What is the difference for a company between having an exit strategy and designing to be ongoing?


Many companies are started by people who dream of one day drinking pina coladas on the beach after exiting their business in some fashion. Of course many fail to deliver on that dream, and some of those who do achieve it find out that they miss it.

In a recent interview with David Heinemeier Hannson of 37signals, he said in so many words that he expects to still be there 30 years from now.

What do you do different in your business if you have no intention of exiting?

Business Plan Exit Strategy

asked May 18 '11 at 10:12
Kenneth Vogt
2,917 points
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3 Answers


I think that this is a fantastic question. do believe that the intended exit strategy has significant implications on the business plan.

The business plan for building a family business which can be passed on is different from the business plan for the website seeking to aggregate eyesballs and sell at maximum perceived value to an internet advertising giant. The business plan for a company that is seeking to grow organically, based on its own revenue so that the ownership stays close will have a different legal structure than the one that is distributing equity from the moment it aggregates it's intial development team with allures of stock options.

The best plans are designed with the end goal in mind. For many start-ups this includes an exit strategy of being purchased, receiving equity investments, having an IPO. But not all. There are many entrepreneurial that are looking to build companies to last, to pass on, to become foundations for employment in their local community, to provide themselves an opportunity to stay employed doing something they love.

Lets look at one example -- a restaurant. Some restaurant owners dream of franchising, of developing a brand that can grow and replicate and scale. They hope that it will be purchased by a chain, or go public. Other restaurant owners want to be able to cook great food every night for a select group of diners. One will be tracking margins and staffing cost against industry standards. The other will be tracking the quality of the conversation they have with their guests. One will be sourcing the best ingredients with the longest shelf life for the cheapest dollar. The other will be developing relationships with local farmers to ensure fresh locally grown food where price is secondary. Two restaurants: one with an exit strategy. One without.

So what areas may be different?

  • the organizational structure
  • the legal structure
  • the leadership development plan
  • the talent acquisition plan
  • the need for boards, board of advisors, etc.
  • the growth strategy
  • the capital needs
  • the marketing targets
  • the vendor sourcing
  • the product development cycle
    Okay, before I keep going -- everything .
Why? Because the business is a reflection of the goals and dreams of the entrepreneur and what they are trying to create. The exit or the lack there of is a primary variable for consideration. Period.
answered May 18 '11 at 13:46
Joseph Barisonzi
12,141 points
  • Nice answer while I was writing mine ... yeah thats pretty much the idea ... in less words :) Plus like the example, longer term investment in the key relationships. – Robin Vessey 13 years ago
  • I picked Rob's answer over yours because the system only let's me pick one. Both are worthy of the checkmark though! – Kenneth Vogt 13 years ago
  • @Kenneth Vogt -- As you should have! The @Rob answer was much better. Mine was more the case for the understanding of the implication of the exit strategy on the planning and development process. Rob's was very specific. We have just touched the surface of this topic! – Joseph Barisonzi 13 years ago


What to do different ...

Your business is a product. You need to package it up as such, who is going to buy it and why? Are they looking to increase their client base? Looking to get hold of your technology? Looking to get hold of your skillset and knowledge? Looking to get rid of you as competition?

What should you invest in? When you planning to sell out from the beginning you think "in 3-5 years we are selling out" so do you invest in a huge expensive office? maybe not as likely than if you are going to spend the rest of your working life there.

Plan to be replaced. You focus on being easily replaced by new management, you should document all the processes and automate everything you can. Yes you should do this anyway but the level of investment will be different. Spend the time to document it so you can hand it over ... how else is someone going to replace you.

Hiring staff. If your here for a long time, you want good staff who will stick with you thruogh think and thin (at least I do) ... if your going to sell and be rid of them, then you might want people who will drive the business a lot harder.

Features of your product. Some features, functions or indeed the entire direction of the product suite may change depending on if your "trying to get into bed" with a prospective purchaser ... basically you want to complement them without competining with them. If you don't care about your competition and are doing it on your own for your customer base (like 37 signals) then you given them what they want, regardless of who else is doing what in the industry.
Then again if your trying to annoy the hell out of them so they buy you ... you would match their features and raise it to the next level.

Investment you take on. A VC wants to get their money back ... and soon ... this typically means trade sale or publically list. If you are happy to grow for the next 30 years, you may opt for a slower more natural growth and avoid the undue pressures.

Clients you target. I want long term, solidily growing clients that I can make a real difference through automating their business ... If I was selling, I would want more clients that I can sell lots to today so tha it looks better on the balance sheet.

R&D Strategy. This is a near and dear to my heart, you aren't going to build a huge production works, wrap processes and quality control around everything if you not going to be here in 5 years time. You going to get todays feature out the door today and rinse and repeat tomorrow. "Hang the long term consequences, we aren't going to have to deal with that".

Short term contract developers VS long term employees. Long term employees know they have to look after it and maintain it forever (like having a baby) but the contract just has to tick the boxes today and move onto the next job.

There are probably more but that will do to illistrate the differences.

answered May 18 '11 at 14:02
Robin Vessey
8,394 points
  • I really like your identification of the specifics -- thank you! – Joseph Barisonzi 13 years ago
  • Ok, little curious, why did I get a down vote on this answer? – Robin Vessey 13 years ago


There should be no difference. If your focus is on your exit strategy then you're not focused on the product or the customers. I didn't listen to the DHH link you pointed out, but I suspect that the comments from him, as they are from Steve Jobs, Bill Gates, Steve Wozniak, Sergei, Larry, et. al. are all the same:

"What exit? I'm focused on building something here."

The very notion of pina coladas is probably a good indicator for failure.


OK, so people think this answer is bogus based on the downvotes and also the comments.

How about we look at the people related to this very website:
Did these people start out looking for "an exit"? Or did they have a desire to build something good/great and then lo and behold, success and cash somehow magically found them?

  • Jason Cohen
  • Joel Spolsky
  • Jeff Atwood

I think you should all rethink the question - and if it is even worth considering. I still contend that if your initial priorities are "to sit on a boat drinking cocktails" then you have already put yourself at a disadvantage compared to the person who is focused on creating value and making customers happy.

answered May 18 '11 at 13:19
Tim J
8,346 points
  • I'm not in the pina colada camp myself but I have quite a few friends who have made it there. Some people like it so I'm not knocking it. They definitely ran their businesses so as to get that outcome. You have listed an illustrious group who never intended to hit the beach. The difference is there. – Kenneth Vogt 13 years ago
  • I'm no knocking the pina colada crowd - what I am saying is that if you go into it with that in mind then you are already at a (severe) disadvantage. – Tim J 13 years ago
  • And what I am saying is that anecdotal evidence says otherwise. – Kenneth Vogt 13 years ago
  • I know of far more successful entrepreneurs who set out to build something useful compared to the very few who set as their goal "to make an exit." – Tim J 13 years ago
  • Any entrepreneur should have an exit strategy like and investor should. No one lives forever and if you are really successful, someday you'll have to leave the business. An exit strategy eases that INEVITABLE transition. Also, you should always have a floating exit strategy for what stage of development your start-up is in, otherwise you could be left holding (a very expensive) bag – Craig Robertson 13 years ago
  • @tim I agree that it is better to build a business with the goal of building something properly. Joel and Jeff are clearly in it for the long run ... the way Joel runs fog creek is testiment to that too. For most active people on this site, that is why we are here ... but its not the only way to build ... some businesses simply have a shelf life which is known in the beginning ... after which time the oppurtunity is gone, the patent is over, the founders want to build something else ... if that is the case, then a different approach is required – Robin Vessey 13 years ago

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