Go to the Light – Start Exit Planning Now

“I don’t know where I’m going, but I’m making good time.” – Quote from a former client.

I just completed a series of discussions with some mature business owners on potential exits from their businesses. As usual, I tend to take away common themes and I thought of this quote from a former client. He used it to describe people he had encountered who were so absorbed in what they were doing, they thought they were making progress.

Through his eyes, he thought they were lost. The latter tended to describe these owners. Each had a valid reason to address the need for exit planning – age, paradigm changes, timing – these were all present and culprits in raising the very thorny question as to “What’s next?” There is an abundance of tools to help an owner through the exit process, but getting started – now there’s the rub.

I hear loads of excuses as to reasons to delay. Many who advise in this space have what are perceived of as ulterior motives – money managers who want owners to sell so they can manage their liquid assets, life insurance sales people who want to make sure owners and their families have the annuity or insurance to cover them as they go on their journey, etc. Unfortunately, while well intended, they give the owner an out by raising questions regarding true intent. I have had some success in this space because I do not care what the result is, I just want to make sure that an owner has all the facts before they make their decision. But I will admit, it is a tough battle.

Having said that, I believe the major reasons for delay are psychological. Fear is often downplayed and yet I think it is one root cause of most owners becoming part of the majority who either have no exit plan or start to plan too late. In his 2000 Year Old Man albums, Mel Brooks cited fear as the great motivator for everything from transportation to the development of the handshake and dancing. One problem for the owner is often the absence of someone they can confide in to discuss their fears. Often seen as the patriarch or matriarch, showing fear is often perceived by them as a sign of weakness. So, they seek solace in finding a solution. This keeps them busy and avoids the need to discuss the obvious – starting an exit plan.

The absence of a “life” after the business is gone is also an issue. Often left with little time to develop hobbies or other interests, the lack of something to go to leads the owner to complacency about staying where they are. Making the business stronger is a great defense and considered “progress” perhaps ignoring at times risks like the paradigm shift which may be too great to overcome.

So, to owners, I say start the process now. Have others tell you it is too early, but I never think it is. My advice has always been not to get into a business without knowing how you will get out. Also, find an advisor you can trust. They do not have to be skilled in the exit process, but they have to be capable of listening and telling you things you may not want to hear. With some guidance, you will know where you are going and have a successful completion to your journey.

Madagascar – Where Being an Entrepreneur is a Way of Life

“Necessity is the mother of invention.” – old English proverb

My wife and I recently visited Madagascar. It is a beautiful country with unbelievable landscapes, great people and of course lemurs. As I am prone to do, I saw this world through my own “colored” glasses and personally believe there are more entrepreneurs there than anyplace I have ever been. Now before you think I may have stayed in the sun too long or had too many THB’s (Three Horses Beers), please bear with me.

I am not sure about the official unemployment rate, but we spoke to dozens of people from all walks of life while we were there. Except for one, all were what we would call in the US, independent contractors. They were paid when they worked (office and factory workers, those in tourism, etc.) and not paid when they didn’t. So to survive, almost everyone has their own “business” – from performing some type of service to raising crops to clothing boutiques. Every town we visited had a plethora (thank you Three Amigos) of vendors selling everything from food to clothing to kindling wood. So I contrast this with what I see here every day and realize there are two big differences.

First, Madagascar is very poor so there are no “friends and family” to help support you as you go off to develop some new product or service. They need their venture just to survive; to pay the rent or barter to get food for their family. They are the ultimate risk takers – figuring out what they need to do to make it through the day – they are not living comfortably at home (or with friends) writing code for what hopefully will be the next killer app.

Second, they are unbelievably resourceful. Now I meet smart startup founders every day and they certainly know how to deal with limited resources. In fact, when I hold sessions and ask participants to describe an entrepreneur, one of the most common responses is they know how to get the most done with the least. But there, this concept is taken to a different level. There is little money and scarce natural resources, yet we visited “businesses” that:

  • Made aluminum pots (the same my Mom used for pasta) out of 100% recycled aluminum. They used everything from old building siding to car parts. By the way – no kilns for heat; just charcoal and the molds were formed out of silica sand.
  • Created inlaid wood pieces from recycled wood. Here the key tool was a saw; the body of which was constructed from car parts and the saw blades from the steel found in recycled steel belted radial tires.
  • Produced miniature model bicycles from 100% recycled bike parts – everything from hand brake cable to old tire spokes.

So now perhaps you can see what I admired about the entrepreneurial spirit there. Necessity for them is the mother of invention – both the need to survive and the need to make the most from what is available. Perhaps this “way of life” will inspire you to work even harder to make your venture a success because as tough as you think it may be, you are probably not as burdened as the entrepreneurs of Madagascar.

