In the last few postings, we have been talking about entrepreneurs . . . what the profile of an entrepreneur looks like and how successful entrepreneurs tend to behave. But entrepreneurs, like all business owners, need an exit strategy, and it doesn’t matter if the owner is 26 or 66 . . . he or she will exit the business sooner or later, so it only makes good sense to plan for that event. Venture capitalists do it. When they invest in a business, they have a pretty good idea about how and when they expect to get their money back. Multi-generational family businesses do it in the form of a “succession plan.” But an exit strategy is something entrepreneurs often overlook. They are so busy trying to get their company out of the starting gate that they have no time to think about crossing the finish line. Yet clearly, that’s no way to win a race. For more on how and when an entrepreneur should ride off into the sunset, please read below.
“You’ve got to know when to hold ‘em, know when to fold ‘em . . . “
- Kenny Rogers
It’s probably unfair to make broad, general statements about entrepreneurs because they are a diverse group, and what’s true for some of them may not be true for all of them. Still, there are some tendencies that show up more often among entrepreneurs than in other types of business people.
Serial entrepreneurs (those who start multiple businesses) in particular may have short attention spans. They bring energy and creativity to the birthing of a business, but their real interest is in “proof of concept.” They want to prove to themselves and to the world that their idea for a product or service is a good one that can thrive in the marketplace. So they want to get to a place where they know they have a profitable, sustainable business. But having achieved that, they may lose interest. They like the excitement of getting that first widget out the door and into the hands of a happy customer, but then the repetitive nature of a mature business sets in and the entrepreneur may become bored by the daily grind of just pushing more widgets out the door. If that happens, a smart, self-aware entrepreneur will either sell it, or bring in a talented COO who can manage the daily affairs of the business and grow it to its potential.
Even if an entrepreneur is excited about growing and operating the business on a daily basis, he or she may not have the right skill set to do it. Creative visionaries . . . “big picture” people, if you will . . . often struggle with the minutia of managing a business every day. In other words, a visionary leader who can spot an opportunity and take advantage of it may not be the organized, detail-oriented manager who can run things day-to-day. So once again, if a business is not reaching its potential because the founder is an inept manager, then the founder needs to recognize that fact and get out of the way . . . either by selling it or by bringing in a talented manager.
In either scenario . . . the entrepreneur has no interest in managing the business or the entrepreneur has no talent for managing the business . . . the exit choices are the same: sell it or step down and let someone else run it. If the founder anticipated these exit choices and planned for one of them in advance, the business will be able to handle the transition smoothly. But if there is no exit plan and the founder exits in the heat of battle because the business is under-performing, the transition will be chaotic.
If you don’t have an exit strategy, get one. Even if you’re that rare individual who launched your company, navigated it through childhood, and are still successfully at the helm in adulthood, you will have to leave it someday. Plan for your exit now.
