Thursday, March 31, 2005

Cry the beloved exit strategy

As any small-business owner knows (or people like me who are in the start-up process), one of the many crucial aspects to be worked out with your company is what's called an "exit strategy" - that is, how you as the owner plan to leave the company when the time is right (for example, when you've decided to retire) without the company falling apart as a result. As I'm already learning, though, such a strategy is not an easy one to formulate, and can be full of all kinds of perils. Take the saga of Politics & Prose, for example, a higly popular independent bookstore in Washington DC, whose travails were recently covered in the Wall Street Journal's; even though the owners had a plan they thought was foolproof (a serious investor with lots of cash, an agreement with him over how the place should be run, a gentle four-year integration plan), the store still nearly experienced a full staff revolt, for reasons that hadn't even occured to them when originally devising the strategy (for example: that the quirkiness, overeducation and anti-authoritarianism that made the employees such good staff members would also bite them on the ass when it came time to bring in a new owner).

There are certain advantages of small businesses over large ones, obviously - passionate loyalty from your employees, a sense of ownership when none legally exists, a "cult of personality" built around the company's owner. All of these things, though, can quickly become liabilities to small-business owners as well, and not just when it comes to an exit strategy. I've said it before and I'll say it again - opening a small business is an infinitely more complex process than I think most people will ever realize. (Thanks to Jeff Cornwall at "The Entreprenuerial Mind" for pointing this out; his entry also contains some really great advice for formulating an exit strategy.)