Are you prepared for life after exit?

April 20, 2021
Business Growth

After years of hard work, sacrifice and being the boss, selling your business can be a major psychological and emotional adjustment. Founders like you share their tips and experiences of what comes next.

Accept that you’re no longer in charge

Earn-outs can be tough. Suddenly, you’re working for the company you built – and you no longer get to call the shots. You’ll have new bosses and you’ll have to march to a new set of rules.

Members recommend that you negotiate a holiday straight after the sale to help you adjust. Find out exactly what the buyer’s plans are for the business and what success looks like to them.

Will they be incorporating your team straight into their existing structure, running it as a division of their business, putting someone else in above you to lead it, or will it be “business as usual” for a certain period of time? Get to know the team you’ll be working with because you will probably be committing to at least two years with them.

Consider your options

Having applied yourself for many years to one project, the void left after selling a business can be hard to fill. After going at 100mph for so long, you may feel guilty for doing nothing and need something new to get you out of bed in the morning. Consider what is important to you.

Travelling and generally recuperating is vital to help you re-calibrate and adjust to a new life. “Having departed [from the business] suddenly, I could immerse myself in a family adventure with a four-year old, six-year old and an eight-year old,” says investor Lara Morgan, who started her first business, Pacific Direct, when she was 23 and sold it for £20m 17 years later. “We travelled with the children for five months around Australasia, which was priceless.”

Some members have opted to take courses or attend conferences to learn more as they explore new avenues and find new passions. Try having a “strategy day” for yourself and write lists of what you want to do and achieve. Or hire a coach to help you rediscover your personal motivations and choose the next big thing in your life.

Become an angel investor

Before you jump back into the startup ecosystem as an investor, ask yourself if you can add real value and influence the result. Would the business simply benefit from a cash injection at this stage or can you bring value in any other ways? Is there a genuine market opportunity? Can the business make a decent margin; and is there potential for a 10x return in four years? Decide how involved you want to be. T

aking a business from pre-revenue to £1m, £1m to £5m and £5m+ all require different skill sets and experience. Next, work out the income you need your capital to generate yearly to fund your lifestyle. Then, you should put aside enough to generate this income plus 2-3% to keep your capital the same in real terms.

Figure out your appetite for risk, based on your personal circumstances (for example, if you have children and need to pay school fees). As one member says, “the pain of losing 10% is 2.5x greater than the pleasure of gaining 10%” so work out how much you are willing to risk and need to keep safe.

Members who have become seasoned investors suggest you need a minimum of ten investments, and be able to do follow on rounds to avoid getting diluted. So if you are putting in £25k to £50k to start you will need £100k per investment (so around £1m to play with). Always check the company qualifies for SEIS/ EIS both at the outset and on an ongoing basis for tax relief purposes.

Be prepared to walk away from investments which aren’t making a return. “Get used to the fact that not everything you touch will turn to gold,” comments Martin Spiller, lecturer in entrepreneurship at Cranfield School of Management and the former CFO and co-founder of Only 4 U. “In the years since exit I have put money and time into a number of ventures and some of them have failed spectacularly. That can dent your ego a little bit.”

Go plural

After exit, some founders take on a portfolio of non-executive directorships. It’s a step back from the stress of a full-time CEO role, a valuable extra source of income and a way of using your skills and experience to help other companies or industries. Remuneration initially tends to be cash, perhaps with an option of equity at a later date. “Board meetings are really hard now as you need a different skill set and to be much more diplomatic,” says Zack Feather, chairman of Springpod. “You have to be almost like a parental figure, nurturing more than driving through the process.”

While it’s a good idea to balance your portfolio with a mix of early and later stage businesses that can benefit from your specific knowledge and network, the shift to a pluralist career can be difficult. “I eventually tired of the pluralist career and missed the structure and organisation of having one single focus,” adds Spiller. “Working on lots of different things can be quite hard work and sometimes less fulfilling than building something.”

Set up a charity

With more than 168,000 registered charities in England and Wales and untold numbers of smaller funds, starting a charity is an increasingly popular option for founders who wish to give back and change the world for the better. It isn’t easy: you’ll need to decide on your goals, work out where your funding will come, appoint trustees, draft a governing document, name your charity and, once you’ve broken the £5,000 turnover threshold, register using the application form on the Charity Commission website. But it is rewarding.

After successfully building and selling Dreams, Mike Clare set up the Clare Foundation, a charity that helps other charities to become more efficient and work smarter. “People working in charities are generally decent and honest but often hopeless with things like negotiation, business plans, and knowing when to take risks,” he says. “But a charity is essentially a business, with HR, IT, admin, and the whole middle section of administration is just the same.”

A successful exit will give you plenty of options for your next chapter – but give yourself time to choose the right path. “Nothing prepares you for leaving your business and losing that power base,” says advisor Martyn Dawes, the former CEO of Coffee Nation. “It’s like climbing a mountain, reaching the summit, finding nothing and having to come back down.”

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