Life After Exit

Introduction by Andrew Beeney – Investment Director

For every entrepreneur who embarks on the journey of building a business of their own, a successful business exit represents a high point in their career.

While this is rightly a cause for celebration, it also represents a step into the unknown. For some, the transition into this new phase in their lives is a straightforward one. But for others, dealing with the combination of wealth and long-awaited freedom ends up being far harder than they imagined.

Although all but a small minority of entrepreneurs ultimately end up enjoying life after exit, reaching a place where the balance of activities matches the fulfilment experienced in running a business, can take longer than expected.

I hope you enjoy reading this report and that it adds insights which help you with your own planning.

What happens next?

A business exit represents a high point for anyone who achieves it, but it also marks a step into the unknown for many entrepreneurs.

Looking in from the outside, there are few who wouldn’t want what life after a business exit seems to offer the entrepreneur. One day you are doing what you have done for years, working hard and focusing on keeping the business on track; the next day you wake up and the financial reward of all your effort is sitting in a bank account. You have the wealth, time and freedom to do whatever you choose.

For every entrepreneur who experiences this moment, they quickly realise it will define the next stage of their life as much as the original act of starting the business. But while much is written about the trials and tribulations of entrepreneurs as they grow their businesses, little attention is given as to how entrepreneurs live through this next phase of their entrepreneurial career – if indeed career is the right word.

The fact is that for all but the most high-profile entrepreneurs, the business exit happens under the radar of publicity. As a trade buyer or management team quietly takes over, the entrepreneur slips away into the shadows to take a new path.

So what exactly does happen next? Where do these entrepreneurs go? And what do they do? That is the subject of this report. We explore how entrepreneurs manage to balance the opportunity which a successful business exit presents, with the challenge of reinventing a new life.

The hidden challenges

Building a fulfilling lifestyle post-exit is harder than many entrepreneurs anticipate.

When it comes to life after exit, entrepreneurs have high expectations about what that life will bring. The vast majority expect a lifestyle which is at least as fulfilling as the one they had running their own business and, for the most part, life post-exit delivers on that expectation.

But although nearly all entrepreneurs end up satisfied with their life post-exit, many underestimate the challenge of arriving at that point of satisfaction.

Research has found three common themes which take entrepreneurs by surprise in their post-exit careers. Of course, not every entrepreneur will face all of these challenges but if one message rings clear, it is how important it is for entrepreneurs to approach life after exit with some appreciation that the process of reinvention will not necessarily be as easy as many expect.

  • It takes much longer to build a fulfilling lifestyle than many anticipate – entrepreneurs tend to overestimate how quickly they are able to settle on a career which they enjoy after selling up
  • The process is more challenging than many imagine – money and time in abundance do not necessarily make it easy to find a fulfilling lifestyle post-exit
  • Living with uncertainty is part and parcel of life post-exit – few entrepreneurs anticipate the extent to which their plans may not progress as planned or the fact they may have to deal with more failure than they did in their previous career

Planning for life post-exit

Entrepreneurs tend to underestimate the extent to which family and finances should form part of their planning before a business sale.

When it comes to preparing for life after exit, entrepreneurs are divided about how necessary and well-defined any plans for this new phase in life need to be.

Planning for lifestyle

While the majority say it is important to start planning for life after exit as part of the sale process, it is only a minority who approach an exit with a clearly defined plan of action. More than half are happy to move into the process of reinvention with no fixed plans in place.

So, is planning really that important for entrepreneurs who want to quickly establish a fulfilling life post-exit?

Although many entrepreneurs say it is important to plan in the run up to exit, whether or not you have a concrete plan for what you want to do next makes little difference and only a small minority who fail to plan say they regret not doing more.

Financial planning

While putting the job of thinking about a new lifestyle on the backburner until the exit is complete may pose few problems, financial planning is one thing which entrepreneurs should not overlook.

