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Friday’s Exit Strategy: How Entrepreneurs Become Prisoners In Their Own Businesses

Before I head out for the weekend, I figured I’d pen a blog entry that captures my current mindset — especially as it pertains to entrepreneurialism, business building and life-work balance. I don’t know if this will be a continuing series. We’ll see.

For starters, let’s explore why you and I started our respective businesses. Thousands of ChannelE2E readers are likely accidental entrepreneurs. That term fit me in 2001, when I suffered a big media layoff during the dot-com implosion. In response, I quickly incorporated a business to do some freelance work while plotting my longer-term career moves. Before I knew it, the cash was coming in and the entrepreneurial bug bit me. But I was still an accidental entrepreneur — basically pursuing project work to fulfill my financial needs. We’ve all been there.

Fast forward to 2008, and I became a purposeful entrepreneur — working with Amy Katz to build a modern day IT media company focused on the IT channel and market inflection points like managed services and cloud services. It worked out remarkably well. We got acquired in 2011, stuck around to expand the sites some more, then personally exited in 2014. It was a mostly excellent journey. Except for one big caveat: At times, I became a prisoner of my own business.

Entrepreneurs: From Total Freedom to Total Lockdown?

Oh, the irony. Amy and I launched that company in 2008, at least in part, to forever free ourselves from big, corporate, slow-moving decision making. We wanted to have fun. But the very company we built became a prison of sorts, during brief times, for me.

Why? The simple answer involves my own mismanagement. Amy always had a long-term plan on the business side of the house. But I didn’t really have a long-term plan for the content side of the business.

Sure, I knew how to build traffic and readership. I knew how to engage audiences. But I never really took the time to really think about a near- and long-term plan to scale all that content. At times, I maintained a dangerous mentality: “Write one extra blog today…” and I would always address our content growth needs. At some point around 2010 or so, Amy helped me realize I couldn’t scale myself to infinity. We made some good hires and I finally freed myself from a sort of business “prison.”

Arlin Sorensen

Arlin Sorensen

Gary Pica

Gary Pica

Paul Dippell

Paul Dippell

ConnectWise CEO Arnie Bellini

Arnie Bellini

The prison metaphor is a familiar one for MSP owners. Consider this: The biggest business challenge facing MSPs that want to grow beyond $4 million annual recurring revenues involves the CEO failing to hire and/or mentor a senior level management team, according to Arlin Sorensen, senior VP of ConnectWise’s HTG business unit. His views, shared during an IT Nation 2017 session in November, aren’t unique. ConnectWise CEO Arnie Bellini, Service Leadership CEO Paul Dippell and TruMethods CEO Gary Pica all reinforced that point during the session.

The business (i.e., the revenues you need) are out there for the taking. The talent (if you truly look for it) is out there for the hiring. But ultimately, you need to make a conscious decision to hire, mentor and delegate. And you need to understand the math behind your business, as Pica has told a few thousand MSPs over the past decade.

The other option? Continue to grind it out on your own. Near term, you can be an individual ‘do it all’ star. But at some point, you’ll simply become a prisoner in your own business — trapped behind four virtual walls (pending deadlines, upset customers, poor cashflow and no time off) that could suffocate you.

Three Books That Guided Me Forward

In some ways, regaining complete freedom for me involved walking away from the IT media industry. It was 2014. Industry noise filled my inbox and my head. I had to step away for some silence to sort out what I wanted to do with the rest of my career life — while putting a greater emphasis on my family life. Amy also took some time to step away. We both resigned around April 2014 from the company that had acquired our business.

During that time of silence at home, I read multiple books. Three of the most influential were:

I listed the books in that order for a reason. Here’s some explanation:

“What Should I Do With My Life?” first helped me through a difficult period in my business life, somewhere around 2001. I was under employed. I was lost. Bronson’s book helped me to understand that I wasn’t alone. This great summary explains why:

“With humor, empathy, and insight, Bronson writes of remarkable individuals—from young to old, from those just starting out to those in a second career—who have overcome fear and confusion to find a larger truth about their lives and, in doing so, have been transformed by the experience.”

