Knowing When to Move On: Structuring a Sale to Meet Your Needs and Transitioning to Your Next Venture with Ashok Sivanand | Episode 208

Greg Alexander: Hey, everybody. This is Greg Alexander. You’re listening to the Pro Serve Podcast brought to you by Collective 54. This is a show for founders of boutique professional services firms. So if you’re in the expertise business, let’s say you’re a marketing agency, a consulting shop, an IT shop, etc., this is for you. On this show, we aim to help founders grow, scale, and someday exit their firms.

Greg Alexander: On today’s episode, we’re going to talk about something that we’ve only spoken about one other time in the five years that we’ve been doing this. What we’re going to talk about today is, let’s say you’re a founder of one of these firms, and you’re at a crossroads. You’re saying to yourself, “I can continue on as is, and the probability of success is X, or I can wind my firm down, shut it down, and find what’s behind door number two.” Understanding that decision is a really important one. Entrepreneurs, by nature, have high risk tolerance and a ton of perseverance, which is why they reach any level of success. But is there a good time to hang it up and go do something else? That’s what we’re going to talk about today. To help me with that is someone who just faced this very thing and went through it. He’s got a very interesting story, and I would like for him to share that story with us. So, hey, man, it’s good to see you. Why don’t you introduce yourself to everybody?

Ashok Sivanand: Everyone, my name is Ashok Sivanand, and I was the founder and CEO of a digital transformation consultancy, a software development firm named Integral.

Greg Alexander: Integral. Yeah, okay, great. So let’s start with the backstory. What happened? You were headed towards shutting the firm down. Tell me why and how you got to that point.

Ashok Sivanand: I had been running this firm for about six or seven years at this point. We had grown it to over 50 people, over eight figures in revenue, and achieved a 38-39% CAGR in growth. Things were going really well, and then we got hit by a few things. First, our core customer base was having major issues. We were largely working with large automotive companies like Honda, Ford, Bosch, and Airstream. We later diversified into financial services, working with companies like Rocket Mortgage and others in the lending space. When interest rates went up, it became apparent that I didn’t have an MBA because that diversification wasn’t very effective. The auto and lending industries are both tied to interest rate cycles, and they tend to go up and down together. This was a challenge as our customers pulled back on spending.

Over the years, we worked on exciting projects like helping patients with a carpooling app for non-emergency medical transit, working on autonomous vehicles, and simplifying vehicle architecture for connected vehicle applications. However, when the pullback happened, clients reverted to what they knew, focusing on selling more vehicles rather than transforming the industry. This led to my third point—my personal energy levels. I was no longer excited about the work we were doing as a company. From a founder bottleneck standpoint, I had invested in getting a COO and a sales team in place, but we didn’t have enough momentum in either area. We also lacked the pipeline to change direction or customer base to pursue more exciting work.

By the third strike, I was feeling burnt out. My work was less creative and less impressive, and it affected how I treated myself and others. These factors forced the decision. Winding the firm down was a difficult proposition, but with your help, I realized there was still value left in the business. We had been conservative with cash, and between the cash reserves and contracts with big-name clients, there was value to be extracted. This helped me think about more nuanced options rather than the black-and-white thinking of continuing as is or shutting down completely.

Greg Alexander: Yup. That’s great context. Thank you for sharing that. I want to add a couple of things to this. You had a business that, after six years, was growing 30-plus percent top line every year. When you’re on a cycle like that, because there are cycles in the economy…

Greg Alexander: When you’re doing this for the first time—this being, when I say this, what I mean by that is this is your first entrepreneurial journey. At first, we’ll go at having a firm. You don’t realize that things can change, and they can change in a hurry. Very often, what causes the change, which was certainly the case here, is something outside of your control. So the interest rates go from basically 0 to 7, 8, 9, 10% in a year, and all of a sudden your end customers, which are levered to interest rates—big auto lending, etc.—start to hit the ship.

Greg Alexander: Well, guess what they’re going to do? The first thing they’re going to do is they’re going to contract. They’re going to cut their discretionary spending, which is what happened in this case. So now you have to adjust to that. What does that mean? That means your day-to-day is like laying people off. Your day-to-day is hearing from your clients about fee pressure. It is all this non-fun stuff. So you have two choices in that scenario: either say, “I’m going to double down and hang in there and dig myself out of this,” and that has its pros and cons, or you say, “Nope, I’m going to shut this puppy down, and I’m going to move on to do something else that might have better growth prospects.” Making that decision is really, really hard. So I just wanted to encapsulate the context there. Let me get to my next question. When you evaluated that—wind the thing down and go do something else, or dig in and slug it out for the next 5 to 10 years, maybe to just get it back to where it was previously—tell me about how you evaluated that, maybe from a risk-reward perspective.