Exit Strategies: Consider Your Options


by Joey Tamer


MDG.org Bulletin October 1998, Volume 5, Number 3.


No one is taking your desire to cash-out lightly. Perhaps you meant to make your nickel million early.

It has become fashionable to build companies to put them on the market, either towards an IPO or towards an M&A strategy. It is trendy to be a millionaire before 30, or 40, or 50. But what did you really mean.

It is important to plan your exit strategy, particularly at the beginning of your business. But what if you don't care about it? What if you would love to work at this job forever? Then, the pressure to cash-out, the pressure to be a contemporary success story, can interfere between you and your wishes. Not that you don't want the money. But I have sat with creative service companies, clients with happy work lives, who have pressured me to offer them their exit strategy options. They tell me they want to work less. They tell me they want financial freedom. But they can't tell me what they want to do with the money. It isn't that they mean to build a new business. It isn't that some other dream is hovering above them. It is as if cashing out is what they are expected to want.

Perhaps you want to build a significant business, small or large, which endures. Perhaps you can even consider it generational, something to pass on to your children or to your proteges (Mr. Murdoch is doing just that with his kids).

Perhaps you don't need a lump sum of some millions of dollars. Perhaps you would prefer structuring a creative profit sharing program which creates annuities for you and your family, your partners and loyal employees. Perhaps a stock option or profit sharing plan can be devised that increases profitability of the company, and allows the successful partners and employees to take cash bonuses every year, improving their immediate quality of life, rather than planning ahead the three to five years for an exit strategy, and the big bucks, which may or may not work.

It is important to understand, particularly for small businesses and service businesses, that a commitment to an IPO or a mergers and acquisitions strategy changes the very nature of your business and your life. From that point of decision, the decisions of the business are focused on the exit strategy, not necessarily on the quality of the work, the creativity of the daily experience, or your lifestyle choices. All decisions, all actions must focus on the big play, the exit. What would the investors think? What will Wall Street think? Does this decision leverage our valuation?

These are the correct questions if you are seriously exiting. These are the right attitudes if cashing out is your true goal, particularly if it was your original goal.

But remember, not all exit strategies succeed. It is possible that the IPO will miss its timing, or fail. It is possible that 15 months of expensive negotiations in a friendly merger will be called off at the last minute. It is possible to deal with partners who are unethical, and the deal blows up.

The risk lies in how you place the bet. The risk lies in giving up what you may truly want as a life, an income, a financial security position, in order to achieve an end result. Once headed for the exit, your life, and your company's life, ceases to be your own. It becomes the property, and the commodity, of you and your exit partners--your investors, your bankers, the Others. From the day of decision, it is in many ways no longer your company under your command.

There is an old saying: be careful what you wish for--you may get it. Think carefully about your choices before you begin down the exit path.




Joey Tamer refines the vision, strategy and success of companies -- 
Fortune 1000, capitalized start-ups and investment fund.

www.joeytamer.com    (310) 245 5310   joey @ joeytamer.com