One thing that every entrepreneur needs to be aware of is the extent to which the amount [of money] you realise on exit will dictate the lifestyle you have. This may sound crude but I see exit in three divisions.

The first is £1-10m – go below that and you will almost certainly have to think about a career and work – the second is £11-100m. Here you have more choices. The third is the £100m plus club and this requires a completely different approach.

Given this link between wealth and lifestyle, it is surprising that only half of entrepreneurs say they put financial plans in place before exit. And although the majority say they end up seeking wealth management advice as part of the exit, there are some that appear to get no advice at all.

The lesson for entrepreneurs contemplating a business exit is clear: financial planning is an inevitable part of the exit process so it is better to get good advice early on.

The importance of advice

You may not know precisely what you want to do after you sell up, so seeking advice from those who have done it already will make the transition smoother.

Planning may not help entrepreneurs adapt to a new life after they exit their business, but one area which will pay dividends is to understand the common areas which either get in the way or help the process of reinvention. There are six common areas which can help entrepreneurs prepare for life post-exit.

1. Build and maintain your networks

Whether you have exited a business already or you are thinking about exiting one in the future, it is important to build and maintain professional relationships early on. This will strengthen your support network once your business has been sold and bring you into contact with peers you may not otherwise meet.

2. Stay liquid so you can be opportunistic

Both entrepreneurs and advisers share the view that once you have sold up it pays to pause and think before making any financial decisions. The extent to which you tie up money you have accumulated can have a significant impact on the opportunities you are able to take advantage of further down the line.

3. Don’t put pressure on yourself to find the next big thing

Although many entrepreneurs expect a new lifestyle to unfurl within the first year after exit, this can be unrealistic and counterproductive. If you have worked hard and done well in your exit, the chances are that you will be burnt out. The last thing you need to do is put pressure on yourself and get involved with something you may regret in the longer term. The common piece of advice which many entrepreneurs give is to take at least six months out and enjoy yourself before starting to consider involvement in new projects.

4. Set clear criteria around what you will and won’t do

The real benefit of life after exit is freedom of choice. Because both time and money are finite it is important to be clear about the activities which you want to get involved in as it is easy to get sucked into ones which you don’t want to do. It is as important to be clear about how you want to invest your time as it is your money.

5. Listen to people who have made the exit journey already

Many entrepreneurs continue to struggle with life post-exit long after they have sold up. Mixing with people who have been there already and have different ideas is very important so you can get a feel for the challenges you might face as you move into life post-exit and how people deal with them.

6. Don’t assume everything you do will be a success

One area many entrepreneurs fail to anticipate is the extent to which the plans they have post-exit may not work out as they want. Being prepared to deal with failure is part and parcel of life; it is just something that happens and you need to be prepared for it. Establishing a portfolio of activities – something which the majority of entrepreneurs do – will inevitably involve experimentation and it is unrealistic to think that everything you do will work out.

The realities of a career post-exit

A love of business and wealth creation shapes the lifestyle choices of entrepreneurs post-exit: few are prepared to walk away from being involved in a business.

There has been numerous studies undertaken to understand what entrepreneurs planned to do and what they ended up doing with their lives post-exit. Despite their professed lack of planning and forethought, there is remarkable consistency in the way entrepreneurs envisage and then end up spending their time.

If there is one theme that stands out, it is that while 30% of entrepreneurs end up retiring – substantially more than originally thought they would do so – the vast majority of entrepreneurs embrace life after exit as the opportunity to further their business aspirations in a new venture or by reinventing themselves in investment, advisory or philanthropic work.

Another area is the extent to which entrepreneurs adopt a portfolio approach to life post-exit, with a substantial majority trying a number of different activities as they look for the right lifestyle balance.

In this section, we look at the lifestyle choices entrepreneurs make, what motivates them and the secret to making these new careers work.

Doing it all again – going back into business

Rather than reinvent themselves as an investor or adviser, when it comes to life post-exit, the first choice for the majority of entrepreneurs is to do it all again.