Entrepreneurial Loneliness – Learning to Share

“It’s lonely at the top of Olympus” – quote from Emperor Nero (Dom DeLuise) – “History of the World” – by Mel Brooks

Some would say that today, we live in the age of the entrepreneur. As someone who has been in this space for over 40 years, I must say I tend to agree. When we first formed entrepreneurial services at EY, it was considered by most to be just small business. There was no Bill Gates, Jeff Bezos, Mark Zuckerberg or Steve Jobs back then. Each entrepreneur we met seemed to be possessed by this passion to set out to create something that big business wouldn’t (or couldn’t) do. They were the outliers; jousting at windmills and looking to accomplish the impossible. Looking back on all the innovation, financial success (can you say unicorn?) and social good, one can only say thank goodness for those early pioneers. It has been quite a ride and the juggernaut continues.

However, I see something a bit different in many of the entrepreneurs of today. While I still believe that deep down inside they want to change the world, they start out motivated by something a bit different; the ultimate vision of being their own boss. They raise questions like, “Why be creative for others?” and, “Why put up with all the office politics, infrastructure and chains which will keep me back?” Perhaps they just can’t find a job. But they love the image of that ultimate dream – – waking up in the morning and looking in the mirror and realizing you have nobody to answer to but yourself. Ah, nirvana.

So why the concern? To me there is an important part of the message of success that does not get delivered as forcefully as the image of the entrepreneur on a stage by himself or herself explaining their success to the world. Lost is the importance of the support cast. Where would Steve Jobs had been if Steve Wozniak had not been there? While every entrepreneur loves the fact that they answer to themselves, that same scenario conjures up visions of fear and uncertainty – – most feel personally responsible for the success or failure of their company. The immediate reaction is usually to do “whatever it takes” to make sure the business is successful. Learning to build a team and share some of that responsibility and “pain” with others does not come easy.

I am surprised that with all the business coaches and organizations that offer advice and the plethora (thank you “Three Amigos”) of guidance on team building that is prevalent in business media, I still get introduced (on more occasions than I care to admit) to successful business owners who believe they are on their own and who are feeling the strains of “being alone on Olympus.” My role with them sometimes morphs into a form of pseudo psychological therapy, but mainly it is just that of an objective observer offering advice that often reinforces what the entrepreneur believes but feels they cannot share with those close to them.

So please, as you build your business, find people to share your successes and your challenges – – key employees, advisory board members, advisors or peers. Many of those in your personal network are more than willing to help and support you on your journey. As the famous saying goes, “No man (woman) is an island,” and for an entrepreneur, no truer words were ever spoken.

Keeping a Broad Vision

Scene at The Olympia Restaurant (from SNL skit)

 

 

 

 

 

 

 

Patron: I’ll have a grilled cheese.

Gus: No grilled cheese – – Cheeseburger

Gus: What do you want to drink?

Patron: Coke

Gus: No Coke; Pepsi

Probably one of the most difficult concepts for an entrepreneur to get his mind around is maintaining a broad vision. The concept of broad implies a wide ranging view while vision seems to suggest a certain focus. Seems to be an oxymoron – like jumbo shrimp. We encourage entrepreneurs to maintain that open view while continually harping on staying focused and this conundrum can drive the average business owner out of his mind. So let’s explore this a bit further.

Many of us remember the scene above from the famous SNL routine with John Belushi. You had to admire the tenacity of focus; but you were never going to get any form of potato other than chips, no entre other than a cheeseburger and no drink other than Pepsi. Pure focus like this can certainly define who you are but does it limit the customers you want to reach? Let’s consider another scenario. Why did Steinway and Yamaha have such different levels of business success? Some would simply point to a broader vision. While Steinway focused on producing pianos, Yamaha saw itself in the keyboard business. So when electrical instruments came along, electric pianos and organs were a natural extension of a broader vision.

Apple and Starbucks are also often sighted as companies who look beyond the utility of the products they deliver to a much wider view; focusing instead on the user experience to expand the appeal of their products to a much wider audience. In his book Start with Why, Sinek encourages us to continually look at the market through the eyes of our customers to always understand the true why of their purchase behavior. In essence, keeping a broad vision with focus.

I have seen this issue many times particularly with software development companies. They develop a great platform and in an attempt to demonstrate its capability, they build an application. Now that is all well and good until the application (versus the software) becomes the focus. Let me give you a real example. In the 1980’s, (“a long time ago in a galaxy far, far away”) I had a client that had developed voice recognition software. Now I know it is popular today, but trust me in 1980, it was revolutionary. They decided to demonstrate this capability by installing the technology in a phone (remember pre cell phone days.) Being the accountant, I wondered why someone would buy a phone for $350 where they could pick up the receiver, say “home” and have it call home automatically when they could push the button on the phone that said “home” and get the same utility. Apparently, the market saw the same thing, so instead of using the money they raised to improve the technology and license it to others; I watched them go out of business with an inventory of high priced phones nobody wanted. They saw the phone as focus; I saw the software as vision. Put another way, I saw the Olympia as an eating establishment with personality – – not just a cheeseburger factory.

So when it comes to your vision, please work to make sure it is broad enough to create sufficient opportunity and not so focused as to preclude your ability to fully develop your vision.