$25,369,000 EXIT: The Brutal Truths Of Selling My Business

0:00In the past 15 years, I've exited three companies and these are the things I wish I knew then. The exit we all dream of isn't necessarily what it looks like from the outside. Being a founder is about having the vision, the skill, the force of will to start something new that didn't necessarily exist before. But everything that starts must end, even if ending means you simply have to move on while the business continues. And I've experienced that more than once in the past couple of years. Welcome back to Secret Leaders. I'm your host, Chris Donnelly, and today this is a solo episode because Dan is still on holiday.

0:34Today I want to talk about how my life has changed over the last couple of years after I've exited one company and then exited a second company and the good, the bad and the ugly along the way. I want to talk about what really happens when you're navigating an exit, the sleepless nights, the tough decisions, the moments of doubt and yes sometimes even the victories. So whether you're building a company now or you dream of starting one someday, understanding the real exit story is crucial because let's face it, every business journey eventually comes to an end. So let's start at the beginning of the end.

1:10So when did you first realise that exiting might be the right move? I think it's very difficult to look back and say there was one specific moment across a variety of companies obviously, but I feel like when I was about 25 we were running our company Verb Brands which was an agency for luxury brands and we were maybe 30 or 40 staff and a consultant said to me one day when are you thinking of selling and I was thinking selling what I was thinking selling to what client and he was like selling the company and I genuinely at that age had very little idea that you would build a company and sell a company and move on and do other things I just thought at that age, I was 100 % in on that company.

1:54And that was my whole life. And I suppose that consultant helped us to understand that even if you're not necessarily building to sell the company, building the company to be sellable is the right way to think about it. So you're building a company to be a consistent growth, with a consistent profit, with good margins, that is attractive to a buyer or to an investor in the future. And so for me, I think I realized it was the right move when I understood that strategically it was the best thing to do to grow it to that sense but I also got to a point where I actually fell out of love with what we were doing with that company it was a very successful company we had a very successful albeit challenging exit but I probably had fallen out of love with the underlying core of the business and as a result I just wasn't getting the same enjoyment from the work that I used to but the company went on existed beyond me has gone on to do better things since I left.

2:51And so realizing that the people in the company were better to take the company forward than I was, was quite a big moment. So what's it like preparing to sell the thing that you've built? So the first time it happened to me, we were actually in a few weeks before COVID, we had an offer to buy our company out of the blue. And so we hadn't been preparing to sell the company. We were a profitable, you know, decent growth business we were you know 70 staff doing millions and millions a year very profitable maybe 20 to 25 profit at that point and we were just growing our sense was to raise money to grow the business and instead an offer came through to buy the business anyway hindsight is you know 2020 but we sat there and we thought we can get more for this business and we said no to the offer thinking they would come back with a bigger offer we were two weeks before covid and covid hit i remember because i was skiing with my wife and covid hit everyone was pulled off the slopes and i called the buyer and i was like i am interested in discussing that offer and they were like offers off the table you know kind of speak to you when we speak to you type thing and i remember being like oh my god and obviously covid for a business like ours which was a providing digital to companies that were selling predominantly physical stores luxury brands was devastating we lost 80 % of the business had to furlough 70 staff or something was absolutely wild however when we came out of covid which was you know quite the journey we managed to catch a wave of businesses digitizing and so we were able to resurrect the business grow it to bigger than it had before but that time we were doing it we were like okay now we've missed the opportunity to sell first because we were greedy second time we're going to make sure that we build a business that That is very sellable.

4:40And when we were coming out of COVID, we were doing better than we ever had before. I basically approached the three biggest digital agencies in the UK. I had met all the founders previously and got myself into a position where all three of them put forward an interest to purchase our company. And so second time round, we were very prepared to sell. We could have maybe sold the first time round, but again, like bad timing. From an emotional standpoint, which is a big question a lot of people ask, it's a bit like people always say it's a bit like selling your baby. For me personally, like I say, I mean, I had kind of fallen out of love with the subject matter at this point.

