Exit strategy is the most daunting focus for every CEO, especially bootstrapped founders. How is it possible to envision an exit from your company when you are so stuck in the weeds of it? How can a bootstrapped CEO, lost in a constant barrage of tasks and problems, find the time and space to think about how they are going to exit? It seems like a mystical dream and the company is their vocation. What on earth would they want to do that is not running their own company in this field and industry?
“What is your exit strategy?” is a hard question that does not really cover the bases a business leader should consider. The better question takes into account the person as well as the results. Things like legacy, post transaction life, and balance. Structuring the answer around YOU rather than a straight money line will help you craft a strategy and vision that is all encompassing, including how you build your operations and succession plan into your exit strategy.
What has to happen to make it worth it to you?
When you ask that question in a program that forces you to think beyond the financial returns, you start to consider things that are vastly more personal. What has to happen for this to matter to you? What is your legacy? What are you leaving behind? How do you want to be remembered? At the end of a transaction, what do you want to do? Do you want to sit on the board of your old company and watch it grow from above? Do you want to step away entirely, or do you want to be an active participant in its future? Do you want to retire and relax? What does your balance between work and life look like after a transaction? What is your relationship with your family? Do you want to spend your time continuing to work, or give that time to others for their benefit?
Answering those questions guides your strategy for the next few years, regardless of whether you intend to sell or not. The financial metrics you want, and what the market is willing to pay, will guide your decisions around growth rates, recurring revenue, gross profit, and EBITDA. Those figures are knowable. Simply ask the market. Ask companies you believe are potential acquirers what metrics drive their buying decisions. Most are quick to tell you exactly what they look for in terms of financial performance and operations. There are thousands of private equity firms interested in your vertical, your industry, and they will happily tell you how they calculate their interest in acquiring a company. Those things are the easy part.
The hard part is the soft stuff. Your legacy. Your life after the transaction. What you actually want to do. Those answers will guide how you build your internal team, find your successor, make your operations completely independent of you, and build a culture that sustains beyond your leadership. Those things take time, which is why it is important to think about them now, three years before you even think about putting your company up for sale.
For Esteemed members, this is essentially your three year growth strategy. You will have the financial and internal metrics you are driving your company toward. And if you do not sell in three years, who cares? You have built a remarkable company that is performing, sustainable, and will withstand the test of time. Then you can ask yourself all over again: what has to happen for this to matter?
Spend some time this month asking that question. Focus on three core elements: financial performance, your legacy, and where you want to be personally when it comes to family, health, and happiness.
Give it a spin.
Be Esteemed.