Yet, succession planning is vital if you’re to realise the value of the business you’ve built. We ask four entrepreneurs who’ve successfully sold up to share their secrets…
‘Plan your exit from the start’
Name: David Williams, 38
Profile: Founded customer management company QCi in June 1998 with two partners, Neil Woodcock and Paul Weston. Sold the business to WPP Group in June 2001 for an undisclosed sum. Now CEO of How 2 Xperience (H2X), the customer and employee ‘experience’ consultancy with a range of blue-chip clients
The key to our success at QCi was having a three-year plan for growth, after which we intended to sell the business. We asked ourselves, ‘Who are the potential buyers? What will they want to see evidence of in the business?’ We came up with ten things, such as a benchmark database of customer data, thought leadership, and so on, checking them off the list every time we achieved them.
The most unusual aspect of our approach was adopting a product model as opposed to just being a service provider like most consultancies. By owning IP, our database of customer data, we could generate regular licence revenue. Then it was vital to ensure we had a growth trajectory and sustainability, so that the business could run without us.
Having said all that, it doesn’t matter how much you plan your succession, you still have to find the right buyer. Going from suitor to suitor was an ‘interesting’ learning experience, as was wading through accountants and lawyers! It takes so much time – nine months in total – and you’re never sure whether the offer on the table is the right one. In the end, a friend gave me a great piece of advice: ‘David, you’ve just got to take the risk and hang your arse out the window!’ Sometimes in business you have to trust your judgement and take the plunge.
‘Step back and give people room to prove themselves’
Name: John Jenkins, 64
Profile: Took charge of his father’s Bristol-based restaurant business in 1989, building it from one outlet to five. Passed the business, The Lunch Lounge, down to his son in a management buyout in 2005 and has now retired to the South of France.
My father asked me to join his café business at a time when he was getting on a bit in years. He trained me up, gave me the space to come up with ideas and soon I was running the operation.
By the time he retired, The Lunch Lounge had double in size to £6 million turnover. Although my wife Linda left her career to help out, it eventually became clear that I needed more support. My son Gary wanted to join the family firm and after much persuasion on his part I agreed. He had been involved in running a hotel in the city for many years.
Early on, Gary and I argued a lot. I had fixed ways of doing things, from managing the accounts to the wording of the menus. In the end, I realised I needed to let him run with some of his ideas and see what happened. It was tough stepping back and I finally understood what that must have been like for my father, but if you want to be able to hand the business on to someone, it’s important to let them prove themselves.
In March, I sold The Lunch Lounge to Gary and his business partner and with the proceeds bought an apartment in Nice, France. When I look out over the vineyards with a glass of wine in hand, I can’t say I miss the restaurant much!
‘Don’t be afraid to walk away’
Name: Penny De Monford, 35
Profile: Left high salaried career in insurance to launch Office Heaven stationery and office goods supplier in 2000.Four years later, she sold her 50 per cent stake to co-founder Anne-Marie Steadman.
I left my job at a well-known Insurance company to fulfil a dream I’d always had of starting my own company. I think I fancied myself as a future serial entrepreneur, viewing this as the first step to building an empire. My friend Anne-Marie had been working for the largest stationery mail order supplier in the country and had been itching to leave and set up her own operation. So, we launched Office Heaven in the summer of 2000, offering small batches of office products at low prices.
We exceeded our revenue targets in the first year, enabling us to take on staff and move to dedicated office premises in the heart of Nottingham. Then, in September 2002, I met Lionel at a social event. He was a successful property lawyer and, as the cliché goes, I knew he was the one for me! We were married within a year and as circumstances changed so did my priorities. The dream I’d once had of being a high-flying businesswoman with several companies to my name just wasn’t what I wanted anymore.
Anne-Marie agreed to buy my 50 per cent stake, but it was hard for me to let go, even though I had made the decision to exit. I kept popping back into the office, which in hindsight stopped me moving on, not to mention being destructive to the team left running the business. I guess it was my first baby, so it was hard seeing it go off and have a life without me! But once you’ve decided to sell, you must let go and stop caring. And now I have a full time job that keeps me occupied – raising our twins Josh and Evan!
‘Nurture talent ready to take over’
Name: Simon Goldberg, 39
Profile: Founder of IT support company Red Route Communications, which he sold to his management team in 2004 for £4 million.
I started Red Route with two friends, Tim Lennox and Geoff Williamson, who I’d known since studying electronics and electrical engineering at university. We’d had various jobs in the IT services sector since then and decided we would form our own company.
We knew we could offer small businesses better customer service and more cost-effective IT support than the big boys we’d been working for. Instead of an anonymous helpline, our customers could call us on our mobiles if they needed help. We ended up with more clients on our books than the three of us could realistically service, which is when we brought on more staff, including two former colleagues, Phil Jordan and Steve McNeil.
They were an outstanding addition to the team, working as hard as the three of us who’d founded the company! Soon, they were taking on more responsibility and we trained them up to handle some of the most complex jobs and important clients. We began to see these two as natural heirs to the business. Tim, Geoff and I had envisaged selling the company to a larger player in the market, but in the end Phil and Steve bought us out. Helping them develop their skills had inadvertently been a case of training our successors.
See also: How to successfully manage succession – Stepping away can be your best business decision, if managed well.