If setting up a small business is difficult, then leaving it can be just as hard. We speak to former SME owners about their experiences of exiting the companies they founded.
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After 15 years Jack Dorsey, founder of Twitter, announced earlier this month that he will be stepping down as CEO of the famous social media platform, effective immediately.
The news – naturally tweeted out from his personal account – shocked many. While Dorsey will remain on the board of the company until next month, the loss of a CEO is a big change for companies of any size.
Getting your business up and running is typically thought of as the ultimate goal for entrepreneurs. We tend to hear a lot of early-stage success stories, but we don’t often discuss the emotional hardship and smart financial planning required to say goodbye.
So how does it feel to leave the business you’ve worked for since conception?
We spoke to several former founder-owners to find out more about the challenges of exiting or retiring from your company, as well as the opportunities it can bring.
This article will cover:
Why would you leave a business you founded?
For many small business owners, the idea of moving away from a business they’ve established from the ground up will be hard to wrap their heads around.
But for others, being able to sell your company and move onto other ventures can be the driving force behind your growth plans.
Entrepreneurial spirit is, after all, about chasing innovation and new ideas. If you’ve been working in one industry or location for a while, it can start to feel stagnant.
Entrepreneur Alison Cooper sold her business, En Route International – an international food service for airlines – to the Emirates group in 2017. She is now the founder and CEO of Alicia J Diamonds, a bespoke diamond and gemstone jewellery service.
Cooper said: “The decision to leave was difficult, because I genuinely loved my role. But I had reached an age where I could do it with my eyes closed. I’d done it for 15 years, and if I stayed for another five, then I’d be too old to start in a new industry. I wanted to do something different. So, I planned it carefully, and once the business was sold, I worked my five-year earn-out period before leaving.”
There are other reasons for why you might choose to say goodbye to your company. Selling a startup or new business idea to a larger enterprise can be a great way to make a profit, or if you think the idea might need the backing of larger resources to succeed.
In fact, according to ONS figures, between June and September 2021, there was a monthly average of 136 acquisitions or mergers involving UK companies worth £1m or more.
Barnaby Lashbrooke started his first company, webmail provider SupaNames, aged just 17 years old. He sold it to a UK plc when he was 23-years-old for £2.1M. Lashbrooke told us: “I didn’t do any exit planning, it just happened really. In the space of a few months, we had multiple offers for the business, and I accepted the highest bid. If I could do things again, I’d have probably been a firmer negotiator. I think with some proper planning I could have got another 20% on the value of my business.
“That’s not to say I have regrets. I am profoundly grateful that I sold a business, and very grateful to the people who bought it. It was an incredible experience for a 23-year-old, and one that made me financially secure for the rest of my life.”
How does it feel to leave?
The ex-business owners we spoke to reported mixed reactions to leaving.
Some felt relief at having completed long deals or relinquished some big responsibilities. Others felt lost at no longer being manager of the company and employees they had watched grow from nothing.
And all spoke of a sense of loss of having something to look after – and the almost immediate desire to follow a new business idea and begin another startup adventure.
“On one hand, leaving En Route International was great, because I was exhausted, having scaled from 14 million sales to 45 million in 5 years. I was definitely in need of a rest,” added Cooper. “But I did find the sudden quietness hard to deal with. I was used to starting at 5am and working till late, dealing with different time zones. Suddenly, there were no emails to answer or calls to make. And you do lose some of your identity when you leave. It’s hard to prepare for that.”
Lashbrooke spoke of similar issues with adjustment following the acquisition of his startup. After he sold SupaNames, he had an extended transition period which took some getting used to.
“Having invested all my energy in that business – I worked seven days a week and took no holidays for years – it was a strange experience to find myself not an ‘owner’ anymore. [I] did have quite a gradual exit from the company over a year or so which helped to smooth the transition. But big companies and big company politics really aren’t my thing, so I left after a year to start Time etc, the virtual assistant platform that I still run today.
“[One] positive during that time was having the support of others to deal with things and no longer being on my own as the sole owner of that company. Years later, it was very strange to see others take my ‘baby’ and swallow it into their corporate system.”
Jonny Rosenblatt founded Headspace Group in 2012, and exited in 2017. He went on to form a new business in the coworking sector, Spacemade, which we featured as one of our top 50 startups in 2021.
Rosenblatt said: “The process of selling a business is long and exhausting so when it comes to completing the deal, the euphoria isn’t quite there, but the relief is tangible. The hardest part of selling my last business, Headspace Group, a coworking business, was leaving behind the team that I’d built.
“I had a reasonably uncommon experience where my exit happened on the day I sold, so unlike many founders I didn’t have the earn-out period to map out my next steps. I went from the busiest and most stressful year of my life to literally having an empty diary the next day. I was a sole founder and the business was a real labour of love. I had built a really strong relationship with every member of the team and surprising many of them with my exit was a hard thing to do.”
What should you do if you’re thinking about leaving your business?
Some entrepreneurs spend far too much time worrying about saying goodbye to their business, which can then create more problems further along in the process. Others very quickly get an acquisition offer dumped into their lap, and aren’t sure what to do with it.
