Not long started a business? Time to plan your exit

I should have also created an exit plan to run in tandem but I was too attached to my business to contemplate that. Instead, I delayed and delayed. And then we were suddenly bought by Brookfield in 2023, an unprompted offer that had coincided with internal board discussions about breaking up HomeServe into three standalone entities.

Back in 2010, I achieved a mini-exit, selling £65 million-worth of shares, a step I’d recommend before progressing to a full sale. That mini-exit was 17 years in and probably should have happened when we listed in 2004. Once you’ve proved your model, the business is growing nicely and profitably, sell a small percentage of shares to remove the constant worry of things going wrong and you not being able to provide for your family.

A mini-exit also gives you confidence to take more risks, step on the accelerator with some expansion and grow your leadership team, to maximise your business’s value. I say “we” deliberately, because collaboration is a key part of the exit strategy. For instance, you and the top team need to get your business on the radar by holding informal meetings with potential buyers a few years ahead of a potential sale, so that they eventually approach you with a serious offer, not vice versa. Ideally, start these conversations up to three years before.

Put in place a clear succession plan, someone who can step into your shoes post-sale. I was lucky to have Ross Clemmow running EMEA and Tom Rusin in the US, and either could have run HomeServe without me.

Ask the entire top team if they aim to stay with the business. Build a comprehensive growth and retention plan, which properly maps out a future transition, perhaps with a bonus structure. And if there are potential conflicts of interest, get them on the table as soon as possible.

If your finance chief isn’t properly equipped to deal with an exit, as is often the case in generational family businesses, bring in an adviser early, whose seniority and fee requirements reflect the size of the business and potential sale. They may start as unpaid advisers with remuneration tied to the exit deal.

Timing is everything in a sale and they should have an acute understanding of when the right moment is approaching, or if it’s passed and you need to wait. Keep discussions confidential because leaked news of a potential sale will lead colleagues to worry unduly about their jobs. If the sale doesn’t happen, that worry will magnify; but if things do go ahead, communicate an inspiring narrative so everyone gets behind the plan.

Analyse long-term hypotheses, anticipate potential buyers’ concerns, be prepared to answer their questions, have accurate figures about the worth of your business. And, finally, make sure the future growth story is a convincing one. This is your baby, remember.

Which brings me on to the second plan — your future growth. What drives you? How will you feel going from flat-out and full-time to full bank account and empty work calendar? I know plenty of founder entrepreneurs who’ve regretted putting their feet up after selling out, such as Kevin Byrne, founder of Checkatrade, despite his £74 million payday. You need to retain a sense of purpose and fulfilment, so prepare for those emotional and psychological aspects.

For me, that was Growth Partner, the result of that sleepless night, through which I began to invest in other entrepreneurs at an earlier stage of their journey. I knew I needed to find a next stage of my career and put the pieces in place, eventually using dividends and that one-off share sale.

Creating it was a great learning process so that when Brookfield acquired HomeServe, I was able to make a smooth transition from HomeServe chief executive to chairman and spend more time backing additional entrepreneurs.

I gradually learned what buyers are looking for in entrepreneurs. They don’t want the swaggering arrogance of someone who thinks building a business is more about money than product or service, brashly quoting big financial targets before proving their model. The financial rewards are the icing on the cake but it’s the cake that matters. That’s why I partner with entrepreneurs who have passion, perseverance and long-term commitment rather than those that want to get rich quick.

I most admire serial entrepreneurs, who have set up and sold two or more businesses. According to a recent academic paper, only about 3.5 per cent of all UK business owners are serial entrepreneurs and yet their firms represent 13.5 per cent of all businesses. These entrepreneurs, which includes me, have made mistakes and learned from them, developing an even greater determination to overcome challenges. The more we grow and sell, the better we get at it and, I hope, the more valued we become.

There is no simple formula in judging when to engineer an exit. That often means entrepreneurs only get round to thinking about selling when things aren’t going well and they need investment, or when a potential buyer leaps upon their business. Both situations will limit your ultimate financial success. Instead, lay the groundwork long before you plan to sell, constantly reassessing according to market conditions.

Remember, no deal will ever be perfect and if you insist on everything going your way, you’ll invariably be disappointed. Aim for 100 per cent, settle for 80 and do all you can to be exit-ready — that way you’ll avoid sleepless nights.

Richard Harpin is founder and chairman of HomeServe and Growth Partner, and owner of Business Leader magazine