In his book Finish Big: How Great Entrepreneurs Exit Their Companies on Top (Penguin Portfolio, 2014), Inc. Magazine Editor-at-Large Bo Burlingham explores the best exit strategies for great leaders. In the following edited excerpt, the author cautions business owners to plan ahead, and avoid regretting their sale after it's too late.
The transition stage is the worst time to discover that you didn't consider all of the possible options before you sold your business. It's the one stage of the business exit process that almost never allows for do-overs.
There are some rare exceptions. In December 2004, Rob Dube and Joel Pearlman sold their thirteen-year-old office products company, Image One, to Danka Business Systems PLC for a lump sum cash payment up front plus a three-year earnout. Under the terms of the deal, Image One would retain its name and use Danka’s enormous resources--including a five-hundred-person sales force--to expand around the country. Hardly was the ink on the contract dry than Dube and Pearlman began regretting their decision, as they quickly ran into the corporate politics and sluggish bureaucracies endemic to giant corporations. "We had all kinds of incentives to do great, and we wanted to," says Dube. "But we were prevented from doing our best work, which was incredibly frustrating."
It turned out, however, that Danka had even more serious problems than they realized, and a new CEO was hired in March 2006 to turn the company around. Image One didn't fit into his plans. That June--barely eighteen months after the initial sale--Danka gave the company back to Dube and Pearlman in exchange for their agreement to forgo the money still owed on their earnout.
By then, their business goals had changed dramatically. Whereas before the sale they had been focused on growing Image One as much and as fast as possible, they now decided that they didn't necessarily care how big the company became or how rapidly it expanded. Yes, they wanted to keep growing the business, but they were equally intent on enhancing their culture, making a difference in people's lives, and giving back to the community. They also developed the habit of sitting down annually to review their visions of where they and the company would be ten to twenty years hence.
So it is possible to get a second chance with the same company. What you need is incredibly good luck. Fortunately, there are other, more predictable ways to secure a happy outcome. They all involve taking the time to go through the first two stages of the exit process--exploratory and strategic--long before anything happens that might force you (or tempt you) to choose a particular path. That means considering the various options you'd like to have, exploring each of them, and--like Dube and Pearlman--revisiting your vision of the future on a regular basis.
Starting early is especially important, I should reiterate, if you aspire to create a great company that (to use Jim Collins's definition) outperforms its industry, makes a distinctive impact on the world, and keeps doing it generation after generation. It is difficult enough to produce consistently extraordinary financial results in one generation. It takes years and years to develop the people, the culture, and the management mechanisms that can give your successors a decent chance to build on what you've done.