12/2019 – Can an entrepreneur ever retire?
by Tan Thiam Hock
Every journey in life comes with continuous uncertainty. It is just so difficult to predict the future. Whether in bringing up your children or starting a business, one can only plan with hope that everything will turn out well. As parents or entrepreneurs, we can only worry that we have made the right decisions and let events unfold as we travel through the twist and turns of an uneven road fraught with potholes.
Recently, my daughter who is the baby of the family, joined the working class of the corporate world, preferring the consulting business rather than joining the family business. Her two elder brothers have also ventured into the “sexy” modern world of insure tech and private equity.
They have absolutely no interest in my ‘traditional’ businesses of manufacturing, trading and distribution and property development.
Every parent shoulders great responsibility in bringing up their children, hoping to provide the best education possible and hoping that they will turn out well as a responsible productive citizen and a humble, good human being. To a certain extent, in this context, I am relieved that my responsibility as a father has ended. They are literally on their own now.
My wife and I have to start planning for our own journey, the last innings so to speak as our children chart their own course in life. But first, I have to unravel all my commitments in my “traditional” businesses and I reckon it will take me at least a year to restructure my business interests and leave my children with just an investment holding company to worry about when I am gone.
Closing a company is not easy. It is easier to close a wholly-owned company than a joint-venture company with partner shareholders. More so if it is an ongoing concern. Divestment in property-related companies is easier as you either sell the properties or complete the development project which signals the end of the partnership. There is a definite timeline to such divestment.
Divestment from a listed company is much easier as the shares are publicly traded but divestment from a private limited company with an ongoing business concern is more difficult as your partners worry about the sustainability of the business without your presence.
Private equity investments only happen when the entrepreneurs stay invested (smaller stake) and continue to manage the company. This investment business model has worked out well hence more funds have been invested into private equity worldwide. Generally, entrepreneurs dislike running businesses based on numbers and forecasts as required by private equity partners but I guess the end results will help mitigate the entrepreneur’s unhappiness of losing control of the company that he has built.
My advice to entrepreneurs who decide to sell a majority control of your company – be very sure that you want to exit this business completely in five years time. No regrets will be entertained. It does help if you have decided not to leave the business to your children and you are not the sentimental type.
With so much disruption happening so fast, we are witnessing a record number of companies closing down. Big and small, they stand no chance of survival if disruptive forces attack their established business model in their industry. Most of the time they see disruption coming but they could not predict the speed nor the breadth of the attack.
Futile efforts are made to adapt existing distribution channels with new channels but in some industries, that particular business model does not work anymore. Like publishing magazines and newsprint business, advertisers have disappeared in big numbers and not all advertising budget have gone to digital mediums either. Just a fraction.
Fast-moving consumer goods companies reduce their total advertising spent and divert the dollars to supporting price wars at retailers who is under attack by e-commerce. This vicious price war reduces margins for all but it does benefit consumers. With a smaller value chain, middleman will be the first to go. Manufacturers will be forced to go directly to the market place.
Due to worldwide excess production capacity, manufacturers who do not adapt fast enough to new distribution channels and consumer preferences will be the next wave of companies to close down. From this disruption, we will see the emergence of brand savvy manufacturers, who work directly with retailers and e-commerce partners, crunching consumer data and producing in exact quantities as to what consumers need. Hopefully the problem of excess unsold stocks currently sitting in shops, warehouses and the logistic chain will be reduced substantially.
So my children’s decision to avoid participating in my “traditional” businesses does make sense as it will take a lot of hard work to re-invent its current business model. I was foolish enough to invest in manufacturing concerns as I thought that the future will still be in the hands of production capabilities but not knowing that manufacturers now have to absorb the middleman role as well. Gets more complicated but doable.
However, I am getting old and just the thought of the massive tasks ahead can make me feel tired. I guess it is time to call it a day as an entrepreneur. No more new business ventures and no more predicting the future. Just need to tidy up the loose ends, complete some projects, close some companies and reshuffle the few pieces of investments.
By the end of next year ( if I am still alive ), I will be twiddling my thumb every morning, planning my daily empty schedule and hoping to hold my first grandchild. I know predicting the future is difficult but without hope, there is no reason to live … especially for an entrepreneur.