. The financials already proved the marketing worked, and most buyers planned to run their own playbook anyway. And behind the hockey stick, the business was still cash constrained and paying for expensive mistakes: a multi six-figure ERP that never quite worked, 80 hires in twelve months, and a seven-figure in-house lab that never paid back.
Today Spencer co-runs Fifth Hammer, an advisory firm and family office investing in health, wellness, and longevity brands, and is fractional COO of Stemregen. In this episode he and Nate talk about what buyers really look for, the mistakes that cost the most on the way up, why he ended up acting as a de facto CFO without a finance background, and how to know when a brand is actually ready for a new channel.
Key Takeaways
- Buyers diligence your finance, legal, and compliance. Not your marketing. Each buyer had one call on sales and marketing and never came back to it. The rest of the process went deep on accurate financials, regulatory claims, contracts, and IP. That is where a deal gets stuck.
- Do the buyer's due diligence before the buyer does. Before going to market, the team ran a full reverse due diligence: documentation, clean data, financials in place, and every agreement checked. By the time bidders arrived, the hard questions already had answers.
- Wait longer than you think on an ERP. These are often six-figure implementations that need dedicated admins and outside consultants. Spencer's team spent multiple six figures on one that never ran well. Plenty of eight-figure brands still don't use an inventory management system.
- More people doesn't always mean more results. Hiring 80 people in twelve months during hypergrowth created excess the buyers later trimmed. Be intentional about hiring, and build an offboarding process as carefully as your onboarding one.
- You can't allocate capital without channel-level numbers. At Stemregen, the team could ballpark revenue across DTC, wholesale, and international, but couldn't see gross, contribution, and profit margin by channel. That made every hiring and spending decision a guess. Set up channel-level reporting before you add the channel, not after.
- Add a channel only when you have signal and real budget. Microbe Formulas sold DTC only for two years and let wholesale grow organically for two and a half years before investing in an eight-person sales team. A new channel needs proof it can work plus six to twelve months of committed spend. Dabbling and stop-starting does more harm than good.
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