Vital steps must be taken in advance to plan for an acquisition
During the 22 years that Don Britton spent running his company, he developed an ardent interest in building strong teams in the workplace. So when he eventually decided to sell Network Alliance, gathering his employees together to break the news about the deal was the hardest moment in business he ever experienced.
“I could see it on their faces,” he said. “It was going to be a rough one. Their lives were changing. A person’s job is a big part of their life. It’s where they spend most of their hours. It’s how they feed their family.”
Don spoke to Greg McDonough about his adventures in business recently on The Impactful Leadership Show podcast. Don sold his company, Network Alliance, to the private equity firm Southfield Capital in 2018 as part of a roll-up merger with Ntiva. Network Alliance is an information technology company that creates business solutions to aid with systems integration.
Network Alliance was attractive to investors because it had a 98% client retention rate, a 99% monthly recurring revenue stream, and a solid team bonded by core values.
“We were able to exit the business with significantly higher multiples than the norm,” Don said.
Don hadn’t been operating his business with the goal of selling it – he loved his role running Network Alliance – but the offer he received was just too good to refuse. It worked in his favor that he had been leading his business using the same principles of those planning for acquisition.
“What I always focused on, and I think every entrepreneur needs to focus on, is building a business that has value. While I was not focused on exiting the business, I was focused on building a business that had value and added value to our client base. There’s a whole slew of things you need to do to add value.”
Not always successful exits
When Don began considering the sale of his company, he started researching the process, and learned that just 30% of companies manage to get acquired. And even when they do, he was surprised to find out that “it doesn’t necessarily mean it would be what you consider a successful exit, where the entrepreneur comes out ahead of the game.”
“One of the biggest things I see as an issue for a lot of small business owners is that the business is all key to them. Meaning if they aren’t in the business, then the business can’t exist. So if they want to get out of the business or exit the business, then they have to build the business in a way that is not reliant or dependent upon them. That comes down to the systems and teams that you build to try and make sure that the business doesn’t revolve around you.”
As simple as that concept sounds, it can be difficult for entrepreneurs to achieve for a variety of reasons.
“Sometimes it’s ego – they like having everything revolve around them, because it gives you a sense of power or pride or ego. But then there are others that just don’t realize they’re not developing their business in a way that’s not dependent upon them. And then they get in cycles where they just can’t get out of them, or it’s harder to get out of them. Some just aren’t good at building teams.”
Team building is key
But building strong teams is crucial for an entrepreneur’s success. It all starts with the interviewing process. Don believes in a system called Topgrading that allowed Network Alliance to significantly reduce turnover in an industry that typically has a lot of it. That marked a turning point for the company.
“I can’t emphasize enough how much interviewing properly is important to building the right team. Be willing to wait it out until you get the right person.”
Rushing to fill vacant positions might feel like a short-term solution, but it can sow the seeds for bigger complications down the line.
“The wrong people will actually cause you more problems than taking the time to get the right people. Our big phrase was always ‘Hire slow, fire fast.’ Take your time to really get to know who you’re going to hire before you bring them on. And then fire fast is when you see it’s not the right fit. You’ve got to move them fast, because it can be like a virus to a company to have the wrong people in there.”
But even if a manager forms the ideal team for the business, the situation can change as the company grows. The team that successfully takes the business to one stage of growth might not be the same group of people required for the business to reach its next heights.
“One of my biggest mistakes was taking too long sometimes to recognize that we needed a new team to carry us forward,” Don said. “I developed incredible friendships with these people, and I always looked at my company as a family. And I treated my people like they were family, which makes having to let people go or move people around really hard. If you’ve got to tell somebody who has been a leader for you for some period of time that now they have to take a step back, most people’s egos cannot take that.”
Ego and greed pitfalls
Whether it’s a company’s employees or its leader, Don said the two things that lead to most people’s failure is ego and greed.
“You have to figure out how to keep ego and greed in check. And unfortunately, ego is a harder animal to deal with than most people think.”
Telling a manager that the skills it took to lead a team of five employees isn’t what’s needed to lead 20 people is a big blow to the ego, and one that can be hard to recover from, Don said. But the entrepreneur also must manage their own ego.
“You’ve got to keep your ego in check. Everybody has their own desires and wants and needs. Your job as the leader is to make sure you understand what those wants and desires and needs are of the people that you’re interacting with. And how do you make sure your goals align in a way that helps them achieve their goals? If you build a team and you’re the only one achieving your goals, it’s not a really good team.”
First business at 9
Don began his lifelong journey into entrepreneurship at the age of nine.
“My mom told me that I wasn’t allowed to have pets, but she said I was more than welcome to take care of other people’s pets. I think she would have been better off if she had let me have my own pet. I started a pet care business. I brought everybody’s pets to my house and then got paid for it.”
He already knew his destiny at that young age.
“I was always independent. I didn’t want to have to rely on anybody for anything money-wise. And I wanted pets.”
Don didn’t grow up in a wealthy family. His extended family hails from a small mountain town in West Virginia. His mother left home after high school graduation and moved to Washington, DC to work for the federal government. In 4th Grade, Don moved to Europe with his family. Over the next 10 years they lived in England, Greece and Germany.
In high school, Don expanded his entrepreneurial pursuits when he became a cable channel installer. There were two local cable channels offering programming in English, but it wasn’t commonly known how to hook up televisions to receive them. As Don’s business grew, even the stations started marketing and advertising his services.
Re-entry culture shock
Moving back to the United States was a culture shock. Don tried unsuccessfully to get a bank loan to start a business but was flatly denied. He decided to get a degree in accounting from George Mason University to give him a solid foundation for his future entrepreneurial pursuits.
“Every transaction in business goes through accounting at some point, so I figured if I wanted to know everything about a business, that would be the best place to do it.”
He learned about financials, profitability and what makes a business work. These days, Don Britton is considering what he’ll take on for his next venture. He is contemplating buying a ranch to open a leadership institute as a vehicle to teach other businesspeople the valuable lessons he’s learned.
The Impactful Leadership Show podcast is sponsored by the Washington, DC chapter of the Entrepreneurs’ Organization. Host Greg McDonough is the chapter president and a managing partner of Blackburn Capital Advisors.