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EXIT STRATEGIES

"What Am I, If Not My Business?"

What happens when it’s time to move on? In the rare moments when entrepreneurs pause to think about it, they are by turns terrified, exhilarated, and just plain mystified by the prospect of life after business.
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The members have dribbled in one by one, all nine of them. The serial entrepreneur who is thinking about selling his fourth business but in the meantime is dealing with a regulatory change that could soon put the company in jeopardy. The woman who inherited a company from her father, built it into an industry leader, and has begun to prepare for whatever will come next. The founder still haunted by his decision six years earlier to sell his company, thereby undermining what he cherished most about it: its intimate and vibrant culture. The family business owner who had what the rest of the group regards as the perfect exit and is now financially independent, retired, dividing his time between three homes, filling his days with travel, sailing, golf, writing classes, and grandchildren. Yet he's unable to shake the feeling that he has lost something important and doesn't know how to get it back. And others.

They have come from all over Chicagoland on a steamy afternoon in August to a sprawling white-brick ranch house overlooking a verdant golf course in the woodsy suburb of Inverness, Illinois -- the home of Dave Jackson and his family. He was an early entrepreneur in the home health care business and sold his company in 1998. The following year and a half he recalls as one of the most difficult of his business career, a time when he felt utterly alone, lost, and confused. The experience played a major role in his decision in 2008 to start a new business called Evolve USA with another erstwhile entrepreneur, Bruce Leech. Evolve is a member organization for business owners who have sold, are thinking about selling, or are in the process of selling their companies. The people gathered on Jackson's screened-in porch that afternoon were the first to sign up.

Their mood is cheery as they go around the room, updating the group on personal and business developments since the last meeting. They listen and laugh and give one another gentle digs, until it comes time for the serial entrepreneur, Michael Le Monier, to check in. He has been struggling with a number of issues lately, and the regulatory threat to his business, MedPro Staffing, is the least of them. He has also had to place his father-in-law in an assisted-living facility, empty the old man's home, and put down his dog.

But Le Monier leads off with another piece of news that he finds even more distressing. It concerns someone he met prior to embarking on his entrepreneurial career, when he was working as a regional manager for a national staffing firm. One of his branch managers introduced him to a young employee named Hugh, who he quickly recognized was destined for bigger things. "He was handsome, articulate, and incredibly bright, far smarter than me," Le Monier recalls. "He wound up replacing me in some of my jobs. I loved it, and I loved him. He lifted the whole team. Eventually he left to start three related businesses that did extremely well. Combined sales went from nothing to $220 million in 11 years. A couple of years ago, he sold to a private equity firm for $100 million, or so I have heard.

"In June, he hung himself. My wife and I went to the memorial service in downtown Chicago. I think everyone there was in shock. It was so confusing. I mean, How could the world have lost such an incredible person at such a young age? I asked his former business partner what had happened. He said, 'He lost his sense of purpose.' "

In the almost 28 years I have been observing the entrepreneurial landscape, I have noticed that leaving is a subject most business owners would rather not think about, and so they put off dealing with it as long as they can. I'm talking about selling the company and moving on. There are exceptions, to be sure. Some people have an exit plan in place before they even get started. Others take on investors whose need for a "liquidity event" is clear from the get-go and whose very presence forces the entrepreneur to contemplate the possibility of having to part ways with the company at some point in the future. Still others view themselves as investors and the businesses they buy or start as investments, pure and simple. For them, the whole idea is to maximize a company's monetary value and then sell it at the top.

But those people are a distinct minority. In my experience, they are far outnumbered by founders and owners so preoccupied with making sure the business grows or simply continues from day to day, month to month, and year to year that they don't take the time to get themselves ready for the final phase of their relationship with it. The result is that they are unprepared -- both practically and psychologically -- not only for the sale itself but also for what happens after the deal is done.

And make no mistake: Sooner or later, every business gets sold, given away, or liquidated, and every entrepreneur leaves the company he or she has built. You may leave feet first, and your estate may handle the sale or liquidation, but both events are going to happen. They can't be avoided. The only question is, How much of a say are you going to have in either one?

