Nov. 24, 2022

How To Successfully Exit Your Business And Find Your Next Purpose

How To Successfully Exit Your Business And Find Your Next Purpose

Selling your business is tough. There is lots to consider both in your business and in yourself. Garret Turley has personally exited his business and helped multiple other do the same very successfully. In this episode he walks you through many of the things that he has learned.

Here is Garret’s story:

Garret qualified as a veterinary surgeon from Cambridge University and, after a few years as a practicing vet, co-founded Pet Doctors, one of the first buy-and-builds in the UK veterinary clinic market in 1998. After a successful exit to trade in 2010 he shifted to the private equity world and was a partner at Bridges Fund Management for 6 years followed by 4 years as a partner at August Equity - for both firms he focussed on the healthcare, social care, and education sectors. In March 2022 he commenced on a portfolio career and is a board chair and company advisor with roles at Avado and Blackrose. He is a keen but slow cyclist, a lover of Italian wines, and has a passion for Italian late medieval art.

In this episode, you will learn the following:

1. How do you manage the psychological transition when you sell a business?

2. What are the key considerations for structuring an earn-out?

3. How important is it to due diligence the buyer of your business?


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Hi, and welcome to the It's a Good Start podcast with your host, Mike Lander and Kevin Gibbons. The aim of our show is to help scale up entrepreneurs, master the best of what other people have already figured out, so you can unlock your own potential. We started it because we've both entrepreneurs for over 25 years. Is wanted to share our knowledge and our guest knowledge. We're all about Shimmer insights.

Wanted to take away one or two things per episode that can help you move the ball forward in your business. We really hope you enjoy and keeping it back for more. Garret, thanks for joining us. We've been friends for I don't know how many years now? Wow.

Must be ten years. 15 years. Also the 15 must be 15. Yes. I remember meeting you on the steps of I think it was the VNA that we met up.

How interesting, because I was actually at the DNA for the first time in about seven years yesterday. Oh, weren't you?

I really loved it. And I said to myself, why do I come here more often? Yeah, exactly. You were just coming out, and you've seen the next mission. You loved it.

And we started chatting friends for a long time. You've been in, you've done all sorts, Garret. I mean, I'll let you tell the story, but trained as a vet, then ran your own business and sold bat. And why don't you just, like, tell people broadly what that kind of journey looks like to where you are today? Sure.

Well, as people will pick up from my accent, I come from Northern Ireland, and I came to England when I was 17 to go to university, to vet school. That was six years. So this is back. I came out of uni in the early 1990s, so many years ago. Incredibly young.

I started working my family at university. I attended a lecture from a Canadian professor of behavior. And that sounds kind of strange, but at the time, that's incredibly radical. He gave this lecture, and I turned around to my friend, I was sitting inside, and I said, I've seen the future of veterinary medicine, and I like it. And this future was people very much seeing their pets as part of the family and humanizing them rather than as agricultural guard dogs or sheepdogs or whatever.

It was interesting. And so he and I afternoon agreed that we would go into partnership together as soon as we possibly could once we left. Universally, that took four years. So the parents worked every we didn't really take holidays. We worked evenings.

We worked at weekends and saved up enough money and bought our first practice together in the mid 1995. Okay. And that was in West Sussex. And I was working as spent resurgent. But really, I loved many aspects of the job, but I got a very weak stomach, so bad smells actually make me vomit.

So that's not great. For a vet, but also a sense that I had a commerciality, and certainly David, my cofounder, had a real commerciality. And after two or three years of doing this, we bought another two practices and over the next ten years built a business that we sold to trade in 2010 with I think it was like 30 practices at a laboratory referral center. We were one of the very first consolidators in the UK of Emory Space. And obviously that has gone on across Europe.

Australia has been a huge global consolidation with some rail benson of the sector. So for good and for bad, we were part of the ignition for that. And how did you find that? So how did you I mean, I guess people will be interested in it sounds so easy. You do one and then you buy two and then you buy four.

But how do you fund the first one or two that you buy? Well, the first one or two well, the first few, actually, all of them were pretty much bootstrapped. So it was banking, cash flow and capital. Now, having said that, we did a third partner joined in 2001. So he invested some money.