5:21And so I loved the people. I love the company. I love the entrepreneurship of the whole thing. But the subject matter, namely just marketing luxury brands, I'd kind of fallen out of love with. and so for me from an emotional standpoint when we were gearing up to sell and selling it was stressful but I was never thinking it was the wrong decision to sell the business I was never thinking you know I'm really going to miss it I didn't really understand what my future feelings would be like and I'm probably going to talk to you about them but the challenge for me was I want to make sure my company is taken care of after I sell it and that was the most emotional point for me when thinking about selling the business.

5:59So how did I manage the transition of selling the company? For me, anyway, the first month of selling the company was the most eye opening thing I've ever been through in my life. And I would say it's probably the most stressful month of all of it, because I realized that no matter what anyone says to you on the way in to buying your company, you know, you're all friends, there's so much trust. And there's so much like, we understand you're an agency type business we're an agency type business it was devastating when we began our exit and began our transitional period because the company that bought us had I think lured us in with real false pretenses as to the type of people that they were but also that the company was and so I think we lost the client immediately at the beginning of our transition which businesses do you know businesses lose clients and it it was like all hell had broken and loose um you know it was super aggressive there was so much office politics it was like don't say this to this person don't say this to this person don't say this to the ceo don't say that to the ceo and i remember my business partner and i turning to each other and being like oh my god what have we done like this is this is an over politicized situation where occasionally you do lose clients um and so for for me the transition was oh my god like i've never had a boss and I've never had management I've never had politics in my company before and suddenly this incredible business that we had built which was very you know I think we had a really amazing culture I think people really built their careers there we had a real way about the way we worked I think we were a cool company you know I think brands liked us we had a bit of a swagger about the agency and we suddenly entered this incredibly corporate um like structure and it was very challenging for for all of us including my team um but for myself and my business partner who you know had run our own company for 10 years had built it from nothing from the age of 21 to suddenly be told that or treated like children often in the in these situations was incredibly difficult and i think that you kind of have to i always said at the time you kind of have to take got on the chin you know you've sold the company it is sold they bought it it's sold and to a certain extent you are their employee and so that transition is very hard to get your head around to begin with and obviously for me I think I only ended up doing a six month earn out period with that company and I think that that was probably because I had started a new company that had taken off and become very big very quickly and so they were they were very clear in the understanding that I was doing that.

8:42And so after six months, it did make sense for me to leave. So how do you separate your personal identity from your role as a founder during and after the exit? I feel like this is something that's not spoken about very often, but I can only speak from my perspective, but I know this is shared by a lot of my friends. When you're running your company, a company like ours, you know, we were, I think about 90 staff or something when we sold. And, you know, I was the founder. Everyone had known I was the founder since I was 21. I'd built the company from scratch over 10 years. And so I had a real identity.

9:18My clients were people like Bugatti or Aston Martin, like they were top luxury brands. And so there was a certain, you know, expectation and approach that companies took with me and that team members took with me and investors took with me. However, the moment you sell, that whole dynamic changes entirely, especially the people who bought the company they go from being like oh super friendly to try and get you to sell the company to i'm your boss get in line which i think was a really big culture shock for our company which we wouldn't have minded if you know they'd said we will be really aggressive bosses when we buy the company we would have been like fine but to lure us in the pretences that we would get like full independence and all this sort of stuff was um was a big change i think the other thing is that when you are a founder of a company that size you get courted by so many people service companies institutions you know whether it's consultancies or banks or whatever and then the minute that you sort of sell those people disappear you know no one wants to sort of you know spend time with you anymore and again I don't think it's necessarily I don't think I necessarily was aware of it specifically in the moment but the way that people treat you is so fundamentally different during the exit and then after the exit and for me I had a very interesting story in that I sold my first company at the same time as setting up my second company and so I had a very short window before my second company was you know out in the world and doing quite well and people were sort of associating me as the founder of the new company but the biggest change for me is when I did step back from Lottie and I as a result had nothing I had no company I was just like people were like oh like what do you do and i was like oh i'm kind of like a entrepreneur who's thinking about my next thing and they'd be like you know people would expect you to be like i'm christ only from lotto i'm christ only from verb and now i'm like i'm christ only from christ only you know as in i had nowhere to associate myself with anymore and i found that very strange and people being like i've forgotten what people were like at the beginning of companies when you tell them ideas that might sound crazy and they suddenly are like that is crazy and obviously it takes a while before your idea that sounded crazy now makes sense in the context of the world and that is to an extent entrepreneurship but I do remember sitting in the kitchen with some friends of mine we were like having a drink at a barbecue and I was like I'm thinking about my new business to like help entrepreneurs scale and everyone was like oh that won't work because like entrepreneurs won't have the time and they won't invest in that and you won't be able to do that um and everyone even though i'm three businesses in at this point in my life was like that's unlikely to work as a business um and then you know six months later everyone's like that is a really great idea i've always thought that was a really great idea and so it's very interesting the change of perception that people have and so to founders i would often say you know i wouldn't expect everyone to you know support you as you might hope they would after an exit or during an exit um and i'd say that as a transition, it was certainly, it's certainly a time I look back on.