Even if you do lay the proper groundwork for your eventual exit, however, it's not clear what, if anything, you can do to prepare for the immediate aftermath -- that is, the metamorphosis from top banana one day to ordinary piece of fruit the next. Some owners need years to acclimate themselves to the change. If you have spent most of your adult life building an enterprise -- and especially if you started with nothing -- it is probably inevitable that you are going to have trouble determining exactly where your business ends and you begin. There may be emotional ties you aren't fully aware of. Chances are, you haven't had time to reflect on them -- or much of anything else, for that matter. Running a business is nothing if not intense. Maintaining some semblance of a life outside the business is challenge enough.

And let's face it: Being the boss brings a kind of ego gratification that's tough to let go of. When you're the owner of a private company, people depend on you. They need you. They value your opinion. They want your input. You are an important person in their lives, and they let you know it in a thousand different ways. It is easy to get used to being the center of attention -- and it can be profoundly disorienting when suddenly you aren't so important anymore.

Yet people who have sold their businesses tell me that the biggest obstacle to a graceful transition has to do with something else: the change in the nature of the questions they are facing. Successful entrepreneurs tend to be highly goal-oriented. That works to your advantage in a business context, when you are constantly focused on setting and achieving objectives, usually ones that are quantifiable. The questions you deal with all revolve around your progress toward a goal. How far along are we? What is holding us back? When will we hit the target? And so on.

But once you have sold and left the company, you suddenly find yourself in a place in which quantifiable objectives are much less relevant. The most pressing questions you face are existential ones: Who am I? Why am I here? Where am I going? "Running a business day to day is a rat race, and there's a lot of stress associated with it," says Michael Le Monier. "But what we deal with here in Evolve is a different kind of stress that has more to do with purpose and the meaning of life. What happened with Hugh really drove home to me the importance of discovering our larger purpose. That's hard. Until you sell the business, you don't have the privilege or responsibility of choice. You're supporting a family, or whatever. It's much harder to choose your purpose than to have life's realities choose you."

Back on Dave Jackson's porch, the group is putting together a list of potential discussion topics based on issues that have surfaced during the check-ins. The retired family business owner, Joel Altschul, remarks that, for the first time in more than two years, Evolve co-founder Bruce Leech has checked in without once mentioning his former business. He talked about his new apartment in Chicago, the activities of his three children, some developments with Evolve, and the decision to put his father with Alzheimer's in hospice care. But he said not a word about CrossCom National, which he founded in 1981, ran for 20 years, sold in 2004, and still owns 20 percent of. The company installs and services in-store voice and data systems for large retailers such as Walmart and Walgreens.

"It's just not on the top of my mind right now," Leech says. "Not that I'm at peace with it. I'm just exhausted being torn up about it."

Leech feels, in retrospect, that he was railroaded into the sale. He was in bad shape at the time -- recently divorced, disconnected from his children, financially strapped, burned out on the business, and tired, dog-tired. Then CrossCom lost a major customer, and selling seemed like a way out. There were prospective buyers in the wings. His advisory board thought it was a good idea. So did Greg Miller, his successor as CEO. They called in the private equity people, and the deal took on a life of its own. "I just wish I'd had six months to cool out," Leech says. "If I'd had some time to effectively transition out of the day to day, there might have been another interim or hybrid role that would have been more satisfying than leaving. But once the deal guys get involved, you get marched down that road, and the next thing you know, you're sitting on the outside."

The deal was a typical leveraged buyout. Leech had given his senior managers 20 percent of the equity, and he kept 20. A private equity firm bought the other 60 percent and put up a portion of the debt. The rest of it came from a bank. The new owners planned to expand the business, pay down the debt, and have a second, bigger "liquidity event" in the next four to six years. So Leech would have two paydays as well as a seat on the board, but would no longer be involved in operations.

"The night before the close, I was in the office at 2 a.m.," he says. "I remember it like yesterday. I sat there surrounded by stacks of paper representing 25 years of my life, wondering if this truly was the best thing for me. I never felt more alone in my life. It was terrible. Then the flash of the obvious hit me: Everybody who was saying this was best for me was getting a piece of the deal. While I consider many of them friends, a little voice inside me was asking, 'Did any of them look out for my best interests?' But I thought, 'I can't pull out now. Everyone is counting on me.' I signed all the papers."

