Exit Strategy

Previous: Scaling & Financing

After you’ve started seeing a profit, you should start considering how you plan to leave the organization.

  • Beyond the business plan, have a long-term goal if you want anything beyond simply yourself (or possibly your family).
  • When you start getting bored with the business, you should sell it.

If you have a good-enough business idea and promising-looking financial statements, you can still sell the company even when you haven’t turned a profit yet!

Logically, there are only several possible ways you can go:

  1. Sell the business outright and leave with a significant amount of wealth.
  2. Develop better management skills and scale it to a very large organization.
  3. Give the business to your children when they’re old enough to run it.


Learn when to stop.

  • Most business ideas do not take off, and that’s okay.
  • Avoid going deeper into debt and wasting more of your life than you need to.
  • Create a fixed, measurable limit on how much you’ll go until you stop (e.g., no more than $10,000 of savings into the business).


Selling is generally a better idea than scaling, mostly because large-scale organization management is an entirely different skillset.

  • Further, you have the opportunity to diversify the wealth you’ve acquired through building your business to that point.

If you wish to sell the business, you have several options:

  • Propose a merger with another similarly-sized company.
  • Sell the company to a larger company as an acquisition.
  • Take the company public and sell it on a stock exchange.
  • Sell the company internally as an Employee Stock Ownership Plan (ESOP).

Try to sell before you have to.

  • Buyers want to feel “blue sky potential” and get excited about the growth they expect to see.
  • If it’s already at its peak, it won’t inspire as much excitement.

Unless you’re in an industry that doesn’t care about brand, the value of the company is not simply its asset value minus its liabilities.

  • You have built a reputation, and the premium over the equity value of the company is the direct market price of your company’s name’s reputation.
  • Most buyers are asking what financial gain your reputation will have on the future, then discount it over that window of time.
    • e.g., if they expect to gain $10 million from your company’s brand within 3 years, they may propose buying it for $3 million but be willing to haggle up to $5 million for it.

Mergers & Acquisitions

Bear in mind what mergers and acquisitions will do to your organization:

  • When you’re in a merger, you’re officially partners with whoever runs the other organization.
  • When in an acquisition, staying on with the organization makes that company’s leadership your boss.

If you plan to interest a company in an acquisition, contact the CEOs who were interviewed in a major publication (e.g., Forbes).

  • Generally, CEOs who have had their ego stroked publicly will pay a premium of 4.8% more for every major article they’ve had.

Most mergers and acquisitions (83%) do not boost the value of the company.

  • Only do it if you want to be completely rid of the company.
  • Be careful, though, since you might be selling it to a very unhinged person.

After Selling

Do not retire.