12:24And I think that was a really tough period of life because you lose complete control over everything. You're now an employee, you know, and I think that as much as I might disagree with the company that bought my company about how they did things, I was always aware that I was an employee and I was always aware that I was working for them. But I think until I actually did, I never quite realised how challenging that could be. The other thing I remember quite distinctly was the loss of your importance in the role and in the company. And so obviously when you're running the company and you're the founder and CEO of the company, in many ways, a lot of things do revolve around how you want them to work.

13:08Whereas you sell the company and suddenly the company that buys you, they want to make you obsolete as quickly as possible, but they want to make you feel obsolete to your own team so your own team will as a result see them as the you know the route forwards and the guidance and the leadership and so forth and to an extent I understand that I think for us it was so present so early on that I would find myself going into the office and trying to catch up with people on clients and I'm like oh yeah no we've done that all and I was like well I I'm I'm sort of owning the client relationship they were like oh yeah no so and so from the new companies talking to them and don't worry it's all been sorted and the funny thing is it's like that's great you know from my perspective I was always like you know less work is always better but the way in which these things are handled and executed are in a very non-human manner and so as a result you go from a feeling of you know my team and I work together in conjunction and now my team work for someone else and I'm somewhat of a ghost around my own office and I've spoken to so many founders about this it's not a it's not a unique thing I feel like the company that buys you tries to replace you as quickly as possible both for clients but also for staff so that the clients and the staff look to them in the future and not you.

14:23So how do the experiences of Verb and Lottie differ and what do they teach you about yourself? So for context Verb was a digital marketing agency for luxury brands that I set up when I was 21. I bootstrapped the business for about 10 years sold it at 30 years old to another agency that was backed by a private equity firm and Lottie is a great business that still exists today that's run by my brother we started it together and it was a company that was aimed at helping elderly people find care but also providing technology to the care space and so wildly different businesses and I obviously sold verb outright completely in a transaction and with lottie i'm still on the board for lottie i'm still involved to an extent but i have effectively stepped back from the operational day-to-day so how do they differ well fundamentally verb was an out and out private equity transaction and so the company was sold and as a result i became an employee of the agency that bought us and you know I am very open about my my journey and my story it was an unbelievable experience and company the people who worked there were amazing I loved them all the exit for us was the worst experience probably of all of our lives for whatever reason we were treated like children for whatever reason we were treated really poorly I think that for me I was made a bad lever and then they reversed their decision and made me a good lever and so it was a very challenging time in life to go through um and so like I don't look back at that with particularly fond memories because of how my team and myself and my business partner were treated in the end you know I look back on it as an unbelievable 10-year period I'm so glad with the exit and how it went and you know the ultimate story but I mean if I could go back and have a conversation with my 29 year old self I would be telling him to do things very differently to how things went in the end and I feel that things didn't have to be so hard with Lottie I mean it's quite literally the opposite story I mean Lottie was a business I started with my brother VC backed business so we raised money quite early on from Kindred, Axel and General Catalyst who are three incredible funds the people that work at those funds that we work with are incredible they're so strategic and helpful and useful and nice and actually like super kind-hearted and what we've built with Lottie which is now I think a hundred people you know bright pink company that helps people find care is phenomenal like my wife is uh was one of the first people to come work with us after she worked at Starling and she's now head of product there and so it's a very nice business with an awesome culture and doing an awesome thing and stepping back from that I found probably emotionally harder because I loved the business and I do love the business but to an extent my brother emerged as a better CEO than I was and I think that my skill set more than anything is probably starting new companies and starting in the very early stages of working out a business I think that's probably where I thrive and enjoy it the most whereas I think what is the case with Lottie now it's a very successful business with a big team you know financially successful strategically can now grow and become a massive business and I just feel like that suited my brother who originally came up with the idea more than I did so stepping back was emotional because I had to say goodbye to everyone and so that was an emotional feeling and then I did actually unlike the verb exit because I had Lottie to go on to leaving Lossie was a complete sense of lost purpose I was like what on earth am I going to do with my days and so I did I went backpacking for a while my wife and I went on an extended honeymoon really really like tried to take like life you know in a sort of simple and slower lane and I think what happened quite quickly is I I put together a new I suppose like plan for how my life would go is in that I didn't want to go back into running a company like Verb or Lottie because of the sheer size of them you know it takes so much from you to build companies like that and no matter what you say if you set out to build a company like that and you have a team and you have a mission it is your responsibility to look after that team and so in many ways I've decided that I want to run smaller businesses that are much more based around um you know the personal brand the leverage that can be used through good technology delegation ai and so forth and so since leaving lottie i had a whole year where i was kind of lost and walking around like my wife was like what are you doing with your day and i was like i don't know what i'm doing with my day i'm kind of reading i'm kind of walking and then for the last year i've been working on my new business which is the Creator Accelerator and Creator Academy, but also investing quite a lot, doing a lot of media stuff and really just following my nose on what I'm enjoying and also what business feels like it's not difficult to run.