He was all right for the first few months. He took a vacation, spent time with his children, flew his airplane -- he had recently earned his pilot's license -- and worked on his investments. After a failed attempt to work from home, he rented an office on Michigan Avenue, overlooking the lake. That's when it hit him: "I got real alone. My friends were still working. My kids were in school. There was no one to hang out with. I had nothing to do. People did the obligatory 'How're you doing? Must be nice to be retired.' I hate that word. I was in my mid-40s. It wasn't time to hang things up. I felt totally insignificant."

So began his journey to figure out who he was. At some point along the way, he began to understand what he had lost. He has come to miss it more and more over time, as the other Evolve members are aware. "I've heard you say you miss the fun," says Jack Altschuler, who sold his industrial water treatment company in 1998.

"I really miss it," says Leech. "I went to visit Tasty Catering" -- a Chicago-area business recently honored by Inc. as a top small company workplace. "I saw their culture, and it reminded me how special ours used to be. I took it for granted back then. I can appreciate it now because I can see what's gone."

"You could go out and do it again," says Le Monier, the serial entrepreneur.

"Well, yes, and I'm trying to get that back with Evolve," says Leech.

Relatively few recovering entrepreneurs have such strong feelings of remorse over the decision to sell, but the sense of being lost for a while is very common, and so is the search for fulfillment -- and meaning. Leech's Evolve partner, Dave Jackson, says his search began right around the time he sold his business, thanks in part to a book he had read called Halftime, by Bob Buford, who writes about going "from professional success to significance." Jackson had the success part pretty well covered by then. His company, FirstChoice Health Care, which he had started in 1989, had grown to about $10 million in sales, with 150 employees and gross margins of 30 percent to 35 percent. On paper, at least, it was worth $4 million to $5 million.

Jackson had had enough, though. The business wasn't fun anymore. He was having to focus more and more on operations, which he didn't enjoy. "Everything felt like work," he says. Meanwhile, changes to Medicare reimbursement formulas were about to tilt the competitive landscape in favor of larger companies. Jackson decided it was the right moment to sell, and in July 1998 FirstChoice was acquired by Baltimore-based Integrated Health Services, then a Fortune 500 company. There he was, 38 years old, with a modest amount of wealth for the first time in his life, trying to figure out what comes next, and the challenge of moving from success to significance resonated.

First, however, he had to pass through his own private purgatory, of which he got his initial taste not long after he had completed his exit. He and his wife had decided to go away for a long weekend in Wisconsin. On the drive north, it suddenly occurred to him that, for the first time in years, he didn't have to worry about being reachable. Nobody wanted to reach him. Nobody cared where he was. "It felt weird," he says. "I hadn't realized up to then how important it was for me to feel needed."

The worst part was that he had no clue what to do about it. He knew that, for his sanity's sake, he had to find some kind of meaningful work, but he searched for it in vain over the next year. "I would get up at 6 o'clock, shower, get dressed, and go to the basement," Jackson says. "Then I would sit down and rearrange the pencils all day. It was like playing business." Even his church turned him away when he showed up to volunteer: There weren't any openings. Finally, out of sheer desperation, he took out a pad of paper and drew a T on it. On one side, he wrote down what he was willing to do; on the other, what he wasn't willing to do. "The not-willing-to-do list turned out to be really, really helpful," Jackson says. "I had things on it like not giving up control over my time, and not putting more than a certain amount of money at risk, and not forgoing vacations and other family things. That list really brought clarity to me." More to the point, it opened up a path he could begin to follow in his quest to move from success to significance.

It's evening in Inverness, and the group has moved to Jackson's dining room, where the discussion continues over dinner. The topic at the moment is money -- specifically, how important is it to sell your business for as much money as possible?

"I had quite a struggle with that," says Ed Kaiser, who went to work at his father's company, Polyline -- a distributor of recording tape reels and other media packaging products -- in 1976, became its sole owner in 1993, and sold it 12 years later. "Some of the potential acquirers might have moved the company and put all the employees out of work. Fortunately, I was able to find a buyer who met my minimum dollar amount and kept everyone employed."

"It's a struggle for me because I haven't sold yet," says Jean Moran, whose company, LMI Packaging Solutions, also was started by her father. It makes heat-sealed lidding, such as the foil tops for yogurt containers. "I don't want to sell now because I'm still growing, our people are growing, and the company is still making a difference in their lives. I can't remember how much money we've made each year, but I can tell you every person who has left and later come back and said, 'It changed my life.' Selling something like that for the most money feels repulsive to me right now. But we'll see. I may feel differently when the time for selling gets here."

