15th April, 2018

Give everything to your start-up — but let it go without a tear

Now begins the rest of your life,” I said to my ex-business partner Charlie. He had just sold his pub business after nine years of graft. The buyer announced a week before completion that Charlie was not wanted once the deal closed. So this was the start of a new chapter for him, and the end of a journey for us.

For many founders of an enterprise, their venture becomes all consuming. When asked why they do not have more holidays, or hobbies, or a really full family life, entrepreneurs often say: “There’s nothing I’d rather be doing than building my business.” No business ever soars unless the proprietor gives it their absolute attention.

Many such individuals are obsessives, which partly accounts for their success. Their creation becomes their community. It represents their status, their wealth, their self-image and their occupation. When that dynamic and visible entity goes — sold, or much worse, liquidated — so much of their purpose and satisfaction disappears with it. Hopefully, they have the compensation of being paid a fine price for their trouble but, for many, seller’s remorse soon sets in.

Of course it is unhealthy to have so much of one’s whole being tied up in a company. Yet the energy and luck required to develop a viable firm is such that only a small number ever achieve it. Those who do are the ones who devote themselves to the task with a manic passion. It almost invariably takes five to ten years or more of sustained effort. Then, when you manage the perilous ascent and reach a summit of sorts, that special sense of fulfilment is very hard to match. Ordinary experiences cannot offer the same high-stakes risks and rewards. Hence, when their business is sold, an entrepreneur’s entire raison d’etre can feel annihilated.

Of course, growing a company is a process and a journey, not a moment. It comprises thousands of decisions, a team of colleagues, countless small victories and many mistakes. I am very sceptical of any entrepreneur who seeks backing for a plan that has an exclusive focus on a highly profitable exit. The ventures that do best are those where the founder has identified a market opportunity and has a genuine desire to supply products or services and make customers happy. A capital gain at the end should almost be a side-effect of providing that solution.

Selling a business should not be a cause for mourning. Ideally, the owner of a private company chooses the right time to exit, rather than having their hand forced. It might be retirement — because they really do want to slow down and enjoy the fruits of their industry. It might be for purely economic reasons: the owner sees that the value of the business is at a peak.

What must feel like a mini-tragedy is when a business collapses, and a lifetime’s work slides into oblivion. Mostly I feel sorry for founders who witness their creation going broke, unless they have been criminal or negligent. Unfortunately, the natural state of affairs for business is not bountiful profits — capitalism is far too competitive for that. Unless the managers run a business with considerable vigilance, then there will be an entropic tendency towards diminishing returns — which is why almost no companies prosper in the very long term.

I can remember feeling both elated and sad walking out of a lawyer’s office at 1am, having just signed the documents transferring my ownership of a business. Such occasions should feel life-changing, but I’ve usually been overcome with a mood of anti-climax. You have some cash in the bank, but you no longer enjoy the involvement and excitement of seeing something grow. You miss the camaraderie, you worry that you sold too cheaply, and you think you will never find a replacement. A door has closed for good — but you learn you can never look back. Ultimately, life is too short for regrets — you must keep moving forwards. There is nothing wrong with feeling sentimental about a company when you say goodbye, but there are always new opportunities.

In a perfect world, you walk away having made some enduring friends, having learnt new things, having created jobs and made a fair return for the shareholders.

Meeting all those objectives is not always possible, but if you do so deliver, then you can hold your head high and feel proud of your accomplishments as you greet the new dawn.