CEO Thoughts Growth Private Equity

My worst year in business

I wrote this article for the Tenzing website where I work as Entrepreneur in Residence. 

In this article, adapted from a pre-lunch talk given in 2018 for management consultants CIL, I’m giving an honest insight into 2015 – my worst ever year in business.

“Autobiography is only to be trusted when it reveals something disgraceful. A man who gives a good account of himself is probably lying since any life when viewed from the inside is simply a series of defeats.” 

George Orwell

As a Founder or CEO, you know that leading from the front, appearing unruffled and inspiring confidence are key parts of your role. And that you need to do this while growing your business, dealing with the inevitable ups and downs, small victories and setbacks, disappointments and – let’s be honest – royal screw ups. 

No matter how successful your business appears on the outside, from the inside it’s a different story. A story that’s not told very often because CEOs must maintain an aura of success. No matter the challenges they’re facing.

That’s why, as a retired CEO who’s free from these shackles, I’m sharing some of my history with you. To let you know that, among a sea of apparently flawless leaders, you’re not alone. Because, despite significant success as a CEO, I also experienced some really tough times. And one year, in particular, stands out as the absolute worst.

An enjoyable rollercoaster

No matter how successful others perceive your business to be, there is always a gap. Between the company and products you can imagine and the company and products you can deliver.

Learning to live positively with that gap gives many entrepreneurs their drive. I know it’s certainly what gave me mine. 

Money or power never really moved me (although, of course, money makes life much easier and sometimes nicer). Instead, I was compelled to act because I could imagine something the world needed. And, no matter how much I worked, I hadn’t built that thing today. 

Whatever I had created or achieved at any stage wasn’t enough. There was so much more that we knew. So much more that we could visualise that we just hadn’t been able to do yet. 

With the goalposts continually moving in this way it seemed that no matter how much I achieved, I was never any closer to the finish line.

So I lived with a feeling of incompleteness, of underachievement. And it was this that drove me through my time as CEO.  

Choose your investors wisely

During the 11 years I was in charge, Reward Gateway was built into a four-hundred-person company operating from seven countries with over 1,000 clients. We also took the business and its people through two private equity investments, one in 2010 and another in 2015.

I was fortunate enough to have not one but two amazing investors during this time. And the big lesson I took away is just how important it is to choose your investors really, really carefully. 

I spent seven years as a private-equity-backed CEO and many of my friends are private equity-backed. Through my experience and the stories my friends have told, I’ve noticed an enormous range of possible investor behaviours. 

The best investors are the most incredible, most supportive friends that you can imagine. The worst? Well, let’s say that they don’t really help when the chips are down. And, like everything in life, the majority of investors are average.

A good example of how a seasoned investor acts is from back in 2011. Christian Hamilton was my investor and he’s now one of the Co-Founders here at Tenzing. 

Christian had just bought my young, three-year-old company for a good price after a competitive auction. Barely 60 days later with the ink still wet on the contracts, I managed to lose three quarters of a million pounds in a single afternoon through credit card fraud.

With much trepidation, I called Christian to explain. He asked me what had happened and what we’d done and, after a short pause, he thanked me for our actions. Christian then asked if there was anyone in the tech team he should send a personal thank you to as an acknowledgement of the work they’d done overnight to stop the losses. 

I remember thinking how lucky I was to have found him.

Incredible pipelines precede terrible results

Shortly after this disaster I turned up to a board meeting to explain that, following 14 consecutive quarters of hitting our sales target, we were going to miss this quarter. And miss it by a significant amount. 

The cause was entirely self-inflicted. I’d wanted to send my best salesperson to America and I thought I’d backfilled with a really great replacement. However, although the pipeline looked fantastic, the deals just didn’t come in. 

I’ve since learned that the worst ever sales results always follow the most amazing pipeline. There’s something magical about the mismanagement of sales. A sort of alchemy where an over-optimistic forecast goes hand in hand with terrible sales. 

However, this was just a practice run for even more problems.

Success comes before a fall

After these two major challenges, we muddled through four years with our first investor. We worked as hard as we could, making mistakes then fixing them at a rapid pace. 

At the end of the four-year backing, the investment ended well. We had a target of selling the business for £60 million which would have given our then owner a 3x return. But we ended up selling for £140m, giving them a return of almost 8x. 

The process to find our new investor was big and competitive with 14 bidders. Every major mid-market private equity fund in the UK had taken part. As a result, they all knew our plans and forecasts.

Of course, this made the post-deal pressure so much worse. 

When everyone was congratulating me on such a great deal and such an amazing result I was groaning under the weight of the expectation that I’d sold this business on. 

Yet I hoped I’d chosen another patient, trusting investor. Which was fortunate, because immediately following the sale we ran straight into a series of disasters.

Easy come, easy go

During the deal I’d acquired our biggest competitor in Australia. This had taken our business there from break-even to contributing a third of group profit overnight. 

This was great until the Australian dollar went strong costing us half a million in currency conversion losses.

Around the same time, we ran some very bad promotions of our core product. This, combined with some sluggish (non-existent) product accounting, kicked out an additional million pounds of losses. 

What was worse, the investor change had heavily distracted the management team. And so two brand new, revenue-generating products became casualties launching over a year late. 

Unfortunately, our budgets already included these products’ revenues. And they were predicted to grow every month. 

This was a big mistake. 

At the same time, we’d also attempted to improve sales metrics, visibility and performance in the UK – our biggest market and cash cow. The more professional, more structured sales process we’d introduced succeeded in being more professional and more structured. We had KPI’s coming out of our ears and beautiful pipeline charts. But unfortunately we had significantly fewer actual sales. 

The icing on the cake was when I realised my leadership team didn’t really like each other and avoided interaction by working in country-focussed silos. 

