When you are a founder of a company in the defense industry you are likely not focused on exiting in the beginning. That is a time for finding your identity, for getting traction, and just overall survival. When that thought does cross your mind though, it is likely something like “some day I’ll sell my company to someone else. But that’s a later concern”. That’s fair. Beyond that, your exit is a pretty mysterious far off event
People I’ve met that are founders and owners of companies with some substance and longevity, by definition, don’t sell their company over and over again. It goes to reason that you are not inherently good at it. Think about the things you excel at. They are likely things you’ve done repeatedly with more success the more often you do it. The early efforts might even be forgettable failures. That’s how we all learn. How successful people thrive.
So back to exits. If you only do it once or twice in life it makes sense that you won’t naturally be amazing at it. There are so many nuances that make sense only when you are looking in the review mirror.
I had the abstract concept of selling our company in the early days, much like what I described above. It was abstract because I didn’t regard it actionable or a priority at the time. Just a far-off concept in “someday” land.
I would encourage you though, to consider two things as early as you can:
- Unless you are handing your company down to your children, recognize that there will come an exit of some sort. You should not ignore that concept when you are doing your long-range strategic planning. It doesn’t have to be planned at all. Just considered. Everything you do can potentially impact your enterprise value, good or bad. Regardless, you need a succession plan even if it is informal.
- There is not one simple path. There are many forms of exits. Some are like the above premise and you fade off into the sunset having sold everything to someone else. Many others involve staying and taking chips off the table or preparing for bigger strategies in yours and the company’s future. Just a few of these concepts include:
- Bringing in a minority partner
- Establishing an ESOP ( Employee Stock Ownership Program )
- Bringing in a Private Equity investor to supercharge the growth of the company
- Merging with other peer companies to create a platform with more size and reach, and therefore, value
- Using outside capital or debt to facilitate a partner exiting while you stay in.
- Buying out, or replacing one or more partners.
The exciting headline here is that there are so many permutations of possible paths for this type of change. Some for when you want to actually exit the company. Some when you simply want to diversify your own personal stake. I plan on touching on several of these concepts in future articles. As a founder myself that went through many of these exact situations, I have a unique empathy and experience to try to demystify the options. It’s never too soon to have that understanding in the back of your mind, even if it’s years away. On top of that, it can be some of the most exciting and rewarding strategic maneuvering you will do as an owner.
We are always available to help answer questions and educate you in a safe environment on concepts and ideas that you likely haven’t needed yet, and might not for a while. Reach out to us at High Stakes Partners and setup a short introduction to get started on planning your long-term goals and the future of your company.