19:36And so I know that sounds quite simple, but if at any point I feel like I'm really pushing water uphill, which is often what it feels like building a startup, I'm like, do I really need to be doing this? Do I really want to be doing this? And so I try and go in the direction of least resistance now actually i just remembered something else about the experience of stepping back from lottie which was that i was kind of a bit aimless you know a bit with without direction for a while and i feel like uh that was met with a couple of different reactions one was people being like um wow you're really chilling and it's like well yeah i mean i've been working really hard for a long time and i'm taking some time to reflect and chill and i haven't really taking weekends or evenings or holidays for 15 years so I'm just going to really try and you know chill for a bit which people people do just struggle with that concept definitely the other thing I felt which I know that the founders have been through the same experience will resonate with I think people thought I'd like completely like lost the entrepreneurial thing as in they were like he's he's done now you know like not that I'd completed it but that I no longer had the ability to be an entrepreneur and in that weird sort of quasi moment of post company is done and new company is not yet formed and you're sort of riffing ideas with people and people are like nah it's not a good idea and you're like no I kind of know it's not a good idea I'm kind of just just sounding things out here I'm seeing if people like this one if this one resonates with people people are like nah he's lost it he's you know that spark is gone that that ember is is out um and i do really remember the look in people's eyes like is he okay you know you don't shave for a couple of days and people are like is he is is he fine you see watch a movie before noon and people like is he okay you see you're watching daytime tv people start questioning your sanity um and so obviously like 33 or what i was i think like 29 when i sold the first one 33 i think when step back from Lottie or 34, you're never going to retire at that age.

