by Jock Purtle
A common practice that new entrepreneurs are starting to think about is having some type of exit strategy while the business is in startup stage. Although having an exit strategy is a great idea once a business is established, it’s probably not in the best interest of your business or customers while in startup stage. Let’s take a look at a few reasons why it’s such a bad idea.
Let’s face it – the first few years of your business are all about hustle, increasing sales and increasing cash flow. If you are thinking about exiting all the time, you won’t really be focused on growing as effectively as possible. A big payday when you exit is, in effect, largely made up of the sweat equity that you initially put into the business. The many hours of time you invested in getting customers, building a team, creating systems, and developing a real business is what an investor is, in essence, purchasing. Early exit planning is just a distraction from getting down and actually doing some work. Don’t fall into this trap.
Tony Hsieh didn’t start Zappos.com so he could sell it to Amazon. I doubt it was even on his radar. No. Tony started Zappos to deliver the best quality customer service he could deliver in a relatively standard market. And in the process of developing an amazing company for both customers and for staff, he created a great company that other companies wanted to purchase. Which eventually happened when Amazon bought them for a stock exchange.
Not Serving Your Customers
By thinking about selling, you will probably be thinking about cutting costs and increasing profitability. While this is a good strategy, this can also lead to a de-emphasis on your customer. Your customer is your number one asset, without them you don’t have a business. Exit strategy planning makes you lose focus on the core fundamentals of a business. Keeping your clients happy, focusing on their needs and the market’s needs, is what will drive your business success.
Might End Up Getting Rid of the Business Prematurely
There have been so many businesses that have sold out early, only to see the company rise and become more successful. If you get rid of your business right away, you may end up selling it to someone else that will just profit from the foundation you created. It is never a fun time to see someone else reap the rewards that you deserve. So never be too eager to have an exit strategy, because you may end up regretting it later.
Create A Success Strategy – Not an Exit Strategy
Having a fully thought out exit strategy takes a lot of time and focus, which could be used on other, more important aspects of the business.
Selling your company for a large chunk of money is great, but who is going to buy a company if it isn’t even successful? You need to make your company appealing if you want to sell, which means you have to make it successful. So stop planning the future exit, and focus on the success of the business now.
Exit Strategies Can Change Overtime
There are multiple different strategies you can use (IPO, shutdown, stock sale, asset sale, fire sale), so why spend time getting focused on one exit strategy, when you don’t even know what the future has in store for you? All you will be doing is wasting time and energy.
Overall, thinking about an exit as a startup is a waste of time. Just focus on building your business as best as you can and you will see much better results – and then, when the time is right, you can figure out your exit strategy.
Jock Purtle is a senior broker at Digital Exits, where he helps you find a buyer when you want to sell your online business.