In through the out door (or using the exit as your entry)

Those of you that know me well might think my title was a clever way of slipping a rock album title¹ into my blog.  This time it wasn’t, as I don’t actually love this band, but someday I will write “Everything I Needed to Know in Business I Learned from Hard Rock.”  But I digress…

The real focus of this post is discussing “Exit Strategies.”  For all small businesses (which generally covers 99.9% of the sales training firms in the world) the Exit Strategy should really be the first strategy defined before the rest of the business planning and strategy work is done.

I’m certainly not implying that a firm always need to be 100% clear about their exit strategy or that they should never change their plans, but so many business decisions would be made differently based on different exit strategies that it really is silly not to spend some time thinking about one.

However based on general conversations with training industry execs and managers it seems like many firms have only briefly considered their likely exits.

The most likely exits probably include:

  • Selling externally … to another training firm, an investment group, or to an alliance partner
  • Selling internally … to the management team or to one of their distributors (and this might be combined with selling to an investor)
  • Keeping the firm going for life … but with the founder graduating to the Chairman of the Board role with someone else taking over as day-to-day President
  • Keeping the firm small … with the Founder staying in charge until they retire … with the business shuttering at that point

Obviously the size and scope of the business affects whether all these options are on the table.

Back to the reason for this post … there are a number of business decisions to be made that should be made differently if the final exit is selling externally rather than being kept with the most short-term annual profits.

If the firm is a ‘mature’ firm with an exit horizon of one to three years, it’s also possible for a training firm to have a feel for the type of firms that they might sell out to … which would also change day-to-day decision-making.

For example, growth into Asia for an American firm can be a potentially revenue-raising, but short to mid-term profit-shrinking, endeavor.  If the only firms that might buy you are larger global entities then pursuit of business in Asia could be done with a lower time and cost investment model such as independent agents.  A better long-term play might be investing in local employees and offices but that may not be the best use of funds if a potential suitor would already have that infrastructure.

My suggestions are:

  1. Take time at least once a year to consider your exit strategy and how that might influence your other strategies (Go To Market, operations, product development, etc.)
  2. When you are starting to think about selling your business, strongly consider engaging an M&A Advisory firm to give you a valuation and counsel on steps to take in your final year(s) to maximize firm value  (I know people in an M&A firm that focuses on the training industry and would be happy to introduce you if you are at that stage now)
  3. When you are networking with other execs add “exit strategy” to your stable of conversational items.  You might just get a great idea from a peer that makes you a ton of money … and keeps you from ending up between A Rock and a Hard Place.²

¹Led Zeppelin, released 1979.  It has nothing to do with sales training … though one song was called “Hot Dog” .. hmmm …

² Rolling Stones song from their 1989 album Steel Wheels