I have been surprised by the number of times when speaking on exit strategies for retiring business owners I get asked the question, “What advice do you have for entrepreneurs starting a business?”
I’ve thought back to what went through my mind in starting my business — the worries, the challenges, the surprises, the decisions I made. I’ve also considered the many things I learned, through the process of preparing to sell my company and eventually writing Exit Signs: The Expressway to Selling Your Business with Pride and Profit, that might help others prepare themselves.
On reflection, I was not surprised that, although beginnings are quite different from endings, there are very important similarities, too.
What Do Endings Tell Us About Beginnings?
I read somewhere that the true measure of a successful sale is if an owner can say a year later, “I’m happy.”
Research shows that almost 75% of those who sell regret their decision within a year. And a big reason is not that they left money on the table or sold to the wrong buyer. It’s because they feel adrift. They don’t know how they will find that path forward that brings them meaning, challenge, belonging, or even structure to a day.
Endings teach entrepreneurs, who are just beginning a company, about three important business lessons:
- The power of purpose,
- The challenge of discipline, and
- The significance of transitions.
In this blog post, I will talk about the first two. The significance of transitions will come next time.
The Power of Purpose
“Do you really want to leave, and why?” is my first question for retiring business owners as we begin exit strategy work.
If they cannot answer this question, they have a different kind of work to do, called soul searching, before the technical work of preparing for a sale. Being unclear about this question is like running blindfolded down a winding path filled with predictable potholes AND having a hole in your pocket that spills large sums of money.
For a start-up owner there is a related question: “Why do you want to start this business? For what purpose?” Are you looking for an outlet for creative capabilities? Searching for independence and freedom to ‘do it my way’? Are you driven to build an entity with a team or community that goes beyond your own talent?
Knowing why you want a business, and knowing your ultimate personal goal, will guide a hundred decisions you will have to make in the first three years:
- Your structure — solo or partners or employees?
- Your income goals — grow equity or yearly income?
- Your infrastructure build-out — what staffing, technology, facilities, and capital investment?
- Your growth strategy — yearly targets and strategic rate of growth?
- Your end game — is this a company built to flip or built to last, and via IPO or M&A or internal succession?
These are just a few of the fundamental decisions that are made easier if you are first clear about why you are in business, i.e., your purpose and your sense of the future.
The Challenges of Discipline: Find the “And” and Just Say “No”
“Discipline: the ability to behave in a controlled and calm way even in a difficult or stressful situation; the mental self-control used in directing or changing behavior, learning something, or training for something.” (Encarta Dictionary)
Exit planning takes discipline. When you are so busy growing your business (and sometimes just surviving), it takes enormous self-control to make the time to pull away from the day-to-day to prepare yourself and your business for a transfer of ownership that is somewhere out in the future.
“I’m too busy” and “It’s too early” are the top two reasons owners give for not engaging in the discipline of exit planning. It’s like deciding, at age 65, that you’ll run a half marathon next week — when you have a free day — but you haven’t started training for it.
Finding the AND
Start-ups require this discipline too. Entrepreneurs need a discipline of thinking of the AND vs. the OR.
When I started my firm it was a constant struggle to be both opportunistic AND strategic. I needed to find work to pay the bills and fuel the business development AND I needed to make sure I was building the client list and results that paved the way to the longer-term goals I had set. Later this challenge surfaced as finding the AND between growth goals and work/life balance for our team.
When to say NO
As we grew in staff and capabilities, the discipline we needed also involved knowing when to say NO to an industry sector or line of service because it did not fit our strategy or values. There is no strategy or integrity of values if you never exercise the discipline to say NO, to that potential new hire or to the RFP that you just aren’t sure is a fit.
Purpose and discipline are fundamentally about focus. In several recent talks, I used the analogy of bifocal glasses. They allow us to focus on two capabilities, seeing plainly a distant location yet reading clearly what’s in front of us. Many of us with bifocals wear blended lenses, i.e., lenses with no visible line. It takes discipline to keep wearing them at first as you navigate where to point your nose so your eyes look through the right part of the lens. But with practice the brain adjusts. So it is with the discipline of balancing opportunity AND strategy, short term AND long term, values AND pragmatism.
Taking the time to be clear about your purpose and developing the discipline to be true to it is your personal work year-in and year-out, from start-up to exit.
Make that time. Such diligence will produce great dividends in results and satisfaction. So I leave you with this thought from Beverly Sills, of opera renown:
“There are no short cuts to any place worth going.”
Read part 2 of this article, on transitions, here.
Please share how you experience the power of purpose and the challenges to discipline in starting up or transitioning out of your business.