Exit Staged Right

When a business turns 18, it’s time to think about handing it on … just don’t count on your kids being there to receive it.



On April 14, my clothing company turned 18 years old – a significant milestone in the life of a person or a business. I remember the 18th birthday celebrations we had for my son; a small party at our Hamilton home with supposedly 10 of his closest friends.

“Write down their names, honey, and as long as I know them, they can come,” I told him. “We’ll put the tent up on the lawn and they can all stay the night.” The thought of all the regurgitated alcohol inside my beautiful home after a late-night excursion into town was just too much to bear.

So now it is my company’s turn to reach the ripe old age of 18! Worth celebrating? Hell yes, and with quite a few friends and no tent.

When a person turns 18, it’s time to think about starting to take life seriously. When a business turns 18, it’s time to think about succession, especially given that I have recently turned 50 years young.

When should one start to think about succession? Experts say at the same time as you start the business. But for the many small- and medium-sized enterprises around the country, nothing would be further from your mind at the time of conception than what to do when you reach your expiry date.

In my initial days and months of trade, the whole operation lived and died on my input. The finalising of orders was exciting, working hours were ridiculously long and we ran at every opportunity. Such heady days are hardly conducive to creating an exit strategy. I couldn’t and still can’t imagine ever giving this up, as I love every minute of this crazy business world in which I work.

I am asked so often whether my children, daughter Sam and son Edward, now 22 and 19, will be the next generation to enter the rag trade business that I have so zealously built. My answer is that I simply just don’t know, but I have no expectation that they will or should pick up the reins and keep things going when I have had enough or if I suddenly end up six feet under.
After all, this was my dream, my vision, not theirs. And at this stage it is still dependent on me being around. Therefore, it is up to me to look at a succession plan that may or may not involve them.

There has been some light at the end of the succession tunnel, recently generated by a text from my daughter, Sam, asking me to call as soon as I could. The reason: she and three of her friends had decided to set up a small business making and selling hair scrunchies. This is the first time she has shown any sign of entrepreneurial tendencies. Never before had there been so much as a hint that she might want to earn money other than by working for someone else.

“So, Mum, can we sell them through your 25 stores?” she asked.
“Think about it, hun, do you really think our demographic will buy them?”
“Yep, why not? They are hot right now.”

It would appear that one of the many clothing stores in which she gives my credit card a regular workout had sown the seeds of this idea.

Not wanting to burst this encouraging bubble, I expressed excitement as well.
I suggested that she give them a go when she next worked in the Annah Stretton Dunedin store for us. “Great, so what about the price?” she asked. “We are going to charge $15. Do you think we will make any money?”

Despairing at the many thousands of dollars I had spent on her recently earned BCom, I suggested that she do a costing for them, based on fabric, elastic, etc. Ah, the early days of business. The tempering of excitement and accepting the reality that business is about profit, no matter how beautiful the product is, or how exciting it is to see customers purchase it.

I couldn’t help thinking about the little terracotta pots I used to paint and excitedly drop into the local florist to sell years ago. It was always about the fact that people wanted to buy them rather than the money I might make. And obviously I was happy to supply them on a sale-or-return basis.

So are the kids an option for ensuring this business can and will survive my departure? Will they ever be? At least they are in the generation that will grow the business rather than blow it as the third generation is alleged to do and has been seen to do in so many cases.

Given that it is simply too early to make those decisions, I have decided that I need to keep my options open.
A fashion business like mine will always have succession problems because it is so closely and strongly identified with me as an individual. Yes, I know that sales of this nature happen regularly in the global market. But it’s a lot harder to find examples at home. Imagine Karen Walker with no Karen, or Trelise Cooper with no Trelise. A lot of fashion businesses have shrunk or failed altogether when ownership has passed to someone other than the founder. You can sell a label and assets, but you can’t pass on the founder’s love and passion for their operation.

Look at the success of the publicly listed Michael Hill Jeweller business and its succession plan. You can buy shares in the business, but Michael Hill himself still holds 60 percent of them. And his daughter, Emma, is the deputy chair of the board. The family still has a strong hold on the company, and it is thriving. The prospect of succession – for me and the company that I love so much – still seems a long way away. But the accountant in me says I should have a much more robust plan, and my partner wonders when we will ever get to enjoy each other without this beast of a company continually demanding to be fed.

The reality is that this will only be over when I depart this earth. I have had the most wonderful life, grown children who are my greatest achievements and married two men who added to my life in substantive ways. If the kids took over, what a great outcome that could be, but only if they loved and advanced the dream to another level; driving it with the absolute love and passion that I still have.

Annah Stretton