The Mirage and False Hope of an “Exit Strategy”

At best, an exit strategy becomes overrated and a waste of breath.  At worst, an exit strategy becomes a destructive mirage of certainty and false hope.  exit strategy mirageI realize that it is conventional wisdom for every entrepreneur to specify their exit strategy.  I have even heard investors say that “I will not invest in anything that does not have an exit strategy.”  The problem becomes — every exit strategy is a fantasy.  It is a waste to spend time and energy on such a fantasy.

An exit strategy is simply a made-up prediction of how the world will work in the future and how the stars may be aligned perfectly for someone to make a multi-million dollar decision that works for your company.  It reminds me of trying to predict that your “marriage strategy” will be to meet the perfect spouse on a ski trip in five years at the Squaw Valley apres ski bar while performing karaoke.  No one has any business predicting that.

Build “Exit Options”

In my opinion, the only way to make sure you have exit options is to build the most profitable business that you can. Build a good business with its widest moat; build a business that is not dependent upon the kindness of strangers, that is not dependent on future equity or debt financing rounds, a business managed (by yourself or someone else) in a way that does not drive you bananas, and that you would be proud to own for the rest of your life.  The goal should not be an “exit strategy” but “exit options” that are available whenever you decide.

Such exit options are also a way to make sure that you are never forced to make decisions with bad timing or bad circumstances, and that time is working on your side.  There is no greater strategic advantage than having time on your side, and no greater strategic weakness than being forced to do something on someone else’s timeline.

Recently, an entrepreneur said to me that he never entered something that he did not know how to exit.  Fair enough.  However, no one knows how to exit everything we begin (even buying a house).  And, such an “always exiting” philosophy causes us to be overly cautious.  Thus, I recommend not to focus on that — it is just a waste of energy.  I recommend focusing your energy on the work that creates the best company today and tomorrow.  You have more control over that.  It is more productive. A good business will create plenty of exit options as time goes by so that there is an exit ramp when you wish it