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Lessons from selling my business: Steve Witt, UKDomains
At a glance
- Exiting a business that you’ve built from scratch will have a financial – and often emotional – impact.
- Preparation ahead of an exit – to understand your company’s true value and to find the right people to work with – is just as important as thinking of your post-sale future.
- Having a plan for yourself and your newfound wealth after an exit is crucial for your overall wellbeing. A financial adviser can help you to understand how your wealth can help you meet your long-term financial goals.
Entrepreneur Steve Witt has started and grown several businesses during his career, including his current venture, The Travel Franchise. In 2008, he sold UKDomains, a company offering web domain services, which he’d built from scratch, for several million pounds. Yet despite his newfound wealth and freedom, Steve felt “nothing but grief”.
“I thought it would be all champagne and fireworks. Instead, it was the most depressing day of my life,” says Steve. “I went through a grieving process – I felt I’d suddenly lost everything I’d worked so hard for.”
Steve realised the truth in the old cliché that “it’s not all about the money” when he handed over his passion project to UKDomains’ buyers. It took time after the sale for him to rediscover happiness and redefine his goals.
Here are some of the lessons Steve learnt about how to exit a business.
Be aware of your obligations under the terms of the sale
One of the terms of the UKDomains agreement was that Steve couldn’t work in the web-hosting sector for a year after the sale. “That’s not so easy when your sector is all you know,” says Steve. “I eventually went into search engine optimisation, then my current travel business, as they didn’t clash.”
Work with an invested partner
Steve worked with an agent for the sale of UKDomains – something he says, in hindsight, he wouldn’t do again. The cost of the agent’s fees from the sale didn’t reflect the value of the work, Steve says, and an agent tends to be less invested in the future of the company than its exiting founder.
“To the agent, it was a one-off financial transaction that they walked away from,” he explains. “If I did it again, I would get someone with a longer-term vested interest. I’d use a venture capital or private equity company that work with you to generate much better value and which has a stake in your business.”
Understand your company’s true value
You may not feel you have a good understanding of your business’s financial value – particularly if you have no prior experience of selling a company. Steve recommends looking at past sales of companies in your sector to see how much they were sold for and what made them valuable.
“Put yourself in the purchaser’s shoes,” he says. “To them, your business is a short-cut to success. What does that mean to them in terms of value and where it lies? Use that in negotiation. If I sold again, I would also get more people interested to create a bidding war and push up the business’s value.”
Have a post-sale plan
The saying goes: “Every athlete dies twice. Once when they take their last breath, and the other when they hang it up.” And that is true for business owners selling their company, says Steve, who recommends thinking about your ‘afterlife’.
By all means take some time off, but having your eye on the next thing is important. “Before the sale goes through, you must ask yourself what’s next – or it may not feel like the happy ending you expect,” he says. “In my case, I woke up the next day feeling bored and empty. I dealt with that by starting another project the day after and created an online marketing business. I quickly secured Toshiba as one of my first clients.”
Find your purpose
To decide how to fill the void that was left after selling his company, Steve had to identify what it was that motivated him and made him happy.
“I came out of my low point by recognising the value of what I had created,” he says. “I achieved happiness by having something to work towards – not an end financial goal, but by helping others. I had a eureka moment when I realised that by helping others become successful, I could become successful too.”
Create a wealth management plan
The sale of your business may leave you with more liquid cash than you’ve ever had before. Saving and investing that money wisely is vital if you are to make the most of it. “Overnight, you think you’re Richard Branson with money to spend,” says Steve. “But you need to work out how much you want to keep and how much to invest. And you need to diversify your investments and your risks.”
Steve learned the hard way just how important it is to have a solid plan backed by sound advice from an expert. After the sale of UKDomains, he invested in the Spanish property market. But the scheme he had backed collapsed after the global financial crisis.
“Because it was a recommendation from a friend, I didn’t do my due diligence like I should have,” he explains. “I went on trust and foolishly left my critical thinking behind. I was left horrendously in debt. I had gone from a millionaire, with more money than I’d ever had, to penniless and sofa surfing at friends’ homes. My advice is to invest wisely and not do what I did.”
A professional adviser can not only offer support when it comes to making investment decisions. They can help you understand how your wealth can help you meet your long-term financial goals – through cash flow projections, for example.
“People often burn money quicker than they imagine. You may need far more than you think to enjoy a comfortable lifestyle for the rest of your life,” says Steve. “For example, buying a nice car burns cash, as does paying off a mortgage. So get professional advice for long-term planning. Otherwise, everything you’ve built and worked hard for could disappear quickly.”
How we can help
Exiting your business will have important implications for your finances. We can be an adviser and sounding board as you plan your exit and your life beyond the sale, helping with cash-flow modelling, saving strategies, protection and investments. If you want help planning your personal financial strategy post-sale, get in touch.
The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.
Where the opinions of third parties are offered, these may not necessarily reflect those of St. James’sPlace.
Exit strategies may involve the referral to a service that is separate and distinct to those offered by St. James’s Place.
SJP Approved 03/08/2023
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