4 PAUL MORRIS: DEMYSTIFYING PRIVATE EQUITY – AN INSIDER’SVIEW
SHOULD I STAY OR SHOULD I GO ?
It’s often said of entrepreneurs and owner-managers that they spend too much time in the business and not enough time on the business. It’s the nature of the role that you tend to focus flat out on the work at hand, head down, dealing with immediate needs and priorities. There simply isn’t much time or space to look beyond the next 12 months. This has never been more true with so many businesses and business owners struggling to deal with the impact of the COVID-19 pandemic. But every so often, you have a moment where you look yourself hard in the mirror and think: ‘I’ve had enough’. Is it a passing thought or an indication of something more serious? It can be hard to tell the difference because running a business is a lonely role and you don’t always have external input. This can be even more acute when you operate in a fast and ever-changing market landscape. To help you sort out your thinking, it can be useful to focus on each of the factors involved so you can make an informed decision about what to do next. What are the typical triggers that could make you think about stopping? What are the indicators, external or internal, that could help you understand if it’s really time to consider an exit? And if you do decide it’s time to change, what are your options? Is it really a black-and-white choice, or is there a middle way between the two extremes of staying and going?
TYPICAL TRIGGERS I have spent more than 15 years talking to owner-managers about their options and investing in businesses looking to upscale. There are some triggers that recur frequently, sometimes in combination. These include: Age. You reach a milestone birthday – it used to be 50 or 60, but these days it’s just as likely to be 40 – and start to wonder how much longer you want to continue. Is it time to retire or do something else? Health. The rigours of running a business – wearing all those different hats, bearing all that responsibility – can take their toll, especially if you have to deal with any health issues Family circumstances. A family issue is another obvious trigger to give the owner- manager pause. Sadly, divorce is quite common and may require the release some of the business’ value to fund a settlement. You may have seen the business as a way of providing for children and they may benefit from a sale. What’s it all worth? Another trigger for an existential moment is when the entrepreneur realises that they are, in fact, wealthy but don’t have much to show for it. Their wealth is all tied up in their business. This can trigger an urge to diversify your wealth so you have more to show for all your hard work. A potential investor or buyer. Both buyers and investors are constantly seeking opportunities for successful investment in growth businesses. As a result, you may receive an unexpected and unsolicited approach from a PE house or trade investor. The figures could seem simply too good to turn down even if you weren’t planning to sell. Time for a change. Whether it’s getting involved in a charity, a creative endeavour or another business venture, you may simply have reached a point where you want to do something different. It may just feel like the right time to do something you’ve always wanted to do but had to put on hold because of the business. Appetite for risk (or lack of it). The business may have reached a point where it needs significant reinvestment or re-engineering in order to keep growing. How are you going to generate the cash to fund new systems, new premises, and increased staff? Coupled with your personal triggers, you also need to weigh the rational, factual indicators which could argue for or against an exit. These can be divided into external and internal indicators.
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