E188 | How to Set Up your Business to be Acquired with Robert Belgrave
If you’re thinking of selling your business, or you’re wanting to create value to make your business more attractive to potential acquirers, then don’t miss Robert Belgrave, CEO EMEA for Pax8 and co-founder of Ecologi, on this week’s The Melting Pot.
Having founded Wirehive in 2012, with a vision to create the sort of business they themselves wanted to be a part of, Wirehive was subsequently acquired by Pax8 in 2021.
So how can you replicate their success and set up your business for a future sale? To make it attractive to potential buyers?
In this latest episode, Rob shares how they set Wirehive up to be acquired – the specific decisions they made to enable success, how they chose who they wanted to acquire them, how they triggered the process without a formal advisor to help them, and what (if anything) he might have done differently.
If this all sounds like something you’re going through or are about to go through, download and listen today.
On today’s podcast:
- Tackling the climate crisis with Ecologi
- Building a business to sell
- Selling without a broker
- Choosing a buyer
- The hiring challenge
Setting up a business for acquisition with Robert Belgrave
Robert Belgrave is CEO EMEA for Pax8, co-founder of social enterprise Ecologi, and previously CEO and co-founder of Wirehive.
Tackling the climate crisis with Ecologi
If you’re looking to help tackle the climate crisis, then you need to know about Ecologi, the social enterprise Rob affectionately refers to as his ‘night job’.
“Ecologi is my pro bono gig. I helped the founding team set it up about two years ago. And it’s a platform to help businesses and individuals fund the world’s best climate crisis solutions – largely reforestation. So planting trees in places where they have the most impact, or purchasing carbon credits through The Gold Standard.”
To put their work into perspective, they plant roughly 150,000 trees every day, meaning over the last two years they’ve planted approximately 32 million trees.
How organisations can work with Ecologi
“We work largely with a specialist tree planting organisation or charity called Eden Projects who are one of the best in the world at doing it. We also have local projects. Some people really like to fund trees in their own countries rather than in the places that have the most impact. So we have a bit of a mix of planting partners.”
Where do the trees have the most impact?
“The best bang for buck where you can plant trees right now is in places like Madagascar and Mozambique. There are a couple of reasons for that [mainly] the types of trees that you can plant there. A lot of it is mangrove trees, which have a number of benefits above and beyond carbon sequestration, because they have an amazing root system that houses an incredibly diverse population of wildlife, which is all part of the mix.”
The other reason is that you get more trees for your money. In the UK, it costs £2-3 per tree, but in Mozambique, for example, it costs £0.10.
But really, says Rob, it doesn’t matter where you plant the trees:
“We all share the same atmosphere, [so it] doesn’t matter where the trees are. Ultimately, the problem is a global one. We’ve selected the sites where we feel we can help our customers get the most impact for their money.”
Building a business to sell
But Rob doesn’t just plant trees, he’s been down a road that so many CEOs and founders dream about – having his company acquired by a dream buyer.
So how do you go about optimising your business in order to maximise the value you can get when you exit? Or, if you’re not ready to exit, what do you need to do to get yourself exit ready?
You can’t grow a business quickly, organically, without a capital injection, says Rob, and that has to come either from future profit, or from debt – in the form of venture or bank debt, as opposed to equity sales.
“We [built the business] without any venture funding. So if you build a business in that way, quickly, as we intended to, growing 50 to 100% year over year, since the day we started, you simply can’t take any money out of it. Because if you do, you’ll kill it.”
They left all of their money in the asset they’d been building hoping that one day, there would be a moment when they could have a liquidity event and realise some of the value of the asset they’d built.
“We always knew that’s probably the path, but we didn’t have any really clear timeline or catalyst for it, we just knew when the time was right, it would probably feel right. And that is how it played out for us.”
Selling without a broker
And they did it without appointing a broker or advisor.
“We did go through the process of talking to some of those people to see how it might work. But most of them were really average, honestly, and I just didn’t really get the impression they were going to offer me anything that valuable, certainly not the £500,000 value that they expect to charge you as a fee.”
Rob’s advice to anyone contemplating exiting their business? Say yes to everything that comes along. And keep a black book of potential buyers.
“I’ve been having coffees and lunches and conversations with people who might one day be suitors for five years. Mindful that those conversations might be good business opportunities for business development, or they might be conversations about an exit one day.”
Choosing a buyer
It wasn’t the price that swayed Rob to sell to Pax8, more they had a great culture fit.
“We took what we felt was the best deal for the ongoing well being of the business and for ourselves as well, because we weren’t ready to retire. We wanted to stick around. And so we’ve been able to do that.”
What would he do differently if he had his time again? Nothing, says Rob.
They built Wirehive balancing culture and purpose, against profit and personal financial wealth for the founders.
“[We] managed to find a unicorn, a business worth more than a billion dollars, who valued all of those things as much as we did, and was willing to pay handsomely, not just to take that business on, but to take its team on and its leadership on and make them integral parts of its future.”
What would be Rob’s advice to other business owners?
“My wisdom would be: be true to yourself, run the business you want to run, [and] maybe one day someone will want to acquire it, maybe they won’t. You can’t rely upon that happening.”
But, looking back, Rob says they always thought about structuring the business in such a way as to make it an attractive prospect.
“There was always at least an annual review of where does this business want to be seven years out, five years out, three years out? What’s the gap today? What’s the product mix? Who’s the customer? What’s the route to market?”
Why hiring is the biggest challenge
The biggest challenge they face right now, comes from the speed of hiring. Pax8 went from 30 to 150 people in the first year of operations in the UK. They’re looking to double that this year – aggressively growing the team, but doing that has a huge impact on culture.
There’s a theory called the Dunbar number which says that the number of people a human can hold a meaningful first relationship with is approximately 100. And Pax8 is well past that now. Meaning it makes it even harder to keep culture on the rails if things start to go wrong.
To make aggressive growth work, you have to cede control of it to your team and trust that they will value the culture and nurture it right. And you can only do that with solid foundations and good guardrails in place. Both of which take time to develop.
“When you’re hiring really quickly, it’s very, very hard to develop [culture] because you look up one day, and you realise there are more new people in the room than there are old people. You’ve got a room with 100 people in it. And only 20 of them have been in the business more than six months. And it’s like, wow, there is no history here, there is no ritual of the tribe, like everybody is making it up.”
So how do you solve for culture?
By hiring right, says Rob. Which in itself is a huge challenge. When you hire the right people, you calibrate against the core values and the type of person you want, as opposed to the skills they have. Helping to ensure that they’ll behave in the way you want them to, strengthening the type of culture you’re trying to create.
“And then you just have to nurture that and hope that with a little bit of adjustment here and there, feed and water the right areas, it’ll all come good. And so far it is but I do not take that for granted. That is definitely our biggest challenge at the moment.”
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