Mergers and Acquisitions, Security Staff Acquisition & Development

The Entrepreneur’s Dilemma: Great Lifestyle Businesses vs. Good Exits

Many technology entrepreneurs -- including VARs an MSPs -- have come to a fork in the road. One lane involves a "great" lifestyle business. The other involves a "good" exit offer.

The dilemma:

  • Do you drive forward with a "great" lifestyle business that pays you a great salary and rich bonuses/distributions?
  • Or do you accept a "good" exit offer -- a company buyout with a reasonable valuation, though typically not lucrative enough to fund your immediate retirement?

In this case, the path from "good to great" seems to be backwards. It seems foolish to accept a "good" financial offer to sell your business -- when you already have a "great" gig that pays you handsomely in your lifestyle business.

Lifestyle Businesses: When Great Isn't So Great

But what happens when your great-paying lifestyle business really isn't so great? You know the scenarios: You're paying yourself very well but work isn't all that fun anymore. In fact, it's downright painful at times.

At those moments, it can be tempting to sell your business for a "good" offer that doesn't quite meet your financial aspirations. Plenty of entrepreneurs sell their businesses during a moment of weakness. In fact, the No. 2 reason entrepreneurs sell their businesses involves personal burnout. You're making a great salary but you simply can't keep going -- so you sell.

Still, there's another option: Perhaps you should rethink how much money you're paying yourself, plow some of those dollars back into the business, and hire the right talent to help restore your own life-work balance. In that scenario, a range of possibilities can surface.

  • The company actually becomes a great lifestyle business, where you're making a decent buck and stepping away for extended periods of time.
  • The company actually becomes a potentially great exit for you and your family, since buyers might pay a bit more for a business that doesn't need its CEO to survive.

By the way, I'm certainly not knocking lifestyle businesses. I'm part of one, and I'm loving it.

Lifestyle Businesses: What's the Value of Time?

Another key lesson to consider: When we were building our previous business, one of my mentors told me to work, work and work some more. Don't make a hire, he told me, until you're in so much pain that you absolutely have to make the hire.

I didn't exactly follow that advice. And my business partner, Amy Katz, has always been forward thinking in terms of the talent we'll need to attract and leverage during each stage of business growth.

Still, I probably worked far more than I should have during that earlier business. As did Amy. It paid off in some ways, with a successful company sale in 2011. But we'll never get back the time we lost with our respective families.

Lifestyle Businesses: Automation Kills Stress, Gains Time

When we launched our current business (After Nines Inc.) in late 2014 and ChannelE2E in September 2015 (yes, it's been a year!)... Amy and I had some new thoughts on scaling a startup.

Instead of throwing people (me, Amy, contractors or new hires) at every business task, we instead considered automation for every business task. As we considered each component of the After Nines Inc. business and the ChannelE2E website, we kept making the following statement:

"If we can't automate it then we can't do it."

Let me give you an example: In our previous business, our weekly newsletter system involved software assists and databases stretched across a marketing system and a content management system. There were data silos and lots of manual tasks to get each weekly newsletter out the door.

Fast forward to our present business, and our daily newsletter lives right in our content management system and web platform. Everything is one integrated solution, that's 99% automated. Newsletters now take us about 5 minutes -- rather than one hour -- to produce. We could activate 100% automation, but we like to keep a 1% manual process in place for some personalized messages that we drop into each  newsletter.

Now, multiply that commitment to automation across the hundreds of tasks we "handle" each week. And the productivity gains are immense. The one thing I can't automate is blogging. But I have found a few ways to automate my approach to blogging. For now, those approaches remain locked away in a Google Doc somewhere...

Bottom line: All that automation -- here, and perhaps in your company -- can create a great lifestyle business. The automation will ultimately drive down your costs or boost your revenues -- or both. And that can also lead to a great exit.

Joe Panettieri

Joe Panettieri is co-founder & editorial director of MSSP Alert and ChannelE2E, the two leading news & analysis sites for managed service providers in the cybersecurity market.