"I don't think selling a company for the most money is a bad thing, provided you're mindful of what you choose to accomplish in the sale," says Le Monier, the serial entrepreneur. "You have to ask yourself, What are my priorities and goals? When I sell my company, my first goal will be to economically and publicly thank my leadership team for what they've done. I'm going to maximize the dollars, but that's in order to take care of the team. I want to send them on in the best possible way."

"The question is: What's a successful exit?" says Kathy Houde, who worked her way up from office manager to president of Calumet Photographic -- a supplier of professional photo equipment -- and participated in the leveraged buyout of the company in 1987. She cashed out in 1996 but stayed on until 2001. "I think it has to do with getting through the transition to a new life. I'm probably 80 percent of the way through it."

Dave Hale has been sitting across the table, listening intently but with a look of mild distaste on his face. At 73, he is the oldest member of the group. His company, Scale-Tronix, is a designer and manufacturer of medical scales, which he and his business partner founded in 1975. "I don't know," he says. "The idea of ending what I do is just a terrible thought. Exiting seems like dying to me. Maybe I'm weird, but to me, exit is a four-letter word."

"I'm not saying you shouldn't enjoy what you do," says Le Monier. "I do, but I've always separated my passions and investments. My wife and kids, my community, my church -- those are my passions. My business is an investment."

"My business is my passion," says Hale.

"Yes, but the frightening part for you and me is, 'What am I, if not my business?' "

"I can't help thinking about your friend who committed suicide," says Jack Altschuler, the former water treatment company owner. "I don't think we humans exist very well without a clear sense of purpose. If my only purpose is my business and I leave my business, I have no purpose."

"Yes, can I be more than my business purpose?" says Le Monier. "I believe I was put on the planet to do more than make a buck. But making a buck frees me to discover my purpose more deeply and more personally."

"Look at the age of this group," says Altschuler. "Yeah, you have to make a buck to live, but is that the primary driver for any of us anymore?"

There are two people whose membership in the group I find a little baffling. One, of course, is Dave Hale, who hates the idea of selling and leaving the business that his life has centered on for the past 35 years. The other is Joel Altschul (not to be confused with Jack Altschuler), who sold his company seven years ago and has, to all appearances, successfully made the transition to a new, and very full, life of travel and leisure.

If Hale's reasons for joining are somewhat mysterious, his resistance to exiting is not. He has a great life. His product innovations have had a huge impact on the quality of patient care in hospitals and medical centers, and he keeps coming up with new ones. That hasn't stopped him from having adventures outside the business. He and his wife of 49 years sail all over the world aboard the expedition ship National Geographic Explorer. He owns an airplane, although he hasn't been able to fly it since the FAA grounded him following a heart attack in 2007. He owns condos in Breckinridge, Colorado, where he skis during the winter and is a major investor in a company that turns scrap plastic into floor mats, carpet runners, and the like.

Then there's Scale-Tronix, which is built around an unusual partnership. His business partner handles sales and marketing from White Plains, New York, while he handles design and manufacturing in Carol Stream, Illinois. The two of them, Hale says, speak to each other once every few months. "She sends in the orders, and we make the scales," he says. "We don't need to talk on a routine basis." He adds that they meet in person once every few years.

So why exactly is Hale a member of Evolve? "Because of Bruce and Dave," he says. "They convinced me I should think about getting out before I die. That was a rude awakening. It had never occurred to me that someday I won't be able to do this. I guess I must be thick in the head. But I've learned it's easier to start a business than to exit one."

And does his partner have as much trouble with the idea of selling as Hale has? "No," he admits. "So we're considering all the possibilities. The group helps me think about it. They force me to focus on things I find extremely distasteful and would rather not have to deal with."

Altschul is another story altogether. Whereas Hale doesn't want to think about exiting, Altschul doesn't need to. He has already had about as good an exit as you can imagine. These days, he plays golf, advises not-for-profits, practices the flute, attends writing workshops, hikes and exercises, writes essays and poetry, watches movies, and hangs out with his grandchildren -- when he is not traveling, that is. He has just returned from his annual weeklong sail with his three brothers, this one around the San Juan Islands, north of Puget Sound. His main problem at the moment is that he and his wife have found their three homes to be one too many. So they have put their condo in Evanston, just north of Chicago, up for sale and will henceforth spend most of their time in Santa Barbara and at the family vacation home in southern Michigan.