21:40And so like when people say like, do you want to retire? You're like, no. But I suppose in a broader point, I thought, what does what does the perfect life look like now? And that's what I've really been aiming at, which is being ambitious, running a great company, but being really intentional about keeping some of that free time. So was there a particularly difficult moment that you had when exiting? There were a lot of difficult moments while exiting and there will be for everyone, no matter how great it sounds up front there will be for everyone but I distinctly remember post this meeting going and sitting outside a prep but not actually going into the prep I was so stunned by the meeting I actually just sat down outside the prep and was like what have I done and it was one of the first meetings after selling our company and my team as in my team from my company had given me loads of feedback about the company that had bought us and how we were going to integrate into them and things like our company worked a few days a week in the office and we had like an unbelievable amount of trust and respect for each other and autonomy within the business and I was a big believer in that as I am now and so the new company that bought us were suddenly like here are all the rules exactly and your team and yourself must follow them exactly and it was it was silly things like be in the office you know three to four days a week and I think it was meant to be three ended up being like closer to four it was that you had a pretty rigid work day people weren't allowed to you know we had this thing called mind body and soul at our company which was funding that we provided to people to spend on their mind body and soul which could be like exercise or like meditation or whatever like that was stripped like immediately and so many of the amazing things in our culture and the way that we had built the company were just taken and so I took them into this meeting to talk about our company and and and all that sort of stuff and the response was no get rid of all of that and tell them that it's all gone and tell them that this is the way things are going to happen and I remember being like oh my god this is gonna be a long two years working with these people um and to an extent like I never never blamed them you know they bought a company they own the company I just think from a integration perspective probably not the best move but I also think to future founders once you've sold your company you have sold your company and I think that's an important thing to remember on the way into selling your company so looking back what's the one thing you wish that someone had told you about the exit process that would have made it easier to navigate I think someone did tell me this as I'm probably going to tell you and I hope you take it more seriously than I did which is that you are signing a legal document and a contract which dictates the terms of the deal and so anything that the buying company promised you on the way in that's not legally written and enforced in a contract when you come to argue about it and decide who's correct on it if it's not in the contract they'll go yeah that was just the discussion that was just the conversation and you go no no no we said at the time this thing was very specific that we would do in our company or that you would do for our company um and so i would say like i wish i wish someone had like battered me around the head with it and said like no all these promises you've been made of like greatness and generosity from them to you if they're not contractually binding they just won't do them they won't hold up their end of the bargain if they're not contractually agreed.

25:17And so I just wish someone had really, really hammered that home. My M &A advisor did say to me that the promises you've been made sound incredible, but like very strange that they're not going into the document. And I was like, yeah, no, I trust them. I'm friends with them, et cetera. And again, like I feel, you know, I understand the business side to this. When you're buying a company, you want the company to cost you as little as possible and you want to be able to profit as much as possible. But I just take a view that if you're thinking long term, you want the acquisition of these companies to be as good as physically possible.

25:50You want the team to love it as much as possible and you want the founders to be brought in as much as possible. And so I think treating them with empathy and compassion and being true to your word is very important. But I just wish someone had just reminded me of that in the dying moments before we signed the contract was, why don't you get these key promises in because you lose all your bargaining power the moment you've signed. All up until the moment you sign, you have ultimate control. They've made an offer to buy you. You know the price, you've negotiated it, but they want to buy you at that point.

26:22And if you're a good company, you're very sellable at that point, right? And so I would just say up until you sign the contract, you have so much power. The moment the contract is signed, you lose so much of that power. So to wrap on that, conversations aren't commitments, contracts are commitments. So what's your advice on building a company with the end in mind? I have so much to say on this. The thing I would say first is people don't think about the end early enough, in my opinion, and it doesn't need to be the end and sold. It needs to be, in my opinion, very sellable because that gives you ultimate optionality when regards to getting your team to take over and giving them equity, which is worth a lot, getting an investor to come into the business, selling part of the business, selling the whole business, merging the business, it just gives you incredible optionality.

27:14So unlike the beginning as an entrepreneur where I talked almost exclusively about the product and the service, nowadays at the beginning I talk about how likely it is to reach a level where a certain margin is achievable and a certain outcome is achievable. And by doing those two things you kind of force yourself to address is this a good business or is this just a good idea or a good product and so I think that's very important up front so before I started my new businesses in the last year I did a real deep dive on what this business looks like not for investors not to try and convince people to give me money but to convince myself to commit years to this project and so I try and start from the position of I don't want to do this and I'm not going to do it and so the business case has to convince me that it's doable.

