Introduction
In "Finish Big," author Bo Burlingham explores the often-overlooked but crucial aspect of entrepreneurship: the exit strategy. Every business owner will eventually leave their company, whether through retirement, sale, or other circumstances. This book provides valuable insights and guidance on how to make that exit a positive and fulfilling experience for both the entrepreneur and the company they've built.
Burlingham emphasizes that a successful exit requires careful planning, introspection, and a clear vision for the future. Through real-life examples and practical advice, he outlines the steps that great entrepreneurs take when deciding to leave their companies, ensuring that their departure benefits both the business and their personal lives.
The Importance of Preparing for Your Exit
One of the key messages in "Finish Big" is that entrepreneurs should start thinking about their exit strategy as early as possible. Many business owners make the mistake of believing they're invincible or that their exit is too far in the future to worry about. However, Burlingham argues that this mindset can lead to disastrous consequences.
Planning for Your Future
When contemplating an exit, it's crucial to consider your personal future as well as the future of your organization. Ask yourself important questions like:
- Who do I want to be after I leave my company?
- What do I want out of life in the next phase?
By answering these questions, you can begin to shape your exit strategy in a way that aligns with your personal goals and aspirations.
The Consequences of Poor Planning
Burlingham shares cautionary tales of business owners who failed to plan adequately for their exits. One such example is an entrepreneur who, due to a lack of financial planning, was forced to sell his company quickly. This hasty decision resulted in the breakdown of his marriage and the loss of close colleagues. Had he planned ahead, he might have avoided such a painful outcome.
Improving Your Company's Value
Thinking about your exit strategy isn't just beneficial for you; it can also significantly improve your company's market value. By imagining your business functioning without you, you can identify potential weaknesses and areas for improvement. Addressing these issues not only prepares the company for your departure but also makes it more attractive to potential buyers.
The Four Stages of a Successful Exit
Burlingham outlines four main phases that entrepreneurs should consider when planning their exit:
Exploratory Phase: This is the time to sort out your priorities and explore your options. Decide whether you want to liquidate or sell your company, determine a potential price range, and outline a timeframe for the sale.
Strategic Phase: In this stage, you'll start to view your company as a product. Identify weaknesses and work to maximize its value in preparation for your departure.
Execution Phase: This is when you'll put your plans into action. Whether you're liquidating, selling, or passing the company on to family members, this is the stage where ownership changes hands.
Transition Phase: The final stage involves moving on to whatever comes next in your life. This phase continues until you've fully transitioned – both physically and psychologically – into your new role or lifestyle.
By breaking down the exit process into these distinct phases, Burlingham provides a roadmap for entrepreneurs to follow, ensuring that they consider all aspects of their departure and plan accordingly.
Choosing the Right Exit Strategy
One of the most important decisions an entrepreneur must make is determining the best exit strategy for their specific situation. Burlingham emphasizes that selling isn't always the best or most feasible option, despite it being the dream of many business owners.
The Challenges of Selling
According to the U.S. Chamber of Commerce, 65 to 75 percent of owners who hope to sell their businesses never even make it to the market. Selling a company can be a complex and time-consuming process, and it's not guaranteed to succeed.
Burlingham shares the story of a bakery owner who struggled to find suitable buyers, wasting significant time and money on advertising and meetings. Frustrated by the process, he eventually sold his business for less than it was worth, highlighting the importance of patience and proper planning.
Considering Liquidation
For small businesses, liquidation might be the best option. Many small companies exist primarily to provide a modest living for their owners, who may choose to liquidate when they're ready to retire or pursue other opportunities.
In such cases, potential buyers are often limited to family members, employees, or friends. If these options aren't available, it might be more practical to continue running the company while saving money, and then liquidate when you're financially prepared to move on.
Making Your Business Attractive to Buyers
If you do decide to sell your company, Burlingham stresses the importance of making your business as appealing as possible to potential buyers. This process should begin well in advance of your planned exit – ideally, at least five years before you intend to leave.
Key Areas to Improve
To increase your company's sellability, focus on improving:
- Cash flow
- Overall customer satisfaction
- Recurring revenue streams
- Growth prospects
- Logistics and operations
While no single factor can guarantee a perfect sale, these are the elements that potential buyers will scrutinize closely.
Tailoring Your Business to Potential Buyers
Burlingham advises adapting your business model to suit specific potential buyers. By anticipating a buyer's wishes and making changes accordingly, you can make your company more appealing and potentially increase its value.
He shares the example of a lighting company's owners who worked to double sales receipts and modify their business model to appeal to a specific buyer looking for a financially sound business with expansion potential. Their efforts paid off, resulting in a successful sale and a strategically sound exit.
Preserving Your Company's Legacy
As you plan your exit, Burlingham encourages entrepreneurs to consider the impact their departure will have on their company's culture and values. He poses an important question: Do you want your business to retain its unique character after you're gone?
The Importance of Shared Values
If preserving your company's culture and independence is important to you, you'll need to find a buyer who shares your values. Burlingham illustrates this point with the story of Roxanne Byrd, a business owner known for her friendly and trusting management style. When she discovered that a promising buyer planned to mislead employees and liquidate the company's assets, she decided not to sell, prioritizing her legacy over a quick exit.
