As a technology investor, I meet a wide variety of entrepreneurs and startup founders. Many times I’ll ask them, “Why do you do what you do? What’s your endgame?”
Many of them share their passion for the journey or how much they value the freedom to be their own boss. Others find it rewarding that they create jobs. For the savvy entrepreneur, however, a big part of their answer includes a fully developed exit strategy – and investors love this. Yes, we admire passion, but we invest our money in solid business opportunities.
It’s Lonely at The Top
Being the creator of a company certainly offers you freedom, but it can also be lonely. My purpose here isn’t to give you wellbeing or lifestyle tips, but it’s no joke. Entrepreneurs are especially vulnerable to debilitating stress. Still, there are professional tactics and resources that can also give you peace of mind.
For instance, your trusted investors might be a source of guidance as many are former or current entrepreneurs themselves. They should be able to offer you some insight about how to get to the other side, so ask them. Entrepreneur networks, such as EO, are great resources as well. They offer peer-to-peer learning and experience sharing. I also recommended forming an advisory board that can help founders tackle high level issues.
The Job Maker
Many entrepreneurs are proud of the fact that they create jobs and rightly so. As you certainly provide something very valuable, it also comes with a great deal of responsibility. Don’t’ forget, you have to make payroll every couple of weeks. It’s almost like being a parent, which means stress.
How are you managing your cash? Remember taxes, benefits, rent and other costs. You never even want to get close to the zone of insolvency. If you can’t pay your employees, you and your board can end up being personally liable. So take full ownership of your fiscal responsibility, and manage it wisely at all times.
What the Veterans Say
More experienced entrepreneurs understand the passion behind it all, but they also implement a clearly defined business roadmap. This helps keep them focused during tough times. In my estimation, a well defined exit plan brings much needed clarity to the life of the entrepreneur.
Which exit scenario resonates with you?
- The Jackpot – Your business booms to the point that it will outlast you. Maybe you’ll take it public. Like the Vegas jackpot though, these events are few and far between. Even if this happens, at some point you’ll need to transition. So plan for it.
- Sell my business to another corporation – When do you think you will sell? Set a target date and start working out a plan 2-3 year ahead. Yes, that’s how long it takes. Who are potential buyers? Name them.
- Sell to my employees – This makes sense for those who love their teams and would be thrilled to see them take over. But you need the right talent in house. And, you need the patience to groom them for the job.
- Bring in a partner that will take over – Ideal for those who thrive on one-on-one mentoring relationships. You dream of passing the torch to someone you’ve trained personally.
“I don’t have an exit plan.”
Not having an answer inevitably sets you up for disappointment. For instance, you might feel a constant sensation of something left undone or no light at the end of the tunnel. No exit means you’re in the rat race: take a deep breath, center yourself and step off it for a moment. A concrete plan makes a huge difference when it comes to business strategy and personal direction. You have enough stress. Don’t make it worse. Make a plan.
I recommend that entrepreneurs begin planning 3-5 years before the exit. In many cases, this means from the very start of their business. Write it down. Be as specific as you can. It doesn’t have to be long, but be precise.
You might say, “In 3 years I want to sell my business to the XYZ Corp. I like them, and I believe I can provide them value.” Even this brief statement brings a new level of clarity and purpose to the why & what of your hard work, overtime and sleepless nights.
The well defined exit also helps you know who potential investors might be. It enables you to set short and long term goals. The path you choose may indeed be very personal, but you have to name it to own it.
So please, eat healthy, exercise and hug your loved ones. Take care of your body, mind and spirit. And while you’re at it, write down your exit strategy.