‘Why I sold my business.’ Four entrepreneurs, four stories
Combined, they sold for tens of millions of pounds. But why did they do it then and what tips can they offer other business owners?
Interviewed as part of a Young Guns survey carried out by Growing Business in conjunction with chartered accountants and tax advisers haysmacintyre, their accounts shed light on the motivations that drive successful entrepreneurs to take the money and run, as well as some pointers to get you through the process.
‘I had taken the business to where I wanted it to be.’
Young Gun: Zack Feather
Company: The Pathology Group
Sold to: Independent Clinical Services (ICS)
Now: Angel investor, non-executive director, patron of Chora Chiri Charity, managing director of Titan Global, Aceso Intermediate Care, and shareholder of QVentures
“Timing can relate to various issues. It may be the right time personally, or it may be the right time financially, as well as market timing. For me selling the business was the right time due to the previous three years of intense growth, which made it very attractive for a buyer.
Personally I had taken the business to where I wanted it to be and felt that if I sold now there was enough still in that marketplace for a buyer to see further growth and opportunity.
There has to be further and visible market opportunity for the buyer, which was very apparent in our market space at that time. I had also put a lot of investment into senior management over the last few years and the company had a very strong managerial backbone to drive it forward in the coming years, this was without me and was essential in the timing to sell.
You must get this right in order to maximise the value of your business and if you want to exit cleanly. Fail to do this and you could be working for someone else in your own business for years to come. That just wasn’t for me.
Being prepared mentally is extremely important. You must get this timing right. Why do you want to sell, are you ready to sell and let go, what will you do next. People say, divorce, death and moving house are the three most stressful things in life, but selling your business is without doubt up there with them. You have to be personally ready and mentally strong.”
‘I’d heard horror stories about earn-outs.’
Young Gun: Dan McGuire
Company: Broadbean Technology
Sold to: Daily Mail & General Trust Plc (DMGT)
Now: Founder and CEO of Cube19, non-executive director, and angel investor
“We'd been approached a few times so we'd considered selling previously, although we didn't really have any kind of formal exit strategy. I was 27 at the time and I liked the idea of banking a good amount of cash, having the experience of an exit and working for DMGT for a few years, and being in a great position to start another company.
I agonised over it for months! On the one hand selling was really exciting and had plenty of benefits but I also loved what I did and we were growing really well. I worried about what would happen if I regretted selling a few months down the road and whether my head had just been turned by the money, but in the end it was the right decision and I never once regretted it.
I actually really enjoyed working the earn-out. I'd heard horror stories about earn-outs and practically everyone I spoke to who had done one advised me not to do it but DMGT were a great company to work for and it was really interesting to run a business as part of a big Plc.”
‘I felt I needed to bring home a big cheque.’
Young Gun: Duane Jackson
Sold to: IRIS Software Group Ltd
Now: Founder of Supdate, patron of The Prince’s Trust, and angel investor
“I used to be what can probably most politely be described as ‘mouthy’ when it came to marketing my business. The accounting software industry was a rather conservative place so being the opposite of that really helped to raise our profile and make us stand out among the crowd.
The downside of it was that more conservative businesses can be reluctant to deal with you – especially a potential acquirer that's worried you'll turn down their offer and then blog and tweet about it.
Thankfully I had someone on my management team that was known to the company that ultimately acquired us so they approached us via him. This distance from the founder also meant that there was less dancing around the table than there could otherwise been. IRIS were pretty clear from early on that they were interested in acquiring us.
I'd had offers to sell the company before and had been tempted. My chairman and mentor, Lord Young, made me take a long honest look at the reasons I was willing to sell a business that still had so much potential. The reality was that I'd been working hard for a long time and had built a growing business with no debts or losses. I felt I needed to bring home a big cheque for my family so they could enjoy the rewards. So Lord Young introduced me to someone who bought a small number of shares from me for £1m.
This put me in a strong position when the next offer came in. I was in no rush to get more money and we'd recently spent a lot of time in the business planning the future. I was feeling very positive about everything so I turned the offer down.
They quickly came back with an improved offer. It caught my attention and whilst I turned it down, I did make it clear that I had been tempted. I didn't want them to give up trying! After some negotiation they improved it again and it was a number that I felt it would be silly to turn down.”
‘If anything, I wish I’d exited earlier!’
Young Gun: Logan Naidu
Company sold: Cornell Partnership
Sold to: Co-founders
Now: Founder and CEO of Dartmouth Partners, owner of CityButler, and angel investor
“I’d been thinking about leaving for a couple of years. Primarily because I felt that there was a better opportunity out there and that my own career was stagnating. There were three of us that owned and ran the business, and we had very different visions and ambitions for the business.
I wanted to keep growing and they didn’t, so there was a fundamental strategic difference. I sold my stake to the existing owners, who continue to run the business.
If anything, I wish I’d exited earlier! We all want to work in an environment that is exciting and has a clear strategy and vision. By leaving, I was able to set up a new firm, learning from my experiences and mistakes and to actually go further, faster.
Key man risk is clearly one of the biggest issues in a lot of entrepreneurial businesses. Having the drive, passion and ambition to build something often means that a lot of systems and processes revolve around you.
When it comes to leaving, you find that you’re inextricably linked with the business and you’re stuck there. My partners didn’t want me to leave, and so we had a number of tense conversations around my departure that lasted a few months. Eventually, we struck a deal that everyone seemed happy with. Three years on, I imagine that neither party have any regrets.
I took a fair amount of advice from close friends and formal advice from a corporate financier and a lawyer. I took emotional advice from my wife!”