There is something very wrong going on in the world of entrepreneurship right now. Entrepreneurs are coming under increasing pressure to sell their businesses far too early.
No sooner have they created a vibrant business then wham, someone is dangling a cheque in front of their eyes and telling them it’s time to leave and hand it over to someone else to take to the next level.
But this kind of approach is bad for the business, it is bad for the employees who work there, and ultimately it is bad for the UK economy.
The problem is that if an entrepreneur is growing their business with one eye on selling it, that encourages a short term approach which profoundly affects the decisions they make about how to run the business.
Instead of investing in their employees and in building customer relationships to enhance the long term value of the business, their focus shifts to being all about enhancing short term profits instead.
Let’s be blunt here. There are basically two ways someone can turbo charge their profits in the short term.
They can screw their customers, or they can screw their staff. Neither are a particularly pleasant way to run a business, and neither creates a business that people love.
Nowadays entrepreneurs are often surrounded by groups of people who really want them to sell out early because it suits their own agenda. Venture capitalists and investors want the entrepreneurs they have invested in to sell their businesses as quickly as possible so they can realise their investment gains.
Accountancy firms want them to sell so they can do their tax planning and inheritance planning for them. Banks want their money back.
Even friends and family generally want the entrepreneur in their midst to sell their business as soon as they can, so they can tell everyone that their favourite entrepreneur has just sold their business for many millions of pounds. And probably bought a yacht.
I started up Caxton FX in 2002 and it now has a turnover of £700m. We are focusing on building a strong business for the long term – and yet everyone around us constantly wants to know when we are going to sell it.
But I have absolutely no intention of selling and the decisions we make are long term decisions. The fact that we invest heavily in our customer service team, for example, means that in the long term our reputation for customer service will be enhanced.
I want to create a long term relationship with my customers and employees, and I believe that is the way to do it. I firmly believe that entrepreneurs should trust in their own abilities and find the confidence to take the business onto the next stage.
It takes a certain shift in mentality but if an entrepreneur is bright enough to start a business and build it through the really tricky early years, then they are certainly bright enough to adapt themselves to manage a bigger company.
The sad thing is that those venture capitalists and investors who encourage entrepreneurs to sell out early have got it all wrong. As soon as you remove the entrepreneur who started the business, you also remove the vision and the passion, so the whole business changes.
Instead of throwing the baby out with the bathwater they should embrace new ways of addressing the issue, for example investing one per cent of the company’s profits in training the entrepreneur to become more of a big company manager.
True entrepreneurs do not start businesses simply for the money they might make. They do it for the personal satisfaction and sense of achievement, and the passionate belief that they are building something of real lasting value. The money they make is a mark of success, certainly, but it is not the success in itself.
Entrepreneurship is not about getting rich quick, it is about building a strong viable business for the long term which carries forward the vision of its founder, which genuinely values its employees and which creates lasting relationships with its customers.
Rupert Lee-Browne is Founder & CEO of currency exchange business Caxton FX.
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