Even more important from an exit standpoint: Altschul can look back with pride on his career as a business owner. His company produced educational audio-visual materials, which it distributed to schools. It had been started by his father, Gilbert, in 1954; it was known as the Altschul Group and later changed its name to United Learning. Joel, the second of four sons, went to work for the company in 1973 and is the only one of the four who stayed. He took the helm in 1990 and steered the company for the next 13 years, during which time it won numerous awards and annual revenue increased from about $6 million to $14 million.

Altschul admits that the decision to sell was not an easy one. He had hoped that his management team -- including his son and brother-in-law -- could someday run the company without him. "That way, we wouldn't have to sell," he says. He realized, however, that he needed help to think through his options, and so in 2000 he became a member of TEC International (later renamed Vistage International), joining a peer group that included, among others, Bruce Leech, Jack Altschuler, Michael Le Monier, and Jean Moran. There his plan to keep the business in the family was met with considerable skepticism. Altschul agonized over the decision for a couple of years and finally concluded that he would indeed have to sell to a third party. In early 2003, he contacted five potential strategic acquirers. One of them, Discovery Communications, came back with an offer he couldn't refuse. Not only was the price right, but Altschul was able to make sure that the management team would be well taken care of. The only negative, from his perspective, was that he had to stay on for a year.

But by the fall of 2004, he was out for good and didn't look back, though he did go through a period he describes as "drifting." He admits that he felt lost at times. "Our mantra in the business was, Doing well by doing good," he says. "It's hard to move from something as gratifying as that to something else." It was even harder because he didn't know what the something else might be. Months went by, and he was no closer to an answer. He tried consulting and didn't like it. No other opportunity interested him. So he filled his time with hobbies, travel, and family -- and continued to drift.

To some extent, he is still drifting. He has just grown more accustomed to it and comfortable with it. He says he doesn't regret selling and never has. On the contrary, he takes satisfaction in seeing how well his former managers and the company have done since he left. He is also happy to have shed the cloak he wore for many years as the head of a family business, particularly because that business was his mother's sole means of support. The sale ensured she would be taken care of for life. "It was a heavy burden," he says. "I didn't know how heavy it was until I took it off. I'd say things have turned out well for me, although it's still a work in progress. What's unfinished? I haven't found anything I'm as passionate about as I was about the company. I enjoy golf, writing, hiking. But none of them are as consuming as the business was, nor am I as good at any of them as I was at business. That's the part I haven't come to terms with. Maybe the next thing is out there, and I just haven't found it."

He shrugs. "But, you know," he continues, "I'm 62, financially secure, and in good health. In the end, I've been blessed. I stayed with the business and was rewarded for it. If we'd waited, we would have sold for a lot less. So more people have benefited from the sale than would otherwise have been the case. I'm sure my dad would have been pleased."

I still don't understand, however, why Altschul stays in Evolve. Granted, he wants to support his friends Bruce Leech and Dave Jackson. But that doesn't explain why he has gone out of his way to be at every meeting. What exactly is in it for him? The other members can't offer him much guidance in his situation. He, on the other hand, has learned a lot that can be of use to them. Is this his way of filling the need to be needed that so many entrepreneurs seem to miss when they leave their businesses?

"That's a good point," he says. "I would say that's accurate. But there's another piece that I think is more important. Remember, most of those people have been with me since I joined TEC in 2000. There's a certain bond between us that I don't have with anyone else. Unlike my family or my friends, they've seen me through this whole roller coaster. They alone really know what I've gone through, and I know what they've gone through. When you're lucky enough to have something like that, you don't ever want to give it up."

So that's it: the opportunity to be understood by people who have shared a type of experience most others will never have. No wonder they all keep coming back.

Inc. editor-at-large Bo Burlingham is working on a book about the challenges entrepreneurs face in selling and leaving their companies.

Last updated: Nov 1, 2010

BO BURLINGHAM: Burlingham joined Inc. in 1983. An editor at large, he is the author of Small Giants. Burlingham is also the co-author with Norm Brodsky of The Knack; and the co-author with Jack Stack of The Great Game of Business.
@boburlingham




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