Exit Strategies: What’s Yours?
One thing that I am curious about is how concepts and thoughts about being an entrepreneur hold up over time. I used to write for Entreworld and Inc. and while most of the articles are lost to the ether, some of them are still around. This article was hard earned and stands the test of time. I wrote this first for Entreworld (now entrepreneurship.org) and then it was used by Inc. I often tell the story of “what’s the goal?” and vividly remember the advisory board meeting that I reference.
Exit strategy — I’ve never like that term. It smacks of an end, of leaving, of walking off without looking back.
When I became an entrepreneur, I was naive about exit strategies. “Exit strategy?” I said the first time the question was asked of me. “You want to know what my exit strategy is?” I couldn’t understand why, in the frenzy of creating a business, I had to think about an exit. Now, five years later, I know that an exit strategy is far less an expectation of an exit and much more a begging of the critical question, “How high is your highest bar?”
While still objecting to the phrase itself, I now believe that having an exit strategy is vital to the success of both a company and its leader. I spent my first two years in business not knowing that I needed one, the next year overcoming my objections to the images the phrase conjured up, and the fourth year dedicating my time to the creation, development, and refinement of an exit strategy.
A New Look at Exit Strategies
When I launched my company, Net Daemons Associates Inc., which consults to the computer industry, the particulars of how I’d get out weren’t anywhere to be found in the business plan I had inked. Four years later, when changes in the industry forced me to revise the plan, they were. So what happened?
Well, the short answer is that a member of my company’s advisory board hammered me every day with this question: “Yeah, but what’s the goal?” That made me realize how important it was to be conscious of what I was striving for.
The formal, presentation-to-the-board answer was that three years after the company’s start, investors were able to put a different type of value on it. In the beginning, any service company is little more than the sum of its founders’ collective vision and specific talents. Should they leave, not much else of value remains.
After three years, however, there are clients who have come to depend on its services, and there is a revenue stream — tangible stuff that makes it easier for investors to put a price tag on it. Knowing my company’s price tag became essential, if only to be able to compare notes.
Exit Strategies as a Goal
But there was another answer, one that was only revealed to me after deep contemplation.
I began to consider the exit strategy question as an opportunity to educate myself about what was truly being asked. I began to see my exit strategy less as a termination and more as a logical part of the goals I had set for both my company and myself. While I may, at some point in my tenure as CEO, actually “exit,” I may also pursue an acquisition, take the company public, merge with another concern, methodically increase sales to the next level, or shoot for rapid 200% growth.
In achieving any of these goals, I will have, in fact, “exited.” My company will have moved from one phase to the next, its exit from one level becoming its entrance to the next. In other words, there isn’t much to fear about the concept, because an exit strategy can — and must — change, as the business and its goals change. Your exit strategy is, therefore, no more frightening than the goal you’re working toward, the highest you’ll raise your bar.
Conversely, there is plenty to fear about continuing to work in entrepreneurial nirvana with no consideration of its end or change: The reality is that unless you define that end or change, your business may change in a way that wasn’t in your plan.
Defining Your Exit Strategy
So what’s your exit strategy? As you consider that question, I hope you’ll also consider the following words of wisdom:
- Know why you’re in the business and what is most important to you. Know this in parallel tracks — the personal and the professional — and also know where the two can merge.
- Educate yourself through listening, reading, and interacting to know what others strive for, both in like-minded and not so like-minded businesses.
- Communicate your goals and intentions, include people in them, and enlist support.
- Understand that your exit strategy may be that you will never leave, or alternatively, that you will sell high and retire early.
- Do what’s right for you.
Write your exit strategy down. Have a road map with a start and a finish. Know how to answer the “What is your exit strategy?” question, but also know that you’re really answering the “What are your vision and goal?” question. And realize that, through identifying your exit strategy, you have a chance to preserve and control your own entrepreneurial nirvana.
