Do I Grow or Exit My Business? The Retiring Founder’s Dilemma
Do I Grow or Exit My Business? The Retiring Founder’s Dilemma
Let me tease an answer to this question really quickly before the intro: I think I have an idea to explore on this... I'll double click on this below.
I feel like the days are screaming by. Can we find a way to slow down time?
I mean, can you imagine that yesterday was the end of Q2? 🫣
I took a few hours off early yesterday afternoon and the fam and I went for a hike. Sometimes you just have to pull the plug and yesterday afternoon was that for me. I turned on my “Do Not Disturb” and we went waterfall hunting… It felt like 1,000 degrees outside, but was fun.
Most of my readers are business owners. I'm largely finding two types of founders in my ecosystem --> founders who are either launching their business or business owners deciding between growing and/or exiting their "baby".
I say "baby" because most founders who run family businesses or "legacy" businesses have been doing it for a LONG time and their passionate about what they've built - as they should be.
I truly think this is an amazing time to be an entrepreneur, founder, and business owner.
That doesn't mean its easy. Things are changing faster than ever - with more distractions.
But, the clearer we can remain, the faster we will accelerate and the "slower" time will feel.
I talk about this here 👇
If you're new here, this is my weekly newsletter where I reflect on the lessons, events, and inside scoop of being a husband, dad, and business builder...
In Today's Blog:
- • Wins/Lessons/Thoughts from the week
- • Do I Grow or Exit My Business? The Retiring Founder’s Dilemma
- • Weekly Take-Away: 👉 Think Bigger, I mean Way Bigger 👈
Weekly Wins/Lessons/Thoughts from the week:
- • As a family, we’ve been watching the US olympic trials this week. It makes me think that entrepreneurs are a lot like the heptathlon and decathlon athletes… Swiss army knives.
- • Bit disturbed this week by the Presidential debate. We can do better. Politics, money, and power are the core problem. I don’t have the solution, but I know some crazy smart people.
- • The one thing we can control as entrepreneurs is our mindset. We’re going to constantly be faced with uncertain, problems, and issues. The faith to persevere despite the storm is key.
Do I Grow or Exit My Business? The Retiring Founder's Dilemma
There is an aging population of baby boomers who are getting ready to pass their businesses on to their children. It's been coined the "Silver Tsunami".
The problem is 👇
Our kids don't want the business.
So, what is the business owner who has all his wealth tied up in this business to do?
The first thought is to SALE THE BUSINESS.
But, there are some challenges:
- • The founders are usually quite active and instrumental in the business (aka Key Man Problem)
- • The businesses are usually too small for PE (Private Equity) buyers and their not VC (Venture Capital) back-able because the market size is probably too small.
- • Often, the businesses are lacking the systems, playbooks, and financials for others to step in.
Now, if you don’t have these challenges (or you’ve corrected them) and you’re in a growing market, then here is what I’m seeing buyers pay (statistics say 30% of business are “exit-able”):
- • Really small businesses doing less than $100k in EBITDA (earnings before interest, taxes, depreciation, and amortization) will get 1-3X. That’s $100k-$300k.
- • Small businesses doing around $1 million in EBITDA might get 2-3X.
- • Businesses doing $2-4 million in EBITDA might get 3-5X EBITDA
- • Businesses doing $5-8 million in EBITDA might get 6-8X EBITDA
Now, all this depends on a ton of variables, but it's a rule of thumb if the business is "READY" to exit.
But, I've got an alternative idea for you:
What if you hired your replacement? The NEXT GEN Entrepreneur.
Someone who you could teach, shape, and trust to take your business into the future.
Someone who's versed in "new school" and wanting to learn "old school".
Someone who's green, but comes with "Motor Included".
I tried it and it's working.
I think its the best of both worlds. You advice, help, mentor, guide. They DO.
You retain ownership, but you cut them into the pie. Maybe giving the ability to earn more over time.
You get the business "exit" ready over 1-2-5 years and then you exit for much higher than you ever dreamed.
Win-Win-Win
Just food for thought. Happy to share more if you're interested in learning more.
Weekly Take-Away: 👉 Think Bigger, I mean Way Bigger 👈
I'll wrap up with this final thought. There are some movers and shakers out there in the entrepreneurial ecosystem.
I had the chance this week to meet with Kennesaw State's entrepreneurial teams and the energy, thinking, innovation are next level.
Surround yourself with other likeminded people and watch the doors fly open for you.
Thank you for being here this week.
Hoping you have an amazing start to your week and great July 4th holiday.
Till next week, keep rocking it...
You Got This,
Andy
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