Jefferson Smufit Center for Entrepreneurial Studies's director discusses the different ways people exit thier companies.
As a company founder, you might not think of yourself as having a career path -- but you do. And the path you're on can tell you a lot about whether you're likely to leave your company gracefully when the time comes to call it quits
Do you know how -- and when -- you will exit your company? If you don't have an end-game strategy, chances are good that it will be feetfirst.
Not you, you say? The fact is, we can make pretty good predictions about your likely future behavior based on how you run your company today.
For the past decade, I've studied entrepreneurial career trajectories, examining the job paths entrepreneurs take throughout their lives as owners and managers. I have found that most of you will stick with one model throughout your work life; it's just too difficult to move from one work style to another, and the payoff isn't clear in any case. I have also found that each of the four career paths I outline below has its ups and downs. No one way of doing things is always positive for the founder or the company. And finally, a feetfirst exit is rarely healthful for the individual or for the company itself. There's no shortage of books and articles about succession planning and developing subordinates to run the company the way you want it done. What is equally important, however, and talked about less is how to broaden your own sources of enjoyment so you can let go of your company in a timely manner.
Before we look at ways to help you let go, here are the four major types of entrepreneurial career paths, including the likely endgame strategy of each:
· Growth entrepreneurs. You are the founders who follow the bigger-is-better model of large business. You measure success by number of employees or sales figures or market share. You also are unlikely to ever have an exit plan -- there's always more money to be made or more market share to be won. If you do have a succession plan, it's likely to be trying to micromanage the future. One owner I know, for instance, dictated a monthly schedule of what business should be solicited at particular times of the year.
· Habitual entrepreneurs. You're a habitual entrepreneur -- a term coined by Jennifer Starr of Wellesley College -- if you start many businesses and often run several at the same time. You measure success by how well each business meets the goals you've set for yourself: maybe making a million dollars, undertaking a project others have rejected, or just beating out a competitor. You are even less likely to have a succession plan than growth entrepreneurs are; there are always more ideas to try out. But typically, as you age, you'll scale down your ventures.
· Harvest entrepreneurs. You're running your company so that when you're ready to leave, you can sell it. You're interested in a strong balance sheet, sizable market share, proprietary products or processes, and developing a team able to take over in your absence. (After all, who wants to buy out an entrepreneur only to realize that the real value in the company departed with the founder?) You, like the habitual entrepreneur, may start several companies during your career. The difference is that you build one company at a time, harvest it, and then start another. In the end, of course, you may find it too painful to give up control. For some harvest entrepreneurs, the unspoken exit strategy is to let the time between deals drag out.
· Spiral, or helical, entrepreneurs. You have spurts of growth and periods of intentional stagnation driven by personal or family needs. Female business owners often are spiral entrepreneurs who may, for example, slow down when their children are young and see an "empty nest" as a time to go full speed ahead on their business. Your endgame strategy, like that of the habitual entrepreneur, is probably to scale down your business.
Why the great block on developing exit strategies? The answer is simple. No amount of golf, travel, or family can replace the adrenaline rush of a make-or-break deal. Your enjoyment comes from passion, and the passion you invest in your company can be almost narcotically rewarding. Endgame strategizing always means denying yourself some of the outlets for that passion.
Founders who are successful at letting go have found a way to put their passion in its place -- a place where it can do them and others the most good. One key is to replace depth with breadth. Instead of total immersion in one undertaking, such as the company, they take on projects of interest in multiple locations. They spread out their interests, much as the habitual entrepreneur does. Instead of taking on board memberships, they take on specific projects, finish them, and move on. They look for new challenges in invention or marketing or problem solving. The number of projects varies, depending on their time and energy, but the greater the number of projects, the greater the satisfaction in seeing the results and the more frequent the feedback.
Is this plan one that will work for you? It's easy to test. Decide on a project outside your company that you'd like to pursue for your community, your industry, or your family. Devote yourself to it. If you can forget about work even for a little while, you probably have the potential to develop alternatives. If you can't, there are several options: hope that age will make it easier, seek help from family members or professionals, or start with very small outside efforts and plan to build on those skills.
Right now your business probably is your life. But it's never too early to think about developing an endgame strategy that will provide you with the same kinds of satisfactions you now get from running your company. One thing is certain: the entrepreneurial skills of a lifetime don't vanish when you reach a magic retirement date.
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Jerome A. Katz is the associate director of the Jefferson Smufit Center for Entrepreneurial Studies at Saint Louis University.