Although on the surface many say they are happy to leave the pressure of running a business behind in favour of a different career post-exit, 75% of entrepreneurs say they would either start a business from scratch or buy into one if they found one they believed in.

So while the exit process may throw up the opportunity for an entrepreneur to try new directions in their career, only a minority close the door entirely.

What motivates entrepreneurs to do it all again? For some, this comes down to a combination of hunger and confidence that they can do even better this time around, having done it before. Others like admit that even though they are happily retired, the challenge of buying back into the business they sold to build it up again would be irresistible.

Another common theme which entrepreneurs talk about is the need to feel in control over their own destiny. So while few miss the pressure of business, it is clear that the buzz of business growth which 95% of entrepreneurs say they miss after they close the door on their business takes a long time to fade.

 

The reality of retirement

Although many entrepreneurs see life after exit as the opportunity to step into a new career, retirement is the second most favoured choice for entrepreneurs.

While those who plan this lifestyle option are likely to stick to their plans to take a step back, many entrepreneurs suggest this is harder to achieve in practice.

One of the most consistent messages for entrepreneurs before and after exit was not to build their plans solely around retirement, as the draw of business – as investor, adviser or entrepreneur – is never far away.

Investing and advising

The third most popular area where entrepreneurs spend their time post-exit is as an adviser or investor.

After selling, many entrepreneurs develop a successful career as non-executive directors and act as angel investors in new businesses. In order to succeed in this post-exit career, entrepreneurs have to be able to learn the ability to influence while living with a lack of control. Although you have to recognise your role is to advise and take a back seat, it can be very difficult – particularly when things don’t go at the pace you were used to when you were running your own business.

For many entrepreneurs life as an adviser ends up being too frustrating after a career of day-to-day involvement at the chalk face of a business. In particular, the discipline of taking a step back can be just too difficult to master.

For those who envisage a career as an investor, there is an additional difficulty: businesses whose management team, size and area of focus which are the right fit for the entrepreneur, may not necessarily be there to invest in when you are looking for investments to make.

Giving something back

Devoting time to philanthropic or not-for-profit work is something which only a minority of entrepreneurs prioritise after they sell up.

On the face of it, it may seem strange that such a small number – just 10% – are motivated to give something back. But the reality is that post-exit, 50% of entrepreneurs get involved with some sort of philanthropic activity: they just don’t tend to classify the time they give to mentoring or coaching younger entrepreneurs as ‘philanthropic’.

For those who get more deeply involved philanthropic giving can be an extremely important and fulfilling part of the post-exit lifestyle.

But getting a sense of satisfaction frequently requires entrepreneurs to develop an appreciation of the different working styles and cultures in the third sector so they can work with them successfully.

For those thinking of getting involved in social enterprise, one key piece of advice is to establish clear boundaries on the limit of any influence you may have and around the use of any investment so there is complete clarity of expectations on both sides from the outset.

Conclusion

If there is one theme that unites all entrepreneurs, it is the extent to which, regardless of how you end up spending your time, a successful post-exit lifestyle requires no small amount of planning and thought before the event.

On a practical level, that means understanding the extent to which the wealth you realise through the business sale can fund the lifestyle you want. It also means thinking about the kind of activities which will keep you fulfilled post-exit and how you want to divide your time and money between them.

Focussing on what you want is important, so too is understanding that the things that you will miss are equally likely to define your lifestyle choices. For many people, the challenge and opportunity that comes with business growth is hard to leave behind.

A fulfilling life after exit also requires a combination of hard work, patience and flexibility to try new things. You need to adopt a perspective which accepts that – initially at least – you will be less able to dictate the pace at which opportunities that interest you come your way and that you may not immediately replicate your business success in everything you try.

Last, and most importantly, life post-exit requires an appreciation that your network – the one asset which you can’t buy or get your hands on quickly – is just as important as time or money in the extent to which you are able to transition from owner-manager to a new lifestyle.