28:01The other thing I would say when selling a company and this is a bit more strategic once you have a company is make sure that you're prepared to sell as in make sure that your finances are in order you know you've got your balance sheets and your P &Ls and your management accounts in a really organized fashion because when it comes to sell you know how your business is performing but proving that to a potential acquirer is actually quite challenging if you're not completely organized and so the first time we had an offer to buy our company we didn't even have like a really strict management accounts monthly process in place we just had a p &l that we got we didn't really keep keep keep abreast of the whole operational running of the business it was kind of running by the um by the force of will of us as entrepreneurs in the team and so when that deal fell apart I remember hiring someone and saying can you get us when we're now rebuilding the company and we're doing well again can you get us into a position that we're sellable and even then when we did that the acquirer that we were bought by had a very different understanding of being ready to sell and so we had to go through another six months with them of sort of bringing our processes in line with what they would expect from being purchased and again like I quite enjoyed that process it didn't I don't think it ever had to be as emotional as it was but I quite enjoyed the process of learning how a bigger company but with a similar product ran their business I thought that was quite interesting and so I would say get yourself operationally ready to sell and this is now the final note which is my advice to founders when you're selling um Nick Jenkins said this in an interview once and I thought it was fantastic and I've spoken to a couple of my entrepreneur friends is that you want to make yourself as obsolete in the sale as possible and I don't mean like you know I think Nick Jenkins pretended like he was you know not very smart or whatever and I think founders I know pretend like they're completely not there I think if your business is amazing maybe you can get away with that my business was I was in charge of the sales and so I had to be like Chris is sales but pretty much not involved in everything else which gave me an unbelievable amount of freedom when I got into the acquired company I wasn't expected to run everything and so as the founder do think about what your exit's going to be like day to day and so for me I positioned myself as new business and marketing which kind of allowed me to keep networking keep building my own opportunities for the future as well as supporting the company and so make sure that you don't lock yourself into being a out and out day to day five days a week nine-to-five employee doing one thing that you probably don't love.

30:47How did selling affect your mental health and what did you learn about self-preservation? I think the mental health question is an interesting one for anyone that knows me and knows me really well. On a day-to-day basis I am not particularly anxious or frustrated or you know you know I don't find the days too challenging quite practical person however during my exit I became one of the most anxious people I knew and it's because the company that had acquired us were quite aggressive in their approach towards my team and myself and I don't necessarily mean like physically aggressive but they treated us like we were children and so I remember my managing director turning to me and she was like Like, I think they've forgotten that we built this company.

31:41And I was like, I know. But at that point, obviously we had sold. And so I was kind of like, you know, they're going to treat us like they're going to treat us. But I felt awful for my team going through the same, you know, situation that I went through, which was, you know, suddenly all the great things that you'd done over 10 years were kind of discounted as childlike and, you know, not professional enough and all the rest of it. In terms of self-preservation, like I said, I was made a bad lever and then after a period of negotiation I was made a good lever again and so I went through one hell of a journey in that exit period and I'm very glad that it ended in the way that it did and all the wrongs are righted and all the rest of it but I certainly learned that going forward when thinking about selling a company you are often selling a company based on it's success in the past but also it's success in the future and so you're often paid the money up front for the success of the past and therefore you're promised money in it for success in the future which is your earn out and so you have to make sure that your earn out is super protected there's no loopholes there's no way they can not pay you the money for the success that you bring and so you just have to make sure that in that moment you are a little bit selfish and that you do try and protect yourself and your team and I wish if I could go back I wish I could sit myself down and say hey what's the rush let's make the sale process take another month let's get a second opinion on the the documentation and the legals like why wouldn't you why would you leave yourself in a position where your 10 years of your work is put at risk and so self-preservation is never something I thought about during the during the deal however if I ever was to go through that process again or advise another entrepreneur I'd be like get a second opinion on your contract before you sign it you might as well and the exam question would be am I protected is my earn out protected in this deal is my team's earn out protected in this deal they would be the questions I would ask so that wraps up this episode of secret leaders you know exits are often painted as these incredibly glorious finish lines.

33:55In my experience anyway, in the experience of so many founders I know or have coached over the years, they are much more complex. They're more like a crossroads of business, emotion, personal growth, jeopardy, challenge, mental health, you know, misaligned expectations. And obviously there's so much good in them as well as there is bad in them. and I'm really glad that I went through the challenge of it all. But the champagne moments will make the headlines. But it's the quiet decisions in the trenches beforehand and during that really shape both the outcome and the person that you will become and the life that you and your team will lead afterwards.

34:37If you found value in today's episode, please share it with another founder, maybe someone who's in the thick of it in their own exit or someone who needs to hear that it's okay for endings to be messy and to be complicated. If you're interested in business's greatest minds and greatest moments, don't forget to subscribe. We've got some incredible guests and topics lined up that you won't want to miss. Until next time, thank you very much.