He didn't come from the sector. He joined effectively as our if we want to spit roads up, which he didn't really do, but he was our finance guy and he led the finance infrastructure. But it was bank debt. And actually back in those days, you were taking all bank debt at like 10% and stuff, but actually just very basic bank debt to buy property and asset secured. Yeah, but if we could do we'd do a sale and lease barrier free up for other acquisitions?

Just talk about sale and lease back. Garret, because some people might not know what that means and how it works, what happens, certainly. So if you got a limited amount of capital, so you got little perish like us. Let's say you got, for the sake of argument, £100,000 and you buy a business and the property is worth £70,000 and the business is worth 30, then you paid 100. But that absorbs a lot of your capital.

If you can actually then take that property and set up somebody else for 70,000 bonds and then lease it off them long term, it reduces your EBITDA, certainly, or your profits, certainly rent. But what it does is it free cash for you to then go and buy another couple of businesses or whatever you want to invest in the business. And that's very important if you're big strapping if you want some businesses, it's really important to own the properties and have that property portfolio. But otherwise, for us, definitely we wanted to be asset light and be an operational interesting so that was kind of. A bit of the core strategy, was basically when you acquire vet practices, do a sale and lease back, free up the capital that allows you to do the next one.

Exactly. That EBD our dilution, but it frees up capital to fuel the gross journey. Yeah. And you're looking to grow and what you're actually saying is, the value of my business with this money is going to grow faster than the value of property is going to grow. So you're backing yourself being a property investor and we weren't property investors.

That's a really interesting point. Like always, whenever we chat, Gareth, I learn things every day. But yeah, of course, if you're looking at properties and you're saying, well, property growth, you might get 3% random, maybe, depends where you're in the UK, but your business can grow much faster than that. So why would you leave capital in an asset that's growing at 3% when you can grow a 20%? Yeah, but there are circumstances where actually controlling the property is really, really important and it creates extra value because you do get in some sectors and you see it maybe in social care.

With if you're selling a portfolio on elderly care homes as an example, then owning the property will give you a higher multiple on exit, but then you've got a way up. Actually you can do the same, at least back on that, free up a huge amount of capital and then sell the operating business. Once you get a reduced ebay, actually, the money you've taken out from here, plus the money there is greater than the thing. So you've got to think about the sector you're in and work out where is the value for your business and how do you use capital. That is the most efficient manner.

And thing is, over the past I would say over the past ten years, that hasn't been I mean, it's been up in the top people's minds. But with interest rates being so low and capital relatively readily available to most businesses that are profitable, then actually, you haven't really need to be as efficient as you might want to. Might not need to be when you're looking at interest rates. So swap rates on five year at 5.5%. So you've got to think that it's going to get more costly to have debt.

So what do you do to be to grow above that, above the pace of your cost of caps? That's what you need to do. OK, interesting. So what happened then? So you got to how many vet practices did you have in the end?

In the group? I think it's about 30. We build those to a trade buyer and as part of that deal, I exited with so one of my partners said all that he still is a veterinary surgeon as his own practice now and is incredibly happy doing that again. But myself and our finance guy exited immediately, which was perfect, I think, for me, in that I can't speak for the other guys. It's perfect for me because I kind of sense that I've done it and I was interested in looking at new challenges.

And so selling the business was kind of a release, not just the fact that we got paid for it, which was fantastic, but actually it allowed me to start thinking about other things I wanted to do. And that was actually terrifying as well, because I was in my early four seasons, and I went from one day being thinking that's really important article, to the next being guy walking down the street to pick up the milk and having no identity, and there was interest. In just talk about that. So, again, a lot of people I'd like to start asking about also the transaction, the earn out for consideration, all that kind of stuff. But just like, mentally, what happens when you sell a business?

We don't care about the valuation and what you got. That's not our business. But it's interesting to hear about. You had enough money to say, well, I've got choices now in life. What happens when you get that kind of I've got choices moments?

