Exit Strategies Workshop – Nashville

BY Basil Peters

These are the videos from an Exit Strategies workshop at the Inc. GrowCo conference in Nashville.

GrowCo is Inc Magazines annual conference for high growth companies. This was a pre-conference workshop attended by about 100 CEOs and business owners.

Section 1 – 75% of the Time we Blow It:

  • Yes, I’m saying that 75% of the time when entrepreneurs and investors build a company that could have been sold we blow it
  • And fail to successfully exit
  • Keep in mind that this is anecdotal observation, not hard data
  • We still don’t have the hard data we need
  • What I know is that it’s far less than half and probably more than 10%
  • “Saleable” is also a matter of judgement
  • 25% is the best observational data we have
  • The good news is that I believe we can increase that percentage to 50% easily
  • What I hope to accomplish today is to provide you the take-home knowledge
  • To increase the probability that your companies have successful exits

Section 2 – Everything is Changing

  • We are living through an interesting time
  • The economy is changing – the whole world is changing
  • Many big parts of the financial ecosystem that worked for a hundred years
  • Don’t work at all anymore
  • The best and the brightest now work in startups
  • Big companies need to grow but they’ve lost the ability to innovate
  • So they are acquiring young companies at a rate we’ve never seen before
  • Most exits are under $15 million
  • Golden era for entrepreneurs and angel investors
  • Never before has it been so easy to create such valuable companies
  • Using so little capital
  • And sell them so early, for so much money

Section 3 – Every Company Should Have an Exit Strategy

  • It’s surprising how much of what you hear about exits is wrong – dangerously wrong
  • There are so many myths and misperceptions
  • And so many ‘experts’
  • And quite a few dirty secrets
  • This workshop is about what actually works today
  • Your exit is just another business process
  • The chances of success increase dramatically if you have a good plan
  • Companies should be sold, not bought
  • Optimum exits require strategy and planning
  • The exit strategy affects a surprising number of daily business decisions
  • You don’t have to be profitable to sell your company
  • You only have to “prove the model”
  • The Equity Effect and optimum vesting

Section 4 – Don’t Ride It Over the Top

  • An exit usually takes 6 to 18 months – from when you hire the M&A advisor
  • The internet has accelerated everything
  • Many companies are sold when they are only 2 or 3 years from startup
  • If a company misses the ideal time to exit
  • There is a significant probability that it will fail completely
  • There are several reasons why this happens:
  • 1. Over-investment by VCs
  • 2. Competition
  • 3. Intellectual property infringement
  • 4. Negative momentum
  • 5. Waves of Consolidation
  • Why an unsolicited offer is not usually good news for the shareholders
  • Like many parts of life, and business, “timing is everything” with exits

Section 5 – Questions

  • Patents are a double edged sword
  • What’s a reasonable fee and retainer for an M&A advisor?
  • How do you determine the optimum time to exit?
  • How can we tell if we’re near a wave of consolidation?
  • Will a more aggressive growth strategy improve my exit valuation?
  • Is there anything we should not do that might create a wave?
  • How can we protect ourselves from fast followers?
  • What should I do if an M&A firm calls to ask about buying my company?
  • How risky is it to offer our company for sale to a competitor?

The PowerPoint for this talk is online here.