Hello SOTGC community,
Welcome back to my series The 6 Stages of a Woman’s E-Ship Journey. Today Patti Fletcher and I discuss Stage 5: Exit.
Stage 5: Exit (time to Exit this business and start my next big thing)
Stage 6: Leadership (what’s my next big thing?)
Heather Boggini: When I hear the term “exit” applied to an entrepreneur and her startup, I think “yeah, she’s made it! She’s making money, the business is either running itself or someone wants to buy it. Either way – she’s leaving.” But I have a feeling that “leaving the business” and “properly exiting the business” are entirely different. Patti, please explain Stage 5: Exit.
Patti Fletcher: Sure. An exit is when you are cashing out from your business and, in the process, change the type of legal entity from which the business is run. Is there money in an exit? Yes! And the goal is to get as much money as you can.
Boggini: Does every entrepreneur need an exit strategy for her business?
Fletcher: No, not everyone needs an exit strategy. If you have external funders, like Angels or VCs (venture capitalists), then you will need an exit strategy for your business because it is only during the exit that these investors make their return.
If you have self-funded or have funded with friends and family, you can go on forever in the current legal form of your business. This only changes if you want to cash out or get an influx of cash.
Boggini: As with all the stages, you should prepare for each stage long before arriving there. But this stage, Exit, may be the one entrepreneurs are least prepared for. Do you agree?
Fletcher: It depends on the entrepreneur. Some are a bit too focused on exit from day one and for all the wrong reasons. There has been a trend in the Silicon Valley that seems to be akin to founding a start-up as the next “quick win” strategy. The best businesses are formed on passion to solve a problem for the buyer better than anyone else in the market.
Some entrepreneurs wait too long to start thinking exit. This could be a big mistake, as you will be asked about an exit strategy by your potential investors during your fundraising rounds.
The more you get to know your market, your customers, and your competitors, the easier it will be to think of your potential exit options. The best time to start thinking exit is right after your Stage 2 (Commercialization) and before you go for funding.
Boggini: What are the typical milestones every business must achieve at Exit?
Fletcher: Every business is different, and if you have external investors, you will be guided (and sometimes pressured) to exit at certain points in your business. The best way to determine the milestones you need to hit while you are guiding your business toward an exit starts with understanding your best options for exit.
The three potential options for exit include liquidating assets, acquisition, and IPO (Initial public Offering).
- During liquidation, you dissolve your business and sell your assets to the highest bidders.
- In an acquisition, you sell your company to another company. This can also happen as part of a merger.
- If your company goes public, it does so through an IPO where stocks of your business are sold.
Boggini: Would you say that Exit is a missed opportunity for some entrepreneurs?
Fletcher: For some I would. That is because for many entrepreneurs, particularly female entrepreneurs, they neglect their own exit and instead focus on their business’s exit and taking care of their employees. I highly encourage any entrepreneur to have a separate but complementary exit strategy for herself in addition to her business.
Boggini: Thank you Patti. I look forward to next month’s interview where we talk about the final stage of a woman’s e-ship journey. And that is Leadership.
Have a question or comment for Patti? Use the comment space below or connect with her directly at @pkfletcher. Click here to learn more about the author, Heather Boggini, and about Patti Fletcher.