Well, you and I actually I said to you just about ten minutes ago, it's never done until it's done exactly when you are selling your own business, it is never done until it's done. And actually really amusingly, the day that we sold, I turned on to the guy I founded the business with and said, what does your wife think about this? He said, oh, I haven't told you.

Wow, so classic.

But I'll tell you when I get home. Okay? Yeah, I know, exactly.

It's very difficult then to properly prepare for that transition, I think. And I find it really difficult, to be honest. I find it, you know, quite just the challenging of, okay, I was this and I'm not this, and what am I? What am I going to do? And will I ever work again when you were young me?

Or what am I an entrepreneur? Or what actually is it? And it did take me a while to kind of work my way through that and understand exactly what it was. So it was quite it was both. There's a young young to all these things.

It was very positive and very successful in some respects, but also I felt like, oh, look, I've abandoned a whole bunch of my friends and colleagues at very short notice. What on earth does the future hold for me?

It's a real psychological mix, and people who do exit do need to think about that. And I've spoken to a number of entrepreneurs who sold their businesses, and they have similarly not all of them, but a lot of them are similarly just struggled with that sense of crikey. What's next and what purpose do I have? And, you know, we'll get on to where I am today conversation. But that's what it was.

The transaction itself was actually pretty simple. We approached it with a full open book. We're going to share as much data as we possibly can to our acquirers. Well, you were prepared so again, people won't know what it looks like, the preparation. Were you like kind of a year in advance preparing everything so that you had a data room almost ready?

Yeah, absolutely. And that's a great question because I would say you can get approached out of the blue and okay, you can't fall UpToDate data room, but you've got to thinking about what would a data room look like? Actually, frankly, that means what does proper professional business management look like? It means having all your contracts, having all your contracts, your employment policies, your board packs your financial day in easily accessible chunks and set aside so that you can go, yeah, I can access that. And also thinking about whatever sector you're in has its own nuances.

But buyers will want a certain type of data and a certain amount of information based on their sector and you've got to be ready with that. Sometimes the field, there's no doubt about that and you just go cry. That will take a bit of work. But really you should be thinking about what do I need to have? How does it need to look and how accessible is it?

And have that very, very just really professionally prepared to hold it all the deterrent, but you got to know where it is on your servers and think about it in those compartmentalized prepared blocks. Exactly. Very good advice. And again, when you're structuring, I mean it could be much later in the day for many people listening and for some there won't be an exit. And I think there's a whole different discussion around everyone seems to want to sell their business and I'm like, well, sometimes actually you're better off keeping it.

Some businesses, if they're generating enough EBITDA and dividends and they're in a certain sector which is got resilience against certain external conditions, sometimes you want to keep it and sometimes, to your point about purpose and who you are, sometimes you want to keep it because that's who you are. It kind of defines you. But for those people that do want to exit, how do you structure the piece around I'm not going to get all the cash up front on day one. So what's your advice around that? Around thinking through, well, how does that kind of structure work to get the money in my hands?

So Earth knows are always tricky and you and I know this. Absolutely.

We both experience this.

I think that firstly, I think what's really important in an or not is crystal clear simplicity of what the metrics are because unfortunately or not can be games. That's just the way you want to structure them so that everybody knows what they are. And if you're in the business, you want to be able to monitor that drive side the business. You want information that allows you to really assess where the business is going to allow you to achieve the overnight. What I would say to people is your day one Lamard Bank gets and almost to some degree go the ornament is the Icing chair.

I would agree. But once you relinquish control of the business of in a majority fashion or in a total fashion, then you have relinquished control of the business. And it's important to recognize that the earlier is to some degree taken out of your hands. But I think that try to negotiate something that's very clearly, objective and simply measured. No many people say well that's EBITDA and you go okay right, but if I for a bunch of new people they're all earning one hundred and fifty k, then your even dad's gone.

By the way. I'm not suggesting any malice or bad faith, I'm just saying that some people take on the business. Actually, you know what, this doesn't quite work for us in the structure and we need to put in this cost for because you're on us over two years but we're thinking about ten years. We need to start work today to make sure that we deliver in ten years what we need and us today investing growth. Rightly exactly that.

