When’s the right time to retire?
You’ve spent years creating, nurturing and growing your business. You’ve been driving towards your vision of what your business should look like and have made sacrifices along the way to make sure your vision becomes a reality.
But now you have to admit that the time has come to step back and take it easier. The dreaded ‘retirement’ word keeps popping up, but how on earth can you retire? What will you do with your business?
Serial entrepreneur, friend and successful businessman, Barry Van Danzig, joined me on The Retirement Café podcast at the end of February 2019 to share his experience of exiting his business. Now a man of leisure, Barry explains the three options he considered, the challenges of making himself redundant and why he opted to keep his business as an investment.
The three exit options
Barry Van Danzig is not successful by accident. An astute entrepreneur who built and lost a business early on in life, Barry picked himself up, reengineered his future and created a fabulous company that brought the wealth and success he deserved. By identifying a market opportunity, Barry’s waste packaging business grew from zero to £30m turnover in just two years.
As Barry approached his ‘50s he started to consider “What next?” The business was booming, robust and running smoothly. He started to think about retirement and the options open to him.
Barry concluded there were three options:
- Sell the business and sail off into the sunset
- Just keep on going ….
- Keep the business as an investment
He started by exploring option one when he was approached by venture capitalists (VC). Barry finalised a deal in 2000 in which he sold 51% of his company to the VCs, who promised to build the value of the business to 50 times that of its then value, sell it and return Barry’s share of the proceeds to him.
The first step in exiting your business
The first part of the deal was for Barry to make himself redundant, which is something you have to do regardless of how you exit from your business.
This proved to be a mental challenge, accepting it’s time to hand over control of the business to someone else. Within 2 years, the VCs had turned a £2 million EBITDA into a loss, by bringing in inexperienced, expensive staff who flooded the business with unnecessary IT and accounting requirements.
Barry realised he must regain control of the business. Due to a contractual quirk, he found himself as the majority shareholder again and was able to buy back his company for a tenth of the value he sold it for.
So, back at the helm and back to square one with regards to his retirement plans, Barry reengineered the business to bring it back into profit and reassessed his options.
Keeping the business as an investment
Option one hadn’t worked for Barry and option two – just keep going and don’t retire – was never really a viable option. Barry was sufficiently self-aware to recognise he probably wasn’t the right person to be running his business. So, he asked himself honestly “Would I really employ somebody my age to replace me?”
Having decided he would opt for option three – keep the business as an investment – the issue of making himself redundant remained. The biggest barrier for Barry to overcome was the psychological barrier of accepting the only real purpose of the business was to make money. The business was an investment. He had to become hard-nosed about it.
Criteria for selecting the new you
When finding the right person to replace you as CEO, Barry’s advice is to:
- Bring someone in at least 5 years before your ideal retirement date, as it takes time for your confidence in your replacement to grow.
- Be prepared to give your replacement the same package and benefits you enjoyed.
- Make sure that person wants to work and have a career in the firm and is as invested in the firm’s performance as you are.
- Don’t put a family member in charge just because they’re family – choose the right person for the job.
- Be ruthless with yourself and the business. Remember, as a shareholder you’re an investor in the business, so make sure your investment returns appear as a line in the accounts, so you get paid along with all other debtors. Don’t get involved in the details.
Barry managed to exit himself successfully from his business and, after an initial period of calling every day to ask: “Is everything alright?” (to be reassured that “Yes, everything’s fine,”), Barry’s confidence in his management team grew as the business continued to grow.
Having exited from his business, Barry was then able to reassess his future and determine what he wanted to do with his life. Being able to overcome the hurdle of making himself redundant was the key to being able to do so. For Barry, retaining his business as a lifestyle business has been a great success.