My entrepreneurial story: Lessons from my business exits
In almost three decades as an entrepreneur, I’ve certainly been around the block when it comes to business exits.
I’ve walked away from some with what I thought my business was worth and from others with almost nothing to show for the blood, sweat, and tears I’d invested into building a business.
In this article, I’ll reveal the good, the bad, and the ugly of my entrepreneurial journey.
And to help you learn from my mistakes rather than making them yourself, I’ll walk you through each of the lessons I’ve learned along the way.
I learned these lessons the hard way. I’ve written this article so you don’t have to.
Read on to discover every lesson I’ve learned along my entrepreneurial journey so far.
Business #1: The lemonade stand
I’ve always had an entrepreneurial streak, and started my very first “business” when I was nine.
It was a sweltering New England summer, and the kids on their bikes were thirsty.
Ever the entrepreneur, opening a lemonade stand made perfect sense to me.
In no time I had my mother squeezing lemons, my six-year-old brother out on his tricycle rounding up customers and a mate behind the counter.
(Lemons don't grow on trees, around here)
Business was booming…
For an entire afternoon.
But I soon learned that lemons don’t grow on trees (at least in our neighborhood), people don’t work for free, and you should focus on selling your product, not consuming it yourself.
Come day two, my workforce had no incentive to get out of bed, I had squandered my takings on candy, and we had no lemons left.
So I hadn’t exactly created the Virgin Group!
But I had been bitten by the entrepreneurial bug...
The key takeaways:
- Fail to reinvest in your business and it won’t last long.
- Cash flow is king – so don’t spend your earnings on candy!
Exit #2: Joining my father’s business
School couldn’t end soon enough for me. I was itching to start making my dent on the world.
My father was a software programmer, and I joined the business he’d built as soon as school was over.
There was massive demand for memory chips at the time, and hardware from companies like Intel, Transcend, and Kingston Technologies was selling like hotcakes.
So I partnered with an importer, Memory International, to sell memory chips and hard drives through classified ads in the local newspapers.
It was a huge success, and we were selling trailer-loads of memory chips.
After a few years, we had built a thriving business selling computer components to local businesses.
And when Fernando, the owner of the memory import business, asked if I wanted to leave my dad’s business behind, I didn’t look back… even though it meant leaving my dad in the lurch.
Regrettably, when I left my father’s business, it had a devastating effect on our relationship.
I learned this lesson the hard way: opportunities come and go, but relationships are permanent.
The key takeaway:
- Long-term success – in business and life – is all down to the strength of your relationships. So think very carefully before you burn any bridges.
Exit #3: Setting off on my own
I spent the next three years growing my business with my new partner, and it was a big success.
(Fast cars and memory chips)
We even brought a third partner in along the way to help us expand to new markets.
And it wasn’t long before we were getting offers for the business.
When an offer of $4.5 million came along my partners jumped at it.
But I wasn’t so keen, as it came with strings attached.
Essentially, I’d end up working in a division of a much larger organization, and I didn’t want to be a small cog in a big machine.
Both my partners wanted to take the deal. I didn’t.
But in my inexperience, I’d entered the partnership without a shareholder agreement.
I didn’t want anything to do with the acquisition and ended up leaving the business without much to show for all the work I’d put into making it the business it had become.
I’d been burned by a string of rookie mistakes. But they weren’t mistakes I’d make again – and I hope they’re never mistakes you make either.
The key takeaways:
- Never go into a business partnership without the proper paperwork in place – even with your nearest and dearest.
- Make sure you and your partners are on the same page about what you want from an exit before you go into business together, or you could be in for a nasty surprise.
Exit #4: My dot-com era start-up
At this point it was 1997. Netscape and Amazon were founded in 1994, Yahoo! in 1995 – all funded by venture capital. We were at the height of the nineties VC wave.
Still licking my wounds from my recently botched business exit, I co-founded a start-up, <eye2eye> – one of the first web content management platforms.
