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How Great Entrepreneurs Exit Their Companies on Top

Jul 3, 2015 by Bo Burlingham 1 Comment
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Every entrepreneur exits. It’s one of the few absolute certainties in business. Assuming you’ve built a viable company, you can choose when and how you exit, but you can’t choose whether. It’s going to happen. You can count on it.

That this simple fact of business life comes as a shock to many owners of private companies is in itself a testament to how little attention the final phase of the journey receives compared to other aspects of business. Do an online search for business marketing, finance, customer service, managing, or culture, and you’ll find oceans of information. What’s available on exits is a mere trickle by comparison, and almost all of it has to do with maximizing the amount of money you can get from a sale of your business. But there are many other aspects to the process and they play a larger role than the size of the deal in determining whether the exit has a happy ending—that is, whether you “finish big.”

But how? Where do you even begin? For that matter, when should you begin? What are your options? How much money should you be looking for? What role models are there, if any? What pitfalls should you be aware of? How do you identify and qualify potential successors if that’s the route you choose to take? Alternatively, how do you find potential acquirers? What sort of outside help do you need? How much should you tell other people in the company? What will you do after you leave? And on and on and on.

Once I took a closer look at exiting, I realized that it is a far more complex subject than I’d realized. It isn’t an event. It is a phase of business, just as the start‑up period is a phase. As in a start‑up, there are many factors that affect how successful the exit will be. For that matter, there are different ways to define what a successful business succession plan looks like.

While it soon became clear that no two exit experiences were exactly alike, it was equally obvious that some were a lot better than others. By that, I mean that some people wound up happy with the process and satisfied with the way it turned out, while others looked back on it as a nightmare and came away with deep regrets about the outcome. My question was, why. What did the people with “good exits” do differently from those who’d had “bad exits”?

I had to begin by clarifying in my own mind what a good exit consisted of. For most people, I’d found, there were four elements:

 1. Owners felt that they’d been treated fairly during the exit process and appropriately compensated for the work they’d put in and the risks they’d taken to build their businesses.

2. They had a sense of accomplishment. They could look back and know that through their businesses they’d contributed something of value to the world and had fun doing it.

3. They were at peace with what had happened to other people who’d helped build their businesses—how those people had been treated, how they’d been rewarded, and what they’d taken away from the experience.

4. They had discovered a new sense of purpose outside of their businesses. They had new lives that they were fully engaged in and excited about.  

For some people, there was a fifth element:

5. The companies they’d created were going on without them and doing better than ever, and they could take pride in the way they’d handled one of the most difficult tasks faced by any CEO: a business succession plan

.Finish Big cover_Bo Burlingham

 So how had the owners who’d had good exits gone about preparing for the day they would leave? What were the patterns?

In listening to the entrepreneurs I interviewed, I was constantly reminded of an old saying: You should build a business today as if you will own it forever but could sell it tomorrow. Most of the great entrepreneurs I’ve been privileged to know have followed that dictum. My friend and sometime coauthor Jack Stack of SRC Holdings (which was sold to its employees) makes the comparison to keeping up the market value of your home—fixing the roof, adding rooms, painting regularly—even if you have no intention of moving anytime soon. The same logic applies to businesses. Oddly enough, you’re far more likely to have a company that’s built to last if you simultaneously build it to sell. You’re also far more likely to have a happy exit.

Excerpted from Bo Burlingham’s new book, Finish Big: How Great Entrepreneurs Exit Their Companies on Top. To learn more and to receive a free copy of the first chapter of the book, visit his website: boburlingham.com

 

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Topics: Planning

Bo Burlingham
Written by Bo Burlingham

Burlingham is an editor-at-large of Inc. magazine and the author of five books,the most recent being Finish Big: How Great Entrepreneurs Exit Their Companies on Top (Portfolio/Penguin, 2014). A previous book, Small Giants: Companies That Choose To Be Great Instead of Big (Portfolio/Penguin, 2006), was one of five finalists for the 2006 Financial Times/Goldman Sachs Business Book of the Year award. Burlingham joined Inc. in January 1983 as a senior editor and became executive editor six months later. As executive editor, he was involved in much of the magazine’s early coverage of innovative companies that have since emerged as leaders of the so-called New Economy. In 1990, he resigned that position so that he could do more writing and assumed the title of editor-at-large. Subsequently he wrote two books with Jack Stack, the co-founder and CEO of SRC Holdings Corp. (formerly, Springfield Remanufacturing Corp.) and the pioneer of open-book management. One of the books, The Great Game of Business (Doubleday/Currency, 1992), introduced the concept of open-book management, has sold more than 300,000 copies, and was named one of “the 100 best business books of all time.” The other, A Stake in the Outcome (Doubleday/Currency, 2002), recounted how SRC built its culture of ownership while developing the business model that has allowed it to grow from $16 million to $600 million in revenue as of this writing. Burlingham also co-authors with Norm Brodsky the popular column in Inc. called “Street Smarts,” which was the winner of a gold Azbee award from the American Society of Business Publication Editors in 2008, and a finalist for a National Magazine Award in 2006 and 2008. He and Brodsky also wrote The Knack: How Street-Smart Entrepreneurs Learn to Handle Whatever Comes Up (Portfolio/Penguin, 2008). (When the book was reissued in paperback a year later, the title was changed to Street Smarts: An All-Purpose Tool Kit for Entrepreneurs.) A former Fulbright Scholar and a Woodrow Wilson Fellow, Burlingham graduated from Princeton University in 1967 with a B.A. in public and international affairs. He subsequently served as managing editor of Ramparts magazine, contributing editor of New Times magazine, and a member of the editorial board of Working Papers, and wrote for numerous publications, including Harper’s, Esquire, Mother Jones, The Boston Globe, and Boston magazine. In the early 1980s, he joined Fidelity Investments, the mutual fund company, where he worked with fund managers and top executives, including Peter Lynch. Burlingham was a founding member, with Tom Peters, of PAC/World, an international organization of business leaders and observers. He served on the board of The Body Shop Inc., the U.S. subsidiary of the international skin and hair care company, from 1992 to 1997. Bo and his wife, Lisa, have been married for 44 years and live in Oakland, California, and Sancerre, France. They have two children and four grandchildren.

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Our approach to running a company was developed to help close one of the biggest gaps in business: the gap between managers and employees. We call our open-book approach The Great Game of Business. What lies at the heart of The Game is a very simple proposition: The best, most efficient, most profitable way to operate a business is to give everybody in the company a voice in saying how the company is run and a stake in the outcome. Let us teach you how to develop a culture of ownership, where employees think, act and feel like owners.