When is the right time for a founding CEO to step down? For Julian Leighton and Mike Parker, founders of Orange Bus, it was three years after their product and service design company was acquired.
The two knew from the outset of starting Orange Bus in 2006 that the eventual end goal was to sell up shop and step out. ‘One of the advantages of having the plan from day one is that we didn’t wait for someone to come knocking on the door, explains Leighton.
In 2014, after posting an annual turnover of £4m the year before and following an aggressive growth strategy, Leighton and Parker decided it was the right time to put the company up for sale. Their first move was to employ the help of corporate finance and advisory practice Green Square. ‘The first meeting we had with them was about what Mike and I wanted for the future of the company and we worked back from there’, recalls Leighton.
What they realised was the company that acquired them had to be a cultural fit that would keep the Orange Bus brand alive well after they had left. ‘We had one company interested who would incorporate us into something very big and reduce our company to just being a delivery centre – that’s not what we wanted,’ Leighton recalls. After a year of searching, the pair settled on Capita.
The point of acquisition is when many founders choose to step down or are ousted (see below). However, Capita was passionate about keeping Leighton and Parker at the helm.
Over the past three years, they have grown Orange Bus, moving the company into the consultancy division of Capita and increasing the workforce from a team of 75 to 130. The company has also posted 20% year-on-year growth since acquisition with revenues rising by 23% in 2018 to £9m and a 25% increase in turnover forecasted for 2019.
‘We had one company interested who would incorporate us into something very big and reduce our company to just being a delivery centre – that’s not what we wanted.’ — Julian Leighton, co-founder
So why would the founders want to step down when their company is experiencing growth under their leadership?
‘Many founders enjoy the early days of a business,’ explains Tom Wilson, an investment partner at Seedcamp. ‘As it grows they lose their sense of excitement and want to focus on new opportunities’. This was the case for Parker who has completely exited the company so he can focus on his own projects. ‘Mike’s a creator, he wants to do new work and be at the cutting edge of things. He doesn’t like run-of-the-mill. I think even if we had failed to sell the business he would have drifted off into something else,’ says Leighton.
Leighton’s own exit is for far more personal reasons. ‘On my 40th birthday I ended up being dramatic and I said to my wife: “I’m not giving up my 40s like I gave up my 30s.” We had two young children then, we have three now, and I missed a large chunk of them growing up because I was working all the time.’ However, he has not left the company completely, and has instead transitioned into the role of brand ambassador.
The future of Orange Bus poses new challenges, which include hitting even more ambitious financial targets and global expansion, which neither Parker nor Leighton have the skills to tackle. With this milestone in mind, they have spent the past two years getting the right senior management team for Orange Bus’ next phase of growth and slowly stepping back from the business so the transition would be smooth.
Taking on the role of CEO is James Hall, who has been promoted from chief commercial officer.
‘He comes from that large corporate background so he understands what it takes to work in that environment. He has the formal training to help build strategies and growth plans and all of that stuff which I, to be quite honest, don’t’, he admits.
‘James said when he started, Capita was the smallest business he had ever worked for – and Capita to us is huge.’
‘Many founders enjoy the early days of a business. As it grows they lose their sense of excitement and want new opportunities.’ — Tom Wilson, Seedcamp