So be happy with what you're getting on day one crisis and metrics and get hold of data and think about all the ways that the or not may be affected or those metrics may be affected and what levers of control you can retain over those within the period of the or not. But also when you're selling a business you got to do due diligence on the buyer if you got nernoid and just understand do they pay for me? My thoughts always was if I'm paying an ordinary it means I'm doing well. So I don't really care. I don't really want to chip somebody just for the of sake shipping.

I want to actually have the business performing well enough for me to be comfortable that I'm earning the cash and that's unable to pay it. So there are many ways of thinking. I think doing DD on the buyer is critical. Absolutely. And it's not just the kind of financial DD that you can do, but it's about who they are.

As people find out what their history is, the track record. When they buy companies, do they pay their earn outs, like you said? You're like, well, if it's growing, it's going well. Why would I want to mess around? Chipping away at the ear now.

It's done well, so I'm happy. Not everyone's like that Garret. They're not exactly that. Exactly that. Yeah.

What happened next? So now it's kind of like you've sold the business, you've taken some time out. What was the next stage? Well actually I took a year out and the first couple of months of that where I found quite stressful. And then actually I got into a pretty good conversations with people about actually just taking a break and thinking and then I was really incredibly fortunate.

I had decided, and I don't understand why I thought that this would be possible. I was fully lucky in many ways to try and get into private equity as either an offering partner or just as an executive private equity.

I found almost no people like me who have done that at the lower mid market scale.

I was fortunate, but I did burn a lot of shoe leather and a large number of maybe 2025 P firms and tried to work out what we might be able to bring to them. And I was invited to join a firm called Bridges Ventures, bridges Fund Management, which is an impact investor. And I joined as an entrepreneur in residence, which was effectively a part time job just for them to test whether I had a clue what I would like to work with. I got stuck into one of their assets that was not doing quite as planned. I was quickly able to help that and ultimately we sold that over four and a half times a month, about three or four years later and it could have gone under.

So it was when I came in, it was definitely needed some work done something.

So I was off for a residence for six months there and then I was invited to become a partner at Bridges, which is fantastic. And actually when I was doing that, I did a shift. So obviously my career had been in the vet sector and I was actually just pretty much done with it because that's not quite the case, but I wanted to buy different things and I was keen to expand my just challenge myself and find new areas that would be interesting and actually give me purpose. You mentioned the word purpose earlier. And so found myself then looking with one of my colleagues there who would like, as I said to him, like, you're the brains and I'm the Braun and we make a good team.

And we did. And we invested in, by the way, listeners. That's entirely not true.

That's how you positioned it. Yeah. So we looked at a lot of social care businesses and invest in a couple of social care business. So social care is looking after people with say, learning disability or elderly care or people with mental health problems or all of those things together. And I just love that sector.

I really, really feel that private equity is course in some cases, rightly maligned, but actually the work that we do in social care can't get it right every time. But what you're trying to do in any social care business, no matter what the ownership structure is, whether it's local authority or family or private equity or whatever it is or listed company is, you are trying to ensure that the culture is correct so that you have systemic good levels of care or excellent levels of care. But if you got 2000 people on the ground every day providing care and you have one rogue operator that's 2000. Then you can put the systems and monitoring place to protect the people who are being cared for, the colleagues and the business, but the stuff will happen. Exactly.

But I thoroughly enjoyed that and spent I think it was there about six years at Bridges and then was approached by a larger P fund by August Equity and to join them and reignite I suppose their social care franchise. And so I joined them as a partner and worked on health care, social care, education, did some stuff, actually did an animal health investment as well and I was there for four and a half years and retired from August and the end of March this year. OK. Loved it there, brilliant firm. And actually what was interesting for me as well, because of bigger funds than Bridges I was able to make large investments and have what I felt was greater impact upon people and the policy that we were all care that we provided.

