Hanging up your boots

Many of the UK's biggest resellers and channel firms were born at the same time, meaning in the next few years, their founders may be considering retirement. Hannah Breeze investigates what impact this will have on their businesses

The late 70s and 80s was boom time for the channel - with many of today's industry giants - such as SCC, Comptacenter, Misco and XMA opening their doors for the first time, along with countless smaller firms. Fast-forward a few decades and many of the founders of such companies may be considering retirement. And because a lot of today's biggest resellers were set up at the same time, many believe the industry is due something of a mass exodus in the coming years as leaders retire.

In fact, data from the most recent UK census in 2011 shows that the number of people due to retire in 2012 rose by 30 per cent, as the baby boomer generation plans to leave the workplace, reported the Telegraph. In the IT industry specifically, CompTIA expects a third of the global IT workforce will retire in the next decade, meaning a new skills problem is brewing.

The shortage of workers with IT and digital skills in the industry is nothing new, with many companies across the channel admitting they struggle to find enough talent coming out of schools and colleges. But on top of the entry-level skills gap which is widening, the figures suggest a new one is about to open up at the other end of the spectrum.

Letting go

Channel recruiter Marc Sumner said that the most difficult roles to recruit are the most senior ones. With this in mind, before many owners leave the company, they try to get a succession plan in place, he said.

"Normally what happens is people try and do an MBO when they've got the team in place already," he said. "If the founder wants to retire, they get to a place where there can be a MBO with the team they've built up. That's the easy way of doing it. If they've got four or five people in place they can exit that way."

"I think it is fair to say some business owners have their head in the sand a bit, and there are some owners who think themselves invincible and that they'll be around for a long time"

But, he said, it's not always that simple.

"If it's just a straight replacement and the MD wants to retire and take on another one, it's more challenging because [a newcomer] isn't institutionalised into the business," he explained. "It's a key hire and it can go seriously wrong. The founder thinks they're going to retire to the beach, but [the new person] is in charge for a year and they have to come back in. It's really, really bad. It depends what the founder wants to do. I find a lot that the founder wants to take ownership of the business and be chairman - not be in the business, but just owning it and coming in once a month. That's happening a lot, I find."

In recent years, a number of channel faces have chosen to step out of the day-to-day running of the businesses they founded. For example, Softcat founder Peter Kelly retired in 2012, leaving now-CEO Martin Hellawell to continue running the business as he had been doing previously.

Sumner said that if a proper plan has not been in place, and a founder has to be directly replaced, it can be very hard.

"I think it is fair to say some business owners have their head in the sand a bit, and there are some owners who think themselves invincible and that they'll be around for a long time,"

"It's a real tough gig," he said. "Working for a 100 per cent owner - which is common in small partners - is the toughest job there is. You're still working for someone else and it's their baby and they've grown it and it's their life's work. You're coming in, hopefully to carry on the good work, but it's a challenge. People really don't want to work for a owner-manager business. They're emotionally attached to it and they make emotional decisions."

Looking within

Although many businesses look to recruiters to find external candidates to take over from founders and senior staff who are retiring, many could benefit from developing their own internal staff, who could be a better cultural fit, according to Graham Hunter, CompTIA's skills and certification vice president for EMEA. But he said many businesses overlook middle managers, assuming they couldn't hack the job.

"I think it is fair to say some business owners have their head in the sand a bit, and there are some owners who think themselves invincible and that they'll be around for a long time," he said. "You can't really knock them for it, they have built their businesses from being very small to what they are today. It is difficult to let them go. But the industry needs to ensure the longevity of these organisations and to make those investments [in middle management]. It's tough to do. They need to ensure the right training and education is in place to make sure they're comfortable with someone taking over."

Hunter added that another exit strategy for founders could be to sell up, which he said could lead to a lot more consolidation in the reseller space.

In a recent partner blog, Cisco marketing expert Pippa Collett cited figures from Pleasant Bay Capital Partners claiming 40 per cent of privately held business owners are coming up for retirement in the next five years. She agreed with Hunter that many will consider selling up as a suitable exit strategy.

"Of course, the best [businesses] will already have succession plans in place, but inevitably, a significant number of owners will be hoping to cash out for a more comfortable retirement," she said.

Collett said there are a number of different things a company can do to make their business more saleable when owners want to retire, including customer diversification, geographical domination and vertical focus.

She said being specialised can help resellers cash in.

"Specialised skills and services [are important] - don't be just another distributor," she said. "Partners that are offering specialisations and services that differentiate them from the competition have the potential to attract a higher valuation and more acquisition interest. The differentiation effect on your company's valuation will be even stronger if it is hard for any competitors to copy your offer."