I’ve re-read that book many times, including during that career hiatus in 2014.

“Start With Why.” Here again, the book summary says it all:

“People like Martin Luther King Jr., Steve Jobs, and the Wright Brothers had little in common, but they all started with WHY. They realized that people won’t truly buy into a product, service, movement, or idea until they understand the WHY behind it.”

And finally, there’s “Walk Away Wealthy” … The description:

“Nearly every entrepreneur dreams of one day selling their business for big bucks, but far too many aren’t aware of exactly what it takes to do so. The sobering truth is that it’s very easy for the entrepreneurs who don’t know what they’re doing to walk away from a sale without the financial freedom they hoped for. In fact, only about 20 percent of businesses for sale will successfully transfer to another owner!

Maintaining My Entrepreneurial Freedom

When Amy and I co-launched After Nines Inc. in 2014 and its associated IT media sites (ChannelE2E in 2015 and MSSP Alert in 2017), we thought very carefully about automation and scalability. We knew there were manual processes from our previous business that we had to avoid. Sure, we’d put in lots of business hours. But we knew we wanted to spend a lot of time away from work with our respective families.

In some ways, the three books mentioned above helped me to organize my own life priorities. If you roll the three books together, you come up with sometime like this:

  1. What Should I Do With My Life?: I want to build a business that provides the financial freedom to spend more time with my wife and kids.
  2. Start with Why: Here again, my wife and kids are my ‘Why.’ Amy and I (married, but not to each other) also found a business ‘why.’ We launched ChannelE2E to help IT service providers on the journey from Entrepreneur to Exit. The ‘why’ was simple — E2E arrived to help MSP owners on the most important business journey of their life. Similarly, MSSP Alert arrived to  address the most pressing issue facing partners and their customers: Safeguarding digital assets.
  3. Walk Away Wealthy: Naturally, I considered learnings from this  book as the end-point from which MSPs can reverse engineer a successful E2E journey. A sort of guide to help understand key KPIs and steps you need to take to increase your company’s valuation.

Rediscovering Your Entrepreneurial Freedom

I realize MSP owners can’t quit their day jobs, take some time off to escape from their virtual prisons, and come back with a completely new business. But you can take incremental steps to regain that freedom. For starters, join a peer group and learn the true financial numbers and business metrics you need to achieve. At the same time, sit down with a financial advisor to talk about where you want — or need — to be financially secure over the next 10, 20 or 30 years.

Then align the peer group math with your financial advisor math. Chances are, you’ll have a valuation gap — a shortfall that means you’re essentially a prisoner in a low-value business, Sorensen notes. The only ways to eliminate that valuation gap and achieve freedom?

  • Again, know your numbers.
  • Automate. And automate some more.
  • Follow Sorensen’s advice. Find the management team talent you need to scale. Focus on EBITDA growth rather than top-line revenue growth.

But most of all: Find your why, and never lose sight of it. Oh, and a confession. I wrote this blog as much for me as I did for you. I need to constantly remind myself of the lessons above.

Bonus: This Friday’s Exit Strategy

Dr. Fink: See you tonight

PS: So what’s on tap for me this weekend? Some extended time with my wife and three sons. A concert featuring former Prince and the Revolution keyboardist Dr Fink. Dinner and drinks with one of my sisters and her husband. Some NFL football. And returning to the current book on my reading list: Hershey — Milton S. Hershey’s Extraordinary Life of Wealth, Empire, and Utopian Dreams.

Thanks for reading ChannelE2E and our sister site MSSP Alert this week.

Joe Panettieri (Joe@AfterNines.com and @JoePanettieri) is co-founder and executive VP of After Nines Inc. and its IT media platforms — ChannelE2E and MSSP Alert.

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11 Comments

Comments

    Arlin Sorensen:

    Great piece, Joe. All business owners face a tough decision – to grow or not to grow. And if growth is the option, which is often the case, then it requires an owner to give up control and trust people around them to take the company to the next level. It’s one of the hardest thing a business owner will ever have to do, but without it, we do become prisoners of our business and will not be able to lead our company to the growth we hope to achieve.