So I spent eleven years so in kind of summary, as we spent ten years as a detective surgeon, ten years as an entrepreneur, eleven years as a PED partner. Yep, about another ten years or something else. So I'm kind of kicking off on the ten years of whatever it is next agenda, work that out. I mean interesting around sector expertise. So lots of entrepreneurs, this is kind of a very popular discussion around do you specialize in a sector as an individual, do you specialize in a skill as a buyer?

How much do you value sector expertise when you buy a business? All of that. And do you have a passion for certain sector? What's your view on the kind of the sector piece and how important it is as an entrepreneur but also maybe as a buyer?

Well, I think let me put it in the kind of the way as a PE guys I might look at it's in terms of board composition. That might be an abuse. If you have a board and you've got a management team, might be an entrepreneur, might be you put in a professional management team as a people become different backgrounds and our managers rather than the initial creative when you're putting the board together and you're thinking, well, we need some non executive skills. The two things you think about are one, I need a non executive chair, and they don't necessarily need an industry expertise. They need to know how to run a board, mentor a CEO, and you know, the rest of the exec team.

But particularly, be it an entrepreneur or not, and so you're looking for that particular set of chair skills. However, you might bring in as well somebody who's got real industry specific sector skills because actually you need to know that you're going in the right direction. So chairing the board is one thing but strategically, going in the right direction, having the contacts, is also incredibly important. If you're a CEO or executive that doesn't have that depth of sector expertise, then that would be helpful. But when I first left, when I first sold my company and was hawking myself, Ron, the Mayfair PE funds, basically, people say, you're the vet guy.

Really hated that. My hackles rise. I'm the guy who's done M and A, buy and build, multi site profession services. Exactly. Subsequently, I've been involved in businesses that have dentistry, veterinary consultant, dermatologists training.

And. It'S multi site special services, buy and build or de novo site setup. So I've got experience across that. That actually my role as pet doctors, which is my business with David. And David gave me I kind of just slightly stepped to the right and done it in the healthcare or social care.

Interestingly about the label. Garret a really old friend of mine, years ago, Matthew, years and years and years ago, he was a kind of ex IBM Salesman of the Year. Very capable salesperson. Really interesting guy as well. Just like a fun guy to be with, but quite challenging, quite tough.

And he said, you know, when people meet you and if they haven't seen you for a couple of years, they label you because it's a shortcut. So we find a need to label people. He said, People know you for who you were, not for who you are. And it kind of stuck with me. Yeah, because the label is, oh, you were the vet guy, you run a vet business, because that's what they knew about you, about your past.

But who you are is an operator, an M and a expert, someone who's moved from being a clinical person into being a business leader that's going to buy and build. They don't know that. So you have to build a bridge, I believe, from what you're labeled as to actually what your skill sets are with evidence today. Yeah. And we've got to do that for others.

We have to build a bridge for them. Otherwise I'll just go, Are you the vet guy? Yeah, I agree. And actually, I mean, the other chestnut is that if you don't control your own career, then somebody else will do it for you. And simply, if you don't control your own message, somebody else will do it for you.

And you've got to work on that. So actually not. I would guess that most people who know me, or knew me maybe, because my husband in the private equity space, he's a social care guy.

I'm pretty. Cool with that and I'm going to try and redefine myself again. Let's see how it goes. But if you want to get out of a sector that you're in because you want to try something different and move into an adjacent sector or something completely different, you've got to think about how you're going to present it. And as you say, what is the bridge to that?

And how do you get people to believe you got to be in evidence text, you can't speak a bunch of words. Has to be some evidence behind it. So, Garret, this has been amazing. I'm very close to your time. A couple of messages.

What would you say to people that are at the million pound turnover? It's gone well, they're starting to build management team. They're thinking about an exit in the next kind of three to five years. You know, what would be your kind of advice to them? The two or three things you'd say focus on this.

Not guaranteed, but they're probably things to help you on your journey.

I would say. I'll tell you, it's interesting because I've got across number of businesses over my time that being really successful. There are maybe 3 million, even though businesses and when I say, oh, let me see your management accounts, they don't have any. Wow.

Be professional. That's the best.

