When Chris Pescott started his business, Perceptive, as a university student, he decided he would one day sell it for millions of dollars.
“At 23, I was studying and I decided to spin out a project into a research-based insights company. Then we basically started growing,” Pescott says.
“Towards the end of the first year, we picked up a contract with Sony, which was to be a catalyst for us getting some scale and some credibility.”
Then the Global Financial Crisis (GFC) hit. The business barely survived, losing clients and about NZ$250,000 of revenue overnight.
“We really struggled, but we survived and learned a lot of valuable lessons,” Pescott says.
After realising how fragile his business relationships were, in 2010 he introduced a new annuity-based product, so clients could subscribe to ongoing data services and insights.
Soon he had 50 staff, with offices in Auckland and Sydney, and more than 250 clients.
“My plan was simple. I always wanted Perceptive to be attractive enough that someone in the marketing industry would want to buy us.”
Over the whole journey, Pescott had a pretty good idea who he’d sell the company to: Clemenger Group, Australasia’s most successful marketing communications company.
Talks started in 2013 but Pescott didn’t sign over his business until July 2017.
“We knew each other for a long time, and I’d been grooming the business and identifying how to maximise that exit strategy for a long time before we actually did the deal.”
Even though Pescott made many millions from the deal, he’s chosen to keep working as the chief executive, and feels more focused than ever.
Pescott, 36, says business owners should have an exit strategy from day one.
“Know what it is, write that strategy down, put in place the size of exit you’d want. If it’s
NZ$20 million, put NZ$20 million. Start to figure out how you could see that come to fruition,” Pescott says.
He says know who you’re going to sell to. “Is it going to be a competitor? Is it going to be a management buyout? Is it going to be a trade acquisition? You need to have answers to all these questions.”
Get your company valued every year, and surround yourself with a trusted team of advisers. Don’t manage the negotiations alone.
“Treat the other party with the utmost respect. Align your values, don’t take shortcuts, and don’t do the deal purely for the money.”
Be open and honest with your team, Pescott says. They’re a big part of the package you’re selling, and key to its ongoing success.
Be squeaky clean with your tax, the banks, and your accounting.
Be warned: an acquisition could take years. “Your conversations should be two or three years out, just on the off-chance that it’s going to be a long process.”
After your exit, get financial advice on investing your money, Pescott says.
First published 28 February 2019
Story by Brenda Ward
This article does not contain any financial advice and has not taken into account any particular person’s circumstances. Before relying on it, we recommend you speak with a financial adviser. This story reflects the views of the contributor only. Content comes from sources that we consider are accurate, but we do not guarantee that the content is accurate.
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