Article 17 – When to exit your business
by Tan Thiam Hock
I received some good news yesterday. This friend of mine had a successful operation and was given the all clear by the doctor. I was tasked by our gang of so-called friends to smuggle champagne into the hospital for her birthday party. That’s the easy part.
Because of this column, I had the unenviable task to find the right time and mood to pop her the dreadful question all entrepreneurs hate. “Are you going to retire now?”
I can imagine her acid tongue wagging at me with caustic words. Her glaring eyes scorching through her ever-present sunglasses daring me to give her one good reason why she should retire. Honestly, other than the “You will live longer” line, I will be at a loss for words.
She has built her business over the last 20 years and, in addition, she created a successful brand that has captured a unique niche in the marketplace. As she is still passionately attached to the brand, I envisage seeing her checking out of the hospital next week and going straight to office to wag more acidity and urgency into her forthcoming major project.
Somehow, female entrepreneurs are more passionate and less financially motivated about the brands and the companies that they have built. Their maternal instinct creates an emotional attachment with the brand that they have nurtured and protected over the years. It makes it difficult for them to let go, whatever the financial benefits that have been offered.
Just look at Pat Liew of British India and Datuk Farah Khan of Melium. These two veteran fashion entrepreneurs have of late created more brands and show no signs of retiring or selling out.
So when do entrepreneurs decide to exit their business? When is enough, enough?
Contrary to common beliefs, not all exits are decided by financial considerations.
Some exits are forced upon the entrepreneurs by events beyond their control. Like the takeover of Petaling Garden Bhd and SP Setia Bhd by PNB where the entrepreneur eventually will sell out and exit. So the sale added a few hundred million ringgit to their already overflowing bank account. Just a scant consolation for the loss of a brand and reputation that they have spent many years nurturing with tender loving care and built with blood, sweat and tears. Only the entrepreneur and he alone will feel the heavy loss and, upon exit, face a vast emptiness which cannot be filled by bank notes.
For entrepreneurs who want to build family dynasties, they will never exit the business. The patriach will continue to work until his children are ready to take over. Then the patriach activates a progressive retirement process, initially exiting from all executive functions, then eventually retiring as the chairman of the company but remaining as the advsior but always retaining a substantial shareholding and control of the company. The Lim family from Genting and the Tan family from IGB are perfect examples of successful dynasties where the second and now the third generation are actively involved in the running of the business.
A reverse situation happens when the entrepreneur has no children. Faced with mortality and getting on in years, the entrepreneur will have to decide on his exit plans before he exited this earth. Should he sell off his business? Should he set up a foundation and bequeath his whole shareholding? Or should he reward his long-serving staff with a share of the business?
Then you have the well-educated children who have become professionals and seemingly not interested in taking over your small business. Many businesses like grocery shops, restaurants etc have closed down because of these reasons. But, if you have a major multi-billion dollar corporation, you can rest assure your children will be interested to join you, whatever professional qualifications they might have.
Putting aside the unavoidable exits and family decisions, there are a few tell-tale signs that should guide you towards an early exit. Like when you have lost your passion for the business. And you dread going to your office every morning. Put on an interested persona and maximise your selling price.
When you realise your gross margins will continue to decline and your business model is outdated. When new technology makes yours obsolete, make a dash towards the exit sign and grab whatever price that you can get.
When the economy is going into a massive tailspin and your business is being dragged down with it, lower your staff onto the safety boats and abandon ship with whatever belongings you can salvage. Don’t even wait for the exit sign to light up.
Or when you are sweating profusely, feeling faint staring at this humongous pile of cash dumped onto your table in exchange for your successful company. Exit with a skip. Hop with pride. And jump with joy. You deserve it.
Then you might ask me why then do billionaires continue to invest in new businesses and buy more companies? In the private sector, they are called serial entrepreneurs. Just pure passion in investing and making the next deal. Where money is just a game of numbers. And they can’t stop.