When you started your businesses early on, you were not likely planning to sell it. You had a big idea, a skill that no one else could quite match, a passion for changing the world in some way. And if any investor asked you about your exit strategy, you would placate them by noting the three giants in your industry, but would likely be clear to state, “but I intend to execute against my business plan. As long as my business is making money, there is no need to exit.”
I wholeheartedly believe that nearly every founder feels this way in the beginning. But running a business is hard work. It requires untold hours of blood, sweat and tears and has no sympathy for its founder’s illnesses, family needs or mental stress.
It is inevitable that you, founder, will one day retire or pass (let’s hope you have some easy days before you go). Knowing that you cannot run your business forever, and assuming that your company will be wildly successful, it is good to begin planning for succession earlier rather than later in your company’s life cycle.
When we craft our exit strategy in our business plan or add the exit slide to our investor deck, we often look outward for a potential acquirer. However, companies are purchased by their employees quite often, and employee-acquired businesses are growing by 10% each year.
Offering stock to your employees builds loyalty within the company and helps you to diversify potential future buyers over time. Whether you plan on selling your business or not, you will want to build trust and investment with your team, and offering some form of an employee stock ownership program (ESOP) and internal promotion structure are two ways to build this opportunity for yourself.