We wanted our slice of the dot-com pie, and from day one we set out to build a company we could sell for millions.
We raised two million in venture capital – no easy feat for a start-up based in Cape Town.
While this was going on, I figured it would be a good idea to have some kind of formal business education, so I worked nights to get an MBA.
Meanwhile, we developed a minimum viable product and started signing clients, including Anglo American, Investec Bank, and Johnson & Johnson.
We felt like rock stars and arrogantly brushed off eye-wateringly large offers.
We even opened an office in London alongside PR giant Burson-Marsteller, and for a while kept a Ferrari in the basement at the Ritz Hotel.
Until the dot-com bubble burst, that is...
The key takeaways:
- Stay humble. I felt untouchable back in those days, so I took my eye off the ball and was blindsided by the market crash.
- Understand what your business is worth – and if you’re getting offers that are higher than that, take them.
Always have a plan B… and a plan C!
Exit #5: Emerging from the ashes...
When the dust settled on the dot-com crash, it was time to start over.
This time I was determined to build a stronger business. I called it Emerge.
My plan was fueled by my desire to create my own business empire. I had visions of running a group of global businesses from a hammock in a tropical tax haven.
I set to work building a complex structure of businesses and offshore holding corporations across three continents.
Over the next five years I scaled the organization to over $5 million in revenue, employing nearly 250 people.
On the outside I appeared successful, but inside I was desperately unhappy. I was burned out and escaping through increasingly self-destructive behavior.
I was working harder than ever, but no matter what I tried, I spent my days going nowhere fast.
Eventually, I decided to sell my business – only to discover the company I had invested ten years of my life into was virtually worthless.
Here’s the story of how it all went wrong – and what you can learn from my mistakes:
Where it all went wrong
Like many entrepreneurs, I started my entrepreneurial journey in search of freedom.
I was inspired by legendary entrepreneurs like Richard Branson. I admired how he blended entrepreneurship, purpose, and adventure to create “the good life”.
I imagined myself building a business that made a difference to South Africa – a business that drove innovation and created jobs.
A valuable business.
However, along the way, I became fixated on growth and started making decisions that reduced the value of the business.
The thing you have to realize if you want to avoid falling into the same mistakes as I did is that you don’t turn your back on your values overnight.
You don’t even do it consciously.
Instead, you spot an opportunity to grow your business, then another, and then another – and you’re growing the bottom line and creating jobs each step of the way.
Then one day you look at the life you’re living and the business you’ve built and realize it’s the opposite of the vision you set out to realize.
The problem with chasing growth
When I founded Emerge in 2003, our core value proposition was helping companies automate complex business processes.
The business grew steadily and within a few years, I had a team of thirteen employees looking after a broad client base producing annuity income and strong profits.
Then came an opportunity to rapidly grow the business that was too good to pass up.
At that time, most of our clients still relied on paper documents, and a number of them had approached us for document imaging services.
My ego told me this was great news – adding a document imaging service to the business would easily double our revenue and create additional recurring revenue.
I was straight on it.
I called the bank to arrange finance for the equipment we’d need and began hiring people for the new business.
The image outsourcing services division grew quickly, and before long we secured a contract with a large bank to digitize all their customer data.
The bank not only needed online access to customer records, but to free up valuable office space.
Again, I saw an opportunity for growth.
Adding a document and records storage facility to the business was another opportunity that was too good not to pursue.
So without stopping to mull the decision over, I invested in a records storage company, Archive-IT. This took us from a 35-person business to a workforce that was almost 250 strong overnight.
(Revenue soars, and the cracks start to show)
The cracks start to show
On the surface, everything seemed to be going well.
Our revenue had soared from $1M to over $3M in a matter of months.
But inside the business a storm was brewing.
The records storage business I’d rushed to invest in was hemorrhaging cash, and I was funding its day-to-day operations from more profitable parts of the business.
Our rapid growth had put a serious strain on our cash flow.
What’s more, we had become heavily over-reliant on a single client whose payment process was erratic at best.
