Exit or Bust?

We discuss the obsession with exiting, why that's harmful, and why focus on building a great business rather than selling is the best strategy long-term.

In a previous article, we shared a framework to help you find the right time to sell your company. If you haven't read it, it's called The Time is Right.

It quickly became one of the most-read articles on Bizma. This is clearly a topic that many business owners wrestle with.

We discuss a range of factors that might push you to sell: your motivation and commitment, the state of your personal finances, how much confidence you have in the business, the health and stability of your industry and so forth.

We received many comments, posing the same challenge: What if I can't ever sell my company?

Let's explore that question here.

The Exit obsession

First, some context. Modern founders are obsessed with getting 'The Exit'. It has become the ultimate entrepreneur status symbol.

The first thing many do immediately after closing the sale is update their LinkedIn bio to include "Exited Founder"...

Why is that? Because of increased access to early-stage, venture investment. Those VCs push you to exit as fast as possible so they can get a return on their investment to return to their own investors.

And slowly that mindset has become the norm.

But it wasn't always this way. If you started your business 20+ years ago, Plan A was probably to build an enduring and healthy company to give you a cashflow until you retire, then maybe pass it down to your children.

The obsession with selling has some nasty consequences. It encourages business owners to force the business to grow too quickly and aggressively. This normalises taking huge amounts of risk early on.

The symptoms of this are really common: unprofitable growth (sometimes with negative gross margins), reliance on expensive paid ads for marketing, hiring too fast and lowering the quality bar on talent, lack of cost control, fancy offices and a quickly declining bank balance...

The hope is to pump up the business, then flip it quickly to get the Exit.

You don't have a stable, sustainable business that can survive for a decade. You are putting all of your eggs in The Exit basket.

Exits are surprisingly rare

Getting acquired at a good valuation requires many pieces to fall into place all at the same time.

You might not have a choice – many of good businesses don't ever get bought.

You need a willing buyer (or many to get some competitive tension), a healthy industry and economy, and a business that ticks enough boxes to be worth buying.

If this is the your only plan, it's a very risky strategy. Because if the Exit doesn't happen... you're left with a loss-making, unsustainable business with some fundamental issues that means it might end up being worth zero.

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