On leaving your own business
This week I will leave my own business. It has been prepared for 3 months, but now it is getting really close. I am ready for the next step and I am honestly happy the company will keep running without me. However, this period felt like a roller coaster and I would like to share some thoughts how such a process could be guided (or the alternative title for this post: “what I learned from my mistakes”).
I think the exit went pretty OK; there are still a couple of loose ends to tighten up, but those are foreseeable and can be dealt with in the time period that’s left. Although I said it went “pretty OK”, the last few months were extremely intense. And that was caused by either how the company was prepared for such event or how we went through the process. I really hope there is some advice here which helps entrepreneurs in preparing themselves for such a decision. At least, I would do it differently the second time I start a business.
One of the major problems that arose quickly is my role in the company. I was a founder and not the only one. However, my role was tightly bound to the services we offered and this made the split up quite difficult.
If you are freelancing, this is obviously intertwined with the business. But if you are (co)founder together with other people, you have to be aware of this issue. My case is a split up, but what if a founder is absent for a prolonged period of time due to illness? Or what if, even worse, a founder is hit by a van?
Make sure you can always keep it running, nonetheless the consequences of a founder leaving the office. A few methods:
- All decisions, plans, quotes, reports etcetera should be accessible for n+1 persons. Keep it on a share, in the cloud, have a backup: with whatever method, make sure that more than one can access important files.
- Don’t keep too many people around with very specific information or knowledge. You can’t make sure everybody knows everything, but if all founders (or employees!) are working on their own island, you can never mitigate the loss of such person. The solution? Keep each other updated, talk, document your work and keep track of what you are doing!
- Think about scale. It is hard to share knowledge if you are with a few people. With two or three persons working, there is a great amount of dependence onto each other; but with ten of twenty people, this is already greatly reduced. So: prepare for a little bit of scale right from the start. It obviously helps your business grow in capacity, but it also makes you more resistant against information loss.
Script the exit
It is no fun to leave. Not for the one leaving, nor for the one(s) keeping behind. You better talk about such event before it happens. When you start your company, it will eventually end for you (whether you quit, sell or retire). Think about it now: how would you like to deal with it at that moment?
When the moment is there to quit, there is a lot going around. To minimize the energy lost on discussions you could have had prepared, simply talk about it before it happens. How are you and your partners thinking about leaving the business? If such event happens, what are the important items to deal with?
You do not need to make decisions at that time, but you can agree about the script. Create a mutual understanding of all the issues you need to deal with and try to put them in a logical order. When the moment arrives you need to talk about an exit, there will be a script for you.
A few topics you likely want to talk about:
- Capital and profit
- Responsibilities, risks and perhaps future liability
The only thing we agreed upon when we started the company, was the time between the notice to leave and the actual goodbye. We decided back then we had to take at least three months. Looking back, I would recommend this is the maximum time to consider. The longer you take, the longer you are getting annoyed by the time it takes. My advice is to stick with two months, which should be enough. Three is the maximum to consider.
When you are preparing to leave, you will have meetings with your (co)founders and other employees. Structure all conversions properly; for example by having a meeting weekly to talk about the progress. Do not have meetings on an incidental base, as it doesn’t help in the progress.
During the meetings, structure the contents as well. Make sure all participants in the meetings list their own topics they want to discuss. This way, you do not have one person forcing the agenda. Ask around what should be on the agenda and try to keep everyone involved.
After the meeting, give yourself some time to write down the important stuff discussed. It will give you an overview of the progress and if anything is unclear, you are able to look and read back what has been said already. Just don’t forget to notice every member of the meeting about the minutes!
During the preparation time you will have a lot of conversations. There are many topics to deal with, so you talk about a lot of stuff. Don’t keep it that way. When talking, you will quickly notice you agree upon a lot of things (and you probably agree on more topics than you disagree with!). My advice, write those down, confirm them together and do not discuss that same matter over and over again.
It is mentally a tough job to keep discussing all the different topics. To alleviate your subconscious mind, make a decision funnel. It helped me extremely to keep the overview and to be (kind-of) fresh for every new topic to discuss. It is hard to deal with 100 things at the same time, but dealing with them one by one is much, much easier.
A strategy I worked on was to summarize every meeting at the end. List all topics you discussed and their outcomes: on what did you agree and what is still left to be discussed? Then, write all agreements down and let everyone involved confirm those agreements. My advice: agree on the decision funnel as soon as possible; then agree to not discuss agreements again. It will be the first step forward for you.
As a founder leaving, you care about the business. Probably you still care while you decided to leave. There is literally no barrier to keep being involved in the business after you left. But don’t. Be aware that you have made the decision and what happens next is not your responsibility.
It is very easy to fall back into common habits, both for you and your partners. They can ask you gazillion questions about the new direction to go to, the new partner to choose, a new business strategy to test out. Due to that common habit, you are likely to think along with them and answer their questions, but be very strict: after the split up, you are not involved any more.
I have made this “mistake” and it cost a lot amount of time and energy, all I have spent onto something which isn’t mine to decide. The very hard lesson to learn here: do not leave upfront expectations. If you are going away, make it directly clear when and how so your partners are not left behind with an illusion you are still available.
Of course the complete post can be summarized as “define better rules upfront when starting your business”. However, I am certain there are many, many companies which didn’t thought through this completely. I cannot blame them: if it is your first time, you don’t have the experience. And if you have the experience, it is still not a fun exercise to talk about quitting and problems when you are full of energy starting a new venture.
So the short summary: make sure you have thought about what happens when a (co-)founder leaves. Make sure you structure the process, create a funnel for all the decisions to be made. And keep an open relationship: have a mutual understanding for each other — do not react based on emotions and discuss any problems you have openly.
Why did I left?
The final question I did not answer is why I left. Currently, my ambitions cannot be fulfilled within my company. I like what I did, but I cannot imagine doing this for many more years. And doing what I love, cannot be done (currently) in my company. There are no hard feelings, just the simple maths that it is the best I quit my company now.
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