By deviating from our original core value proposition, I had inadvertently flown us into a perfect storm.
I thought growing my business would be my ticket to more freedom and fulfillment in my life. But I found myself constantly in emergency mode, struggling to stop the tailspin we were stuck in.
I was learning one of the most important lessons I’d ever learn, and I was learning it the hard way: be careful what you wish for. Pursue the wrong goals and you’ll quickly end stuck in your own personal nightmare.
Another lesson that crashed down on me like a tonne of bricks was that there’s no easy way out of a business you don’t want to be part of anymore. You’ve got two choices: walk away without a penny to show for all the stress and sleepless nights, or prolong your sentence in the prison you’ve built yourself.
Learn from my mistake and build a business that aligns with your values so you don’t end up in the mess that I did.
How I escaped
In 2010, on a flight home from New York, one of what would become many, as I fought to rescue the sinking storage business I’d acquired, I went to the bathroom and stared into the mirror.
“Why are you doing this?”, I asked myself. “Is this really who you want to be?”.
This flight home set a change in motion. For the first time I found the courage to admit it to myself:
I wanted out.
I was already in discussions with a large public company interested in purchasing my document storage business. However, the deal involved me sticking around for another five years in an earn out.
They wanted me to continue to lead the business after the sale – something I had no interest in doing.
Unfortunately, I had already moved the document storage business into one of their warehouse facilities. As you can imagine, this significantly weakened our negotiating position.
At the time, I was still in the throes of a legal battle with my ex-business partner, who’s document storage business I had invested in a couple of years earlier. We had agreed to merge his business into mine.
Fortunately, one of the businesses in the group – Emerge Queue – was performing well. And I owned a seventy percent stake in it.
I brought in a part-time CFO who helped structure a deal that pocketed me just over $1M through a management buyout.
So, that was one business down.
Meanwhile, I was being strung along by the potential buyer of my document storage business.
The acquirer was a strategic buyer that believed our business would make a valuable addition to their organization.
My goal was to exit the business for around the same value as Emerge Queue – $1M.
However, the buyer wanted me to stay on at the helm of the business for five years. Plus, they wanted CompassDocs (our SaaS document management platform) as part of the deal.
I believed the software was more valuable and wanted to retain the intellectual property and negotiate a license agreement with them.
The deal stalled.
By the end of 2011, I was jetting back and forth between Johannesburg and Denver, Colorado, where I’d set up Emerge Studio – a business I intended to use as a vehicle for investing in FastSell, another SaaS start-up.
Meanwhile, the buyer continued to string along the negotiations for the document storage business.
By now I had put a leadership team in place and was gradually stepping back from the business.
However, revenues began to slide and I ended up funding the business from my own pocket while also investing in two SaaS businesses: FastSell and CompassDocs.
The beginning of the end
It changed my life.
On the plane journey home I opened up my journal and began to write. The more I wrote, the more apparent it became – I needed to get out of my business at all costs.
The first thing I did when I landed was reach out to Bill Fostch, an open book coach, and ask him to start working with the management team at Emerge IOS in South Africa.
I also started implementing the Entrepreneurial Operating System (EOS) – which I’d also discovered at the Small Giants event – at Emerge IOS.
In February of 2013, my marriage had broken down. One morning my wife simply asked, “Are we flogging a dead horse?”. And in that moment we both acknowledged it was over.
I spent 2013 desperately trying to salvage the document storage business. We abandoned the start-up in Colorado, packed up our lives there, and moved back to South Africa.
I was desperate to sell the business for whatever I could, and had done some good work with Bill implementing Open Book Management and the EOS System, thereby increasing the value of the business.
However, the deal with our potential acquirer had all but fallen through. We were still in their warehouse and they were jacking up the rental rates, putting a massive strain on our cash flow.
I approached the competitor who had acquired my business partner's document storage business – the partner I had taken to court for selling the business from underneath me.