We spoke to experts and those with previous experience, to find out what they think business owners should prioritise when planning to leave or exit their business:
Hire a third-party consultant
Richard Osborne is founder and CEO of UK Business Forums (UKBF), an online community for small business owners. After setting up the platform, Richard sold it back in 2007. He then made the decision to buy it back again in 2021.
“Take and follow legal advice from a mergers and acquisitions solicitor”, said Osbourne. “Regardless of how established your business is, who you may be selling it to, or how much money is involved – go through the proper channels. Buying and selling a business is a huge amount more than simply being added as a director and bank signatory.”
Find your replacement first – whether internal or external
George Style is regional managing partner at Haines Watts, a chartered accountancy firm. Style gave us some top tips for succession planning: “Careful succession planning ensures that a trusted and capable leader is in place to keep the business up and running. Mapping out who will carry on the strategic management responsibilities in the company makes for a smooth exit plan and minimal business disruption. As part of the transition period, the chosen person must be made aware of the finer details of the business, including its strengths, weaknesses and values.
“[Acquisitions are] one of the most common exit strategies, allowing you to find a thriving business that wants to buy yours, and negotiate the best possible deal to sell, considering the price and the acquirer’s plans for its future.”
Keep it confidential
Cooper said: “My exit involved selling 80% of my shares. I couldn’t scale the business without that investment. But my advice to others is to keep everything confidential during the sale process. Some colleagues have a sixth sense and change makes people jumpy, and they may jump to incorrect conclusions.
“Once a sale is agreed, gather the management team together and make sure you’re all saying the same thing – write down the essential information to tell to staff. Press releases should also tell a clear story.
Cooper also offers some advice on judicious diary management.
“Keep your door open after any announcement of change – selling the company or if you’re leaving. Clear your diary for several days after and speak to anyone who has concerns. If you make an announcement and then aren’t available, people will feel like you don’t care about them.”
Enjoy your time off!
Spacemade founder Rosenblatt told Startups the best advice he received was to put his feet up.
“It gives you time to process your new position, your new identity (or lack thereof!) and how you want to tackle the next phase of your life. I have a young family so I was lucky enough to spend a lot of time with them whilst I mapped out what the future held. The thing I realised during that period was that I really missed the cut and thrust of running a business and driving a venture from an idea into something tangible.
“Once my non-compete was over, I was ready to start my latest venture, Spacemade, a flexible workspace business that creates phenomenal, individual and beautifully designed workspace for the new world of work.”
How will it impact your business?
One of the biggest disincentives to leaving your business is what it might do to your customers or turnover.
But these worries are best avoided as you shouldn’t be leaving your firm if it’s in a risky or unstable position.
Haines Watts’ Style told us: “When a founder exits a business, the organisation should be in its prime. By focusing on the health of the business in the run up to an exit, you ensure longevity and sustainability for your company long after you have left. A well-run business is appealing to the strongest candidates for taking over and means there will be minimal risk of loss of revenue.”
Another key consideration if you’re thinking of leaving your company is how the change will affect your future business endeavours or career changes.
That’s why you should make sure you’re setting yourself up for future opportunities. Even if you’re not planning on starting another firm, you never know when the entrepreneurial bug might bite again.
“If you know you’re going to be leaving, you should look to join some entrepreneurial clubs – there are some great ones around, like The Supper Club in London,” suggests Cooper. “They give you great opportunities for networking with like-minded people who are still scaling their business or who have already sold. It opens your eyes to the other industries.
“For CEOs I’d advise consulting a branding expert or consultant soon after you leave, to help you work out how to continue your personal brand. I found myself stumped when people at events asked what I did – it felt complicated to explain that I had just sold my business and was in-between things. I wasn’t retired.
“In retrospect, I could have reidentified as an entrepreneur and business consultant at that point.”
Of course, part of facing the issue is just about letting go. If you’ve properly prepared your exit strategy then whoever is taking over from you should be well-prepared to carry out the job well. In this instance, your job is then about showing you have faith in the company’s new CEO.
Jake Third, managing director of digital marketing agency Hallam, told us that, after stepping into the MD role and taking over from Hallam’s founder, he realised the skills required to make a great founder are sometimes different to those needed to lead through the next stage of a company’s growth.
“Founders tend to be highly self-reliant, with exceptional personal talent: this means they excel as individual contributors. Leadership, in contrast, requires greater teamwork, with a focus on nurturing and developing those around them to encourage greater depth of organisational capability. While it’s not impossible for individuals to have both of these traits, it shows impressive self-awareness when a founder recognises when a different skill set is needed.”
All good entrepreneurs make mistakes. You might encounter issues or delays in your exit plans that can create new challenges to weather – but all of them will be a new lesson to learn, as Richard Osborne knows first hand.
Osborne admitted: “The first time I sold a business, I learned the hard way. I needed to exit, and I literally sold it over a curry. It wasn’t planned properly; I wasn’t protecting myself for the future. But hindsight is a wonderful thing, and it was a very valuable business lesson.”
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