I felt like a complete failure. I couldn’t even run a decent executive team – the most basic thing a CEO has to do.

Don’t forget, all this happened just after we’d come out of a really big and very public process to find our new investor. 

I’d landed the investor of my dreams and they’d paid a small fortune for our business. Yet here I was, faced with a huge hole in the budget plus £90 million of bank debt from the deal. And we were sailing close to the banking covenants we had all thought were light. 

Just when I thought nothing else could go wrong…

There are two things that haunt private-equity-backed CEO’s. The first is a failed process which means you try to sell your business and nobody wants it. The resulting public humiliation is the business equivalent of being left alone at the dance. 

The second is a covenant breach. This means you’ve broken your agreement with the bank so technically they can take control and you could lose your business. Again, public humiliation. 

We’d come much closer than expected to breaching the covenants relating to our deal. And I could just imagine the voices around Mayfair as PE firms who hadn’t managed to buy us changed their tune to be thankful for a good escape.

But at least now nothing else could possibly go wrong, I reassured myself. And also I had the best CFO I’d ever had on my side. He would help us work out how to get out of this mess.

A brave face that fooled everybody

But, just as I needed him most, my CFO resigned. The challenges facing Reward Gateway on our growth curve were just more than he wanted.

I was in Australia at the time. I felt tired, sick from jet lag and I was putting on a brave face for the super hard-working team we had there. I can remember it like it was yesterday. 

Everyone I met thought we were on top of the world. That we were doing an amazing job, with an amazing sale and a new investor behind us. But I was having, without question, the worst year of my business career.

Even with a great team around you, leadership is a lonely job. 

You dance a fine line of being open and honest, humble and vulnerable, but without inducing panic or despair – even when you feel it yourself. 

You have to find time and head space for your colleagues’ issues even when your own feel insurmountable. 

Although it’s nearly four years ago now, I can recall how I felt. I just wanted someone to fire me. The relief would have been tremendous.

But the call never came. And that was because I’d picked the right investor, Chris Busby at Great Hill Partners. 

I remember his words. They were the same each time I told him of a disaster: “I’m not worried about this Glenn, you’ll figure it out”. 

And it’s funny how all I needed were these simple words to convince me that I could fix things. 

Good things come to those who work through their mistakes

Obviously this is a story with a happy ending. 

I restructured the business from geographical to functional lines, made half my executive team redundant and promoted the next level of managers up to the board. 

The shakeup re-energised the company. And I found I had the most amazing people just under the surface ready to excel. Our late products launched. We fixed the product accounting mess. The currency fluctuations evened out. And the UK sales process iterated to a better place. 

Six months later, the company had its best ever quarter – our highest ever global sales, over 100% client retention and our best product upsell results.

But between navigating disasters and patching up messes, often of my own making, I spent much of my time as CEO with part of my brain preoccupied with two, key personal questions:

  1. How would I know when it was time to leave? 
  2. What should the CEO be doing anyway?

I realise with hindsight they’re two red flags showing how much I suffered from imposter syndrome. And that’s something I worked through with my therapist for the next two years.

People or product? Employees or customers?

Four years after my worst ever year – by which point I’d been CEO for eight years – I had a clearer and more comfortable view of my job than ever. 

I knew my role was to grow the business profitability and I was pretty certain that to do that I only needed to focus on two things: people and product. 

If I got the product right then it would add value to our client’s lives and their businesses and they would buy it, tell their friends and renew their contracts.

If I got our people strategy right – recruited the right people, organised them sensibly and created an environment to do their best work –  they would learn enthusiastically, innovate creatively, sell our products and service our customers well. 

That, along with having the right product in the first place would give us the profitable growth that I was responsible for.

But a second question came up in my mind. 

Who is the most important? Our employees or our customers? 

It’s a chicken and egg question really. But eventually, I realised that there is an obvious parallel in relationship counselling. How can someone love someone else if they haven’t learned to love themselves?

Unless you, as CEO, are going to personally service all of your customers, then your employees will have to look after them. And how can your company possibly make the customer believe they’re the centre of the company’s world if the employees know that they aren’t the centre of yours? 

Unloved employees can’t and won’t do great things for clients. So customer love has to start with employee love. A beaten dog may be obedient, but that’s all it will be, and you need much more from your people than carrots and sticks can possibly provide.

It’s all about your people

I had thought that there were only two things I needed to think about – people and product – but I was wrong. There aren’t two, there is only one. And obviously it’s people. 

When you get the people right then they get the product right for you. 

They are the ones that glue themselves to the customer. They are the ones that hear the customer’s mutterings, sense the customer’s disappointment and spot the opportunity. 

If you’ve created an environment that empowers them, where they can and do speak up, challenge, discuss and debate, then your team will get that information to the right people – product, engineering, whoever. And they will constantly iterate your product to where it needs to be.

Excellence requires rebellious leadership

It took me 10 years to realise that the role of Chief Executive is to be the company’s Chief People Officer. You may have an HR Director or even a person called Chief People Officer. But no-one other than you, the Chief Executive, can or should ultimately own your people strategy, culture and working environment. 

Only you have the cross-divisional mandate and power to make controversial decisions. Only you can lead organisational change and make things happen. Only you can make your whole executive team realise that putting your workforce first is the only way your business will only reach the heights it truly deserves. 

It’s obvious but also, from a business perspective, completely counterintuitive. Which is why my book ended up being called The Rebel Playbook for Employee Engagement. Because to lead your business to success you’re going to have to rebel against the standard business practices that create average, disengaged businesses. 

And only you have the power to make your business behave differently.

Doing this takes courage and you will get things wrong. But, as I’ve shown, failure is a critical part of success. Because, even the most successful CEOs’ careers are, when viewed from the inside, a series of defeats.

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