Business Exit: Are You Being Pushed or Pulled?
We will all exit our business someday. The question we need to answer is, “Am I being pushed to exit or pulled into it?” The distinction between the two is entirely about you as the entrepreneur and not about the business itself.
When you are being pushed, it is typically because you feel that you cannot continue with the business as it is. There is something missing which makes continuing not a viable option. A pull exit is when you feel something else pulling you to it. This is a feeling that something else is waiting for you, and you need to go to that something else. A pull exit is by far the better feeling.
Push exit
Here are some examples that would leave you feeling pushed to exit your business:
- You are burned out, and you cannot continue running the business as you are today.
- You feel like the landscape for your business or industry is changing for the worse. Think about Kodak during the proliferation of digital cameras.
- You have a big offer on the table for what you have built.
In each of these situations, you have something pushing you to exit. Without something else pulling you forward, you can end up feeling dissatisfied. What is your plan for where you will spend your time? If you are thinking of this as your last business exit, have you done the math to make sure that you will have the income you want for your lifestyle going forward? Where will you put your mental and emotional energy that previously went into your business?
Pull exit
Here are some of the pull reasons for exiting a business:
- You have another business you are passionate about starting or scaling.
- You have a great internal team who will allow you to move to entirely passive ownership of your business.
- Your kids are at an age where you want to spend lots of time devoted to them and their activities. You might want to coach their sports teams or be there every day after school.
- You have a passion outside of business to which you want to devote lots of time. Maybe you want to train for a marathon or teach at your local college as an adjunct professor.
In each of these cases, you have a clear vision for what you want to be doing and why you would need to fully exit (or at least exit operational control of) your business to do it. So how can you stay away from the push exit or transform a push into a pull?
From push to pull, example one
Let us first look at the example of you being burned out and needing a change. Sometimes when you are in this situation, you are not at your best, because executing in your seat is no longer energy filling. It is energy draining. The simplest solution is to look for ways to change jobs inside your company, such as hiring, delegating or empowering your team to take on the pieces that just do not excite you anymore. In order to do this, you should focus on the things that are energy filling, and get you excited to contribute to the mission of your company.
If you are still feeling burned out or are just ready for a change, think about what comes next. What business would you want to start? Where is your time going to be dedicated after an exit? Spend some time journaling to really think through what you want.
Finally, if you are just too burned out to even think about next steps, consider taking a sabbatical. If your company has the operational leverage to allow you to step away completely for a few weeks or a few months, take it. The space may give you clarity about what you actually want before you just decide to exit and figure it out later.
From push to pull, example two
The second example of changing a push to a pull exit tackles your perceived certainty that the best days are behind your business. What has changed to make you feel like you just cannot be successful going forward? Can you change the direction of the company or pursue another segment of your market?
If you think your business is on the downhill, it can be very difficult to keep that feeling separate from how you present yourself to a potential buyer. The more you can focus on the opportunity that is still ahead, the better it will be for yourself and the better story you will have to tell your buyers. There may very well be a systemic challenge that your business is not well prepared to take on, but having a plan for how to pivot and chart a new course is a vision that you can sell to a buyer even if you no longer feel like the right person to execute that vision.
That can also be part of how you can transform a push into a pull. Can you stay on after the closing for a period of time to help the new owners get the business turned around? Are there pieces of that vision that excite you but that you will feel better about chasing with some or all of your capital off the table and not at risk? Every business is attractive to someone, so keep the faith in a sale event.
From push to pull, example three
The third example of a push exit regards thinking long and hard about the size of your compensation. As most merger and acquisition professionals will tell you, the deal never gets better for the seller after the letter of interest (LOI). If someone has thrown a crazy number at you, it likely means that either your business is more valuable to them than you had thought, or that the number is, in fact, too good to be true.
In the first case, they are likely a strategic acquirer who can fit your business together with one they already own and create a situation where 1+1=3. In these cases, you can start down the road of discussing a deal. In the second case, where you cannot understand why someone is looking at you with a particular valuation, tread carefully. They may want to hook you into an exclusive negotiation in order to head off a competitor who is interested in your business. Or, they may be looking to get a conversation going and then push the purchase price down drastically during due diligence. The risk you run is a diversion of your time and attention away from your primary business. Your time and attention are precious resources that need to be protected.
If you have in fact been approached by a strategic acquirer who can and should pay you a crazy number for your business, you still need to think about what comes next when turning this push to a pull. Where does your time go? What are you building in the future? Where will you continue to create value and enjoy it in the process? Without answers to these questions, you may end up with a mountain of capital in your accounts but feeling upset about it in the end.
As you think about your business exit today or years in the future, be mindful of how you feel. Are you being pushed or pulled into that next chapter?
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DISCLOSURE: Jarrod Musick is an officer of Destiny Capital and Entrepreneur Aligned, a DBA of Destiny Capital. This article is for informational purposes only and should not be relied upon as a basis for your investment, business, or personal financial decisions. We recommend consulting with your wealth advisor, CPA/tax advisor and/or attorney, as applicable to your situation, prior to implementing any new tax, legal, or investment strategy. Advisory services provided by Destiny Capital Corporation, a Registered Investment Adviser.
ABOUT JARROD
Jarrod was born into financial planning and solving financial problems. With his financial advisor father Steve telling stories about finance around the dinner table from an early age, the idea that everyone has a different financial situation was always there. After an early professional career spent in nonprofit and government, Jarrod came back to his roots helping people plan and invest in 2011. Since then, he has worked with individual clients, led internal teams and ultimately became partner and the CEO of Destiny Capital in 2017. With a passion for helping entrepreneurs change the world, Jarrod ultimately oversaw the creation of Entrepreneur Aligned in 2020. With both Destiny Capital and Entrepreneur Aligned, Jarrod leads teams that help people live lives of abundance where money is simply a tool to let everyone be a positive force for the world around them. When he isn’t working with the talented teams for EA and DC you can find him chasing his twins, wily trout or a podium spot at an OCR race.