    Another resource your readers may enjoy is our HTG “Planning For Success” workbook which helps an individual create personal and business legacy, life, leadership and business plans as well as a number of other helpful tools to provide resources to grow a company. We are just finishing the refresh to version 2, so now is a great time to get the book and work through the planning tools. It is available of the HTG website.

    Keep up the great work of educating the channel and entrepreneurs. Most of us are accidental and need all the help we can get!

      Joe Panettieri:

      Hey Arlin: Thanks for navigating the blog. I know it was a bit of a wandering rant. But I’ll be sure to crystalize and reinforce many of the ideas in the weeks ahead in future blogs.

      Readers: Arlin refers to the HTG Planning for Success workbook. You can Find it here. All the best for 2018.

      Best,
      -jp

    Dustin Bolander:

    This has been a big focus in my local owners peer group the past few weeks. It is interesting seeing how everyone is going about it. One is building to sell outright, another is selling to employees, another to existing partners, etc. Mine is with no intent to sell anytime soon (I am young enough I still have an easy 15-20 years to put into the business and could retire young) but the build-to-sell mentality still seems most successful. Scalability, solid margins and a great team are important no matter if you’re selling or keeping

      Joe Panettieri:

      Hey Dustin: Thanks for your note and readership. A growing number of our readers strive to run their businesses using a “be prepared mindset.” Be prepared for the unexpected M&A offer, and you’ll always have your accounting, biz plan and growth chart at your fingertips for that potential suitor… We tracked about 150+ M&A deals among MSPs & IT service providers in 2017. We’ll share many details during our webcast this Thursday.

      Best,
      -jp

    Joseph Pannone:

    Great job on this Joe, it really struck home. Looks like i have some reading to do this weekend…

      Joe Panettieri:

      Joe: Somehow I suspect you’re a few laps ahead of us in terms of addressing the challenges I mentioned. Thanks for reading ChannelE2E.
      -jp

    Joe OCallaghan:

    Joe, you are spot on with the constant battle of hiring and “letting go.” It is a constant battle on trusting the talent you hire to uphold the quality that you want…However, if you find the right person, they should be able to escalate what you are doing and what you have done in the past. How do you motivate new hires to handle your baby the way you would? That is the challenge we face with every new hire…but it all goes back to Simon’s “Why.” Hire people that believe what you believe and the outcomes become incredible. The other challenge I see is startups chase revenue, no matter what. While I am no exception, I have realized that finding clients that “believe what I believe” makes life so much simpler and profitable as well. Great post, thanks!

      Joe Panettieri:

      “Hire people that believe what you believe and the outcomes become incredible.” < -- Well said.

      Readers: Joe O is working on something that should interest you. What if there was a table where VARs, IT service providers, MSPs and channel partners could pull up a chair next to startups, innovators, disrupters, VCs, etc. And once you grab a seat, in theory, what if you could learn really quickly from those experts? That table and chair for each of you is here. I’ll share more details about it next week.

      -jp

    Jamie Warner:

    Joe, excellent article and I absolutely agree with the concept of being a prisoner in your business. I wrote a nice little BLOG post from an MSP perspective about how I grew my MSP from $3M to $7M by doing some of the things you mention.

    Also, another great book to read is E-Myth by Michael Gerber where he talks about the ‘Accidental Entrepreneur’ which again aligns nicely with the article.

      Joe Panettieri:

      Jamie: Great blog link. Thanks for sharing it with us. I think E-Myth requires a slot on every entrepreneur’s bookshelf. Thanks for mentioning it.

      In terms of that journey from $3M to $7M, congratulations. I’ll keep that blog and your journey in mind as we plan future content in that area.
      -jp

    DAVE O'CALLAGHAN:

    Joe, your article is spot on from my perspective. As a former Cisco and VMware exec, life was focused on driving top line revenue. At Vation, we are a start up, so we know the challenges, as well as the excitement ourselves. But we also serve the VC community of Emerging Tech companies helping them drive their go to market and connect to key partners to scale. We see the startups focusing on their technology “what”, while the market is looking for the “why” and the outcome it provides. We are finding that through rapid collaboration, the early stage company can balance their efforts between what and why……technology and go to market….

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