Strategic Buyers vs. Successors
If you're planning to sell to a strategic buyer – someone who already owns other businesses – you may not need to have a successor in place. Strategic buyers typically install their own managers to keep all their businesses aligned with the same goals and strategies.
However, if maintaining your company's unique culture is a priority, you may need to search for a buyer who is willing to preserve and build upon the foundation you've laid.
The Psychological Aspects of Exiting Your Business
Burlingham dedicates significant attention to the emotional and psychological challenges that entrepreneurs face when leaving their companies. Many business owners view their companies as extensions of themselves, making the separation process difficult and emotionally charged.
Embracing Change
One of the most important mindset shifts that Burlingham advocates is recognizing that sometimes the best thing you can do for your company is to free yourself from it. A company that's overly dependent on its owner is unlikely to thrive in the long term.
He shares the story of a meat processing plant owner who successfully made this transition by empowering his managers and giving them more responsibility. This process ensured that the company could function effectively without him, setting the stage for a smooth exit.
The Transition Period
Burlingham emphasizes the importance of a well-planned transition period between your exit and the start of your company's new life without you. This phase is crucial for ensuring the continued success of the business and for your own psychological well-being.
Many owners underestimate the complexity of this transition, assuming that leaving will be a simple process. However, Burlingham argues that exiting is a phase unto itself, carrying long-term consequences for you, your employees, your loved ones, and the legacy of the company you've built.
Common Pitfalls to Avoid
Throughout the book, Burlingham highlights several common mistakes that entrepreneurs make when planning their exits. By being aware of these pitfalls, readers can take steps to avoid them in their own exit strategies.
Procrastination
One of the most significant errors is putting off exit planning because it seems less urgent than day-to-day business operations. Burlingham stresses that this mindset can lead to hasty, poorly planned exits that end badly for both the owner and the organization.
Underestimating the Complexity of Selling
Many owners assume that selling their business will be a straightforward process. However, as Burlingham's examples illustrate, finding the right buyer and negotiating a satisfactory deal can be time-consuming and challenging.
Neglecting Personal Planning
While focusing on the future of their company, some entrepreneurs forget to plan for their own lives after the exit. Burlingham emphasizes the importance of considering your personal goals and aspirations when crafting your exit strategy.
Ignoring the Company's Future Without You
Failing to prepare your company to function without you can significantly decrease its value and make it less attractive to potential buyers. Burlingham encourages owners to start delegating responsibilities and empowering managers well before their planned exit.
The Benefits of a Well-Planned Exit
Throughout "Finish Big," Burlingham highlights the numerous benefits that come from carefully planning your exit strategy. These advantages extend beyond just financial gains, impacting your personal life, your employees, and the legacy of your company.
Personal Fulfillment
A well-executed exit can be a liberating experience, allowing you to pursue new passions or enjoy a well-earned retirement. Burlingham shares the story of Ray Pagano, who successfully exited his security camera business and devoted himself to his love of sailing, all while maintaining a positive relationship with his former company.
Preserving Relationships
By planning ahead and communicating effectively, you can maintain strong relationships with your employees, colleagues, and business partners even after you've left the company. This can be particularly valuable if you want to stay connected to your industry or potentially pursue new business ventures in the future.
Ensuring Company Success
A thoughtful exit strategy helps ensure that your company continues to thrive after your departure. By addressing potential weaknesses and preparing your team for the transition, you set the stage for ongoing success and growth.
Financial Security
While money shouldn't be the only consideration, a well-planned exit can help you maximize the financial benefits of your years of hard work. Whether through a profitable sale or a carefully managed liquidation, proper planning can help secure your financial future.
Conclusion: Your Exit as a Legacy-Defining Moment
In "Finish Big," Bo Burlingham presents exiting your company not as an endpoint, but as a crucial phase in your entrepreneurial journey. He emphasizes that how you leave your business can be just as important as how you built it, shaping your legacy and setting the stage for the next chapter of your life.
The key takeaways from the book include:
- Start planning your exit strategy early, ideally years before you intend to leave.
- Consider both your personal future and the future of your company when crafting your exit plan.
- Understand the four stages of a successful exit: exploratory, strategic, execution, and transition.
- Carefully evaluate whether selling, liquidating, or passing on your business is the best option for your situation.
- Work on making your business more attractive to potential buyers by improving key areas such as cash flow, customer satisfaction, and growth prospects.
- Decide how important it is to preserve your company's culture and values after your departure.
- Prepare yourself psychologically for the transition, recognizing that leaving your company can be an emotional process.
- Avoid common pitfalls such as procrastination, underestimating the complexity of selling, and neglecting personal planning.
By following Burlingham's advice and learning from the experiences of other entrepreneurs, readers can approach their own exits with confidence and purpose. A well-planned exit strategy not only benefits the departing owner but also sets the stage for the continued success of the company they've worked so hard to build.
Ultimately, "Finish Big" encourages entrepreneurs to view their exit not as an ending, but as a transition to new opportunities and experiences. By approaching this phase with the same dedication and strategic thinking that built their businesses, owners can ensure that their exit becomes a positive, life-enhancing move that cements their legacy and opens doors to exciting new chapters in their lives.