How To Build A Business, Not An Exit Strategy

Photo credit to:  www.entrepreneurfail.com

With media covering more and more stories about entrepreneurs who sell their companies for millions and billions of dollars, people have begun to believe that building businesses should be all about selling out as fast as possible.

From the stories of Instagram, Tumblr and thousands of other startups, the sexy thing to do is to get acquired. Entrepreneurs are falling in love so much with this idea that they are no longer building businesses, but rather building exit strategies.

Rewind back 5 years and you would know that selling your business was typically an exit strategy or something people faced when considering retirement. Today, people are looking to flip as many companies as they possibly can.

Entrepreneurship is all about pursuing a career you enjoy, but those who look to flip their businesses as the end goal are really just a slave to the money. Not only that, but the number of businesses that do get acquired for millions are less than 1%.

Fighting the Temptation

Most of you who know me are probably wondering why I’m writing about this even though I sold my first business. However, I had a really good reason to do so and I didn’t build my business for the sake of selling it.

When I started out, I loved the idea of starting a business and a multimedia agency was what came natural to me. While I ran the business for two years, I realized something. I wasn’t as passionate about this as much as I thought I was.

It seemed really great when I started but after the honeymoon period was over, it really sucked. I escaped jobs because I wanted to do something that really made me feel happy and this business wasn’t it. That prompted me to sell this business and move on to something else. If I had built the business around trying to flip it, I probably wouldn’t have been able to sell it at all.

If you have a business or a business idea, make sure your end goal isn’t to sell the company for as much money as you can get. Build something that you’re passionate about and want to serve a purpose with.

If you see yourself trying to build a business that you can get out of as soon as possible, don’t even get started. The years until you sell (that is if you do manage to sell it) will be hell.

What Do You See Yourself Doing For The Rest Of Your Life?

I have friends who built businesses because they loved what they did, but ended up selling the business. The reasons for them selling their business sometimes involved exterior factors.

One of my friends sold my company for $2.2 million last year because his founding team just couldn’t make the impact that they had hoped for. They were reaching hundreds of thousands of people, but the acquisition would help them reach millions.

Another one of my friends sold his company for an undisclosed amount because he was having his first child and even though he loved his business, he wanted to see his kids grow up. He didn’t want to spend 16 hour days anymore, he was happy working on his company for 8 hours and spending the rest of his time with the family.

Before you start a business, remind yourself why you’re doing it. Money should never be the reason why because you set yourself up for failure. Build something that you’re passionate about. Don’t build something you want to sell off and get away from as soon as possible.

Generate Revenue

Many people choose to sell their business because they cannot generate enough revenue from the business. Startups are really tough because you don’t get a guaranteed paycheck in your hand at the end of each month.

However, knowing that you need money to survive is a great reason to focus on revenue from the start. You are more likely to hold off on selling your business when you make enough money to live on and enjoy what you do.

When I started StatFuse, I put revenue off because I wanted to be all about building around my passions. I learned after a few months that I had to find a fine balance between passion and money in order to really be successful.

My course on how to build a startup really shares in-depth insight on the formula behind successful businesses and really aims to help people avoid the trap of building exit strategies.

Get On The Same Page

If you choose to develop a partnership with numerous people, it’s key to be on the same page. From the beginning, you want to make sure that everyone in the company has the same expectations and goals.

The fastest downfall of a startup is when the team isn’t on the same page. If one person is thinking acquisition and another is thinking of building a business, something will eventually end up going wrong.

Everyone in a startup must have the same common goal. It must be known by everyone at all times and people should live by it like it’s their startup code. Before you bring on employees or founders, always find out what their end goal is.

I typically shy away from entrepreneurs who have no passion and are solely looking to sell their business in a few years. It’s nice to think you can build businesses and sell them, but what happens when you can’t find a buyer?

The nice part about building a business is that regardless of whether you find someone to buy you out, you won’t be relying on anything. Build a business not an exit strategy!

Conclusion

With more startups popping up and failing than ever before, it’s key to build a business for the right reasons. When you build a business to sell out, you’re just building an exit strategy which can be disastrous.