How we built a business out of recession - chapter 44 - the runaway train is halted
The story of CitNOW*
This is the 44th chapter about CitNOW, the company started from a kitchen table in Winnersh, Berkshire. If you’d like to read from the beginning, here’s a link to chpt 1. Each chapter is a 5-minute read. It’s an early draft of a book.
CitNOW was founded by Andrew Howells and Donna Barradale in 2005, although the company was only registered in 2008. In February 2018, we sold the company to Tenzing, a UK private equity company. It has been sold again since.
Why all the high jinks?
It was deliberately set up as an ambush, sort of, because the fewer people who knew, the better. I was particularly keen that Alistair be kept out of the loop, although there was no guarantee that this would end up being the case. Geoffrey had started attending my meetings with Ken and was fully briefed on my intentions. It had been in discussion with Geoffrey that the decision had been made to remove Steve, or at least attempt to. He could have forewarned Alistair at any point, but chose not to do so.
I was nervous. I wasn’t going to get a second attempt at this, so it needed to go well. There was no presentation, which would have been crass and not the right sentiment at all. I liked Steve. We all did. This cause of action was solely to stop the runaway train and bring a halt to the entire financial mire which now bogged us down.
Instead, I stood up, always a good idea in such situations, and began to summarise. Where were we, and what did I believe had to happen next?
Before reaching this point, I had had numerous discussions with Donna about how we thought this meeting would unfold. Who would vote in favour of what we were proposing, and who was likely to object?
Every shareholder had a vote, which meant a total of seven. Geoffrey was also present, primarily to fulfil his role as impartial observer. I was also half-expecting him to throw his more objective weight behind the proposal, if the need arose. For some reason, I don’t think Chris, our other non-exec, was present.
Our assumption was always that Alistair would object. But would anybody else join him?
I didn’t know Angela well at this point, but I knew she wasn’t happy with what had been happening. There had already been murmurings at several board meetings, a sense of general dissatisfaction that the business was under-performing, and so soon after she’d decided to invest.
In many respects, she was also the most critical vote around the table that day. Everyone else was there because of sweat equity. She wasn’t. There had been a significant leap of faith on her part, and a substantial investment made. Hard-earned cash, which had opened the door to more credit with Santander. This could never have happened unless Angela had committed her money to our balance sheet.
Geoffrey knew Angela well and was confident that she would welcome the proposed change.
This then left our three tech shareholders and a question mark over how they might react. Colin, our Technical Director, had the most active role in the running of the company, and I thought the most likely to object and side with Alistair.
Here was a Director facing the sack because he was guilty of not putting a stop to the company's deteriorating financial situation or planning a sensible course of action to escape it. It wasn’t difficult to draw some similarities with Colin’s position, who knew exactly what it felt like to be dealing with the constant, unchecked demands of our MD.
Berrie and Michael were less enamoured with Alistair, but then they didn’t have to work with him either. At some point, I’d heard that Michael had had a significant spat, but I never unearthed the details as to why. It didn’t matter. It was reassuring enough to know that he was prepared to stand his ground, an encouraging sign under the circumstances.
The other good news was that these guys were not pimple-faced rookies. They all had extensive experience, having co-founded at least two software startups, and were well-equipped to understand the significance of their current predicament. I also assumed that whatever they decided, they would likely stick together and vote as a group, three votes going one way or the other.
If they went against me, it would likely result in a 3-3 draw, with Alistair having the deciding vote. That would be a serious failure, so I also had a sweetener up my sleeve, which might just tip the balance.
As soon as I started to speak, I knew that Alistair thought I was coming for him. Was there just a small flicker of relief on his face when I announced that Steve should depart the company with immediate effect? The next Financial Director would be very different. One with shareholder approval who would be expected to behave more independently. No more sideshows.
His first reaction was to argue that we couldn’t do this because of the existing shareholders’ agreement. Donna anticipated this and rebuffed Alistair immediately, quoting the necessary section, which made it quite clear that there were no legal obstacles to taking this course of action.
I continued.
I realise that the relationship between you and me is no longer a good one. You don’t see me as your Chairman, so there is little point in continuing with the current arrangement. It’s not providing any benefit or value to the company, which is my primary consideration as a shareholder.
I propose that Geoffrey be appointed as our new Non-Executive Chairman, and I hope that he will provide you with the support you need to fulfil your duties as Managing Director. Geoffrey has already indicated to me that he would be happy to accept this position.
And then I shut up and waited.
Angela immediately dived in, explaining her concerns about Steve and the fact that even today, of all days, he hadn’t insisted on being present at this meeting, given what was being discussed. Instead, he’d preferred to prepare a financial handout, defining the current situation without providing any sort of way out. She was in favour of the proposed course of action.
Geoffrey also followed up with his support for the proposal, reinforcing the fact that we could do a lot better with our next appointment. Hiring the right Financial Director would further strengthen the company and increase the likelihood of a future sale.
This just left the other three shareholders and their thoughts. They said surprisingly little. I believe I was mildly admonished for not sharing my thoughts and proposal in advance, but they had no serious objections.
The dice had been thrown, the proposal approved, without having to directly point the finger. Geoffrey offered to give Steve the news, but Alistair insisted that he talk to him.
The search for a new Financial Director began immediately.
*CitNOW was our company’s trade name before we sold it in 2018.