But the business was no more valuable than the boxes of paper sitting in the racks, as being half-acquired by another buyer and tied up in its warehouse complicated the transaction beyond reason.
In the end, I negotiated another management buyout with the leadership team I had grown over the past few years.
I sold the business for a fraction of what it was worth on a payment plan. What’s more, the new owners soon ran into financial difficulties and never fully honored the sale agreements, leaving me with next to nothing for the years of my life I’d put into the business.
The key takeaways are:
Decide what you want from your business and don’t deviate from your true north. I can tell you from hard-won experience that once you’ve built a prison of your own making there are no good ways out.
- One of the most effective ways to increase the value of your business is to build a strong leadership team and get a CFO in place.
- If you don’t decide what you want from an exit long before you decide you’re done with your business then you won’t walk away with what it’s worth. It’s as simple as that.
- Avoid earn outs and when it comes to management buyouts, never accept an exit in installments. There’s no guarantee the business won’t go under during the payment period and you’ll never see a good chunk of that money.
My current business: Helping entrepreneurs build valuable businesses and sell them for what they’re worth
After everything I’d been through, I became obsessed with how important it is for business owners to focus on increasing the value of their business.
By 2014, when the dust had settled on my latest exit, I decided that I was going to dedicate my time to helping entrepreneurs avoid what I had endured.
I’ve spent the last seven years helping business owners grow their businesses and develop exit strategies. Because smart entrepreneurs always build a business today that could be sold tomorrow.
Of course, I’m still learning myself.
My latest wake-up call came in 2017, when my daughter Courtney came to live with me.
At the time, I was living with an eccentric photographer in Italy, having spent three years vagabonding around the world.
(Vagabonding and a wild-eyed Italian photographer)
I would take a consulting gig in a city helping owners of growth-oriented technology companies create a more valuable business, then move on to the next business and the next city.
I discovered my decades of experience starting, scaling and exiting businesses was an invaluable resource to business owners navigating growth. And more importantly, I loved helping them.
But while my professional life was more fulfilling than ever, my personal life was still a mess.
I was advising global tech entrepreneurs by day and partying like Caligula by night.
When Courtney came to live with me, I knew it was time to get serious.
One day walking beneath an ancient Roman arch, a friend of mine turned to me and said: “It’s time to start doing what’s best for your daughter.”
She was right. It was time to get a grip.
I hadn’t realized it then, but close to three decades of keeping my nose to the grindstone and growing multiple businesses had taken their toll, even after exiting in 2014.
I was still bobbing about like a sailboat in a storm, riddled with holes and with no sign of land in sight. Courtney became my lighthouse and I really started sorting my shit out.
I went vegan and started running, meditating, and doing yoga.
I revisited an old passion – writing – and started building routines and optimizing my day around doing the things I love.
Now, three years later, we’re settled in London and I’m more committed to this endeavor than anything previously in my life (while Courtney has inherited my inborn inclination toward random bouts of vagabonding).
(She'd live in the sky if she could)
The key takeaway:
- Make sure you’re making a life from your business, not just a living. Decide what you want from life, start saying no to the shiny opportunities that will take you off your chosen path, and enjoy a much more fulfilling life.
As you can see, my entrepreneurial journey has been a rollercoaster to say the least.
I hope you’ve taken something from the up-and-downs of each of my business exits and don’t make the same mistakes as me.
Of course, I’ve only been able to scratch the surface here.
For insights into the specifics of growing a valuable business and selling it for what it's worth, check out my deep dives into:
- How to build a valuable business you can sell at a premium
- Why there's never been a better time to turn your business into a valuable asset
- How to remove yourself from the day-to-day running of your business
- How to switch to a recurring revenue model (and why you need to)
- What is my business worth?
- The 10 best business exit books
- The 6 types of business exit (and which is right for you)
- The ultimate dictionary of business exit terms you should know
And if you’d like my personal help building a valuable business (and avoiding the mistakes I’ve made over the years) then get in touch about my business coaching.
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