Do it properly, no matter what size you are. Do you have monthly management accounts? I remember doing it myself, setting up it on QuickBooks or whatever it was I was setting up a town or on Zero, whatever you use and produce monthly management, that kind of allows you to manage your business. Yes, that for a lot of people will think that I'm being patronizing, but I've seen it in very large businesses and actually, I think the real important thing about that is by managing that, you manage your cash flow. And I really believe that the next couple of years are going to be tough for businesses of all sizes.

I agree. And cash is king. You don't control your cash flow, then something can happen. Correct. When I left August 1, of the things I know what I can get my old man leaving speech was I said that firstly, inflation is coming.

So Christmas said inflation is coming, interest rates are going to go up and businesses are going to look a lot different and business models are going to look a lot different with 5% interest rates than they do with 00:20. 5% interest rates. Exactly. And that's already coming to pass. But the other thing, and Mike, you and I have been around long enough to be through a couple of these cycles, is that not actually the stuff that you expect to happen that gets you, it's the stuff you gosh, that is really interesting.

I didn't expect that. You're in a good place, but the bank calls in your loan just because the bank has to make a decision. Exactly. Find that your suppliers go bust and suddenly I'm not a supply chain. That works well.

You breach your covenant, you breach your banking coverage and the bank says, you've got three months, give me the workout plan. If it fails, I'll take over control of your business. Exactly. That and the very friendly person that you. Were speaking to suddenly doesn't answer the phone, and you're into the workout guys and that's right.

And they're not friendly. They're not friendly. Professionalized management. And I've been known lucky throughout my career to have had really good people beside me in my businesses, be it in Pet Doctors with David and David, be it at Bridges with people. I was actually out there for dinner and drinks last week, dinner and drinks with the week before.

I've been really fortunate to get people around you who are really, really super strong, not to just replicate what you're doing, but to augment or fill in the gaps or whatever it is. And I think also there are both you and I kind of mentor and help people who are who need just a little bit of guidance occasionally. That's right. So reach out into your networks and build networks, because you'd be amazed. And we got history of this ourselves.

You're having a conversation, somebody says, I think you should talk to this person. Yeah. And off it goes. And it's not necessarily but it's not you need to give me something. It's much more of we are friends in this world together.

Let's see what we can let's just have a glass of wine and chat. What listeners won't know. Garret was the kind of a neighbor that transformed my life. I mean, that's quite remarkable. No, you were and it was that conversation.

You were talking to someone who was looking to buy a business of a certain type in a certain area, and they said, who should I talk to? And you said, talk to Mike. He's one of those looks like that. Have a chat. And I ended up selling that business.

And that was remarkable. I mean, remarkable. And you gave him freedom. You just said, Go talk to Mike. We'd had a drink or dinner a few nights before, and you were telling me all about your business.

So reach out to people. Yeah. So reach out to people. You're right. Build the network.

Because you never know what connections they have and conversations they're having. Yeah, absolutely. And actually, Mike, it sounds strange, the stage of my career, but that's happened twice to me over the past month in terms of really thinking I'm building the blocks for what I want to be and the purpose I want to have. Just going out for a glass of wine with somebody, and then she does that, going, I just met so and so, and they would love to chat to you about this. Oh, really?

When something left field comes in, that could be fascinating. Absolutely. I did it on Tuesday at Edinburgh Airport waiting for a plane. Rang a friend of mine I've been done bits of business with over the years. The next thing he says is, I was thinking about you, Mike.

There's something that I've got. Would you be interested in X? Yeah, he may have ringed me. Anyway, but I rang him, and the connection was remade. Garret amazing.

Thank you ever so much for taking the time to talk to us. And thanks for your insight. It's been amazing. If anyone wants to kind of, like, send your kind of profile or getting contact, what's the best way of, like, seeing what you do? LinkedIn.

Really? I'm not anything else, so that's probably the best way. Very good. You'll find him. Garret Turley on LinkedIn.

There's only one. Always. Thanks, Garret. Okay, Mike. Thank you.

Bye bye. Thanks for listening to our podcast. We hope you learned something new and useful about entrepreneurship. We'd love it if you could rate or review us on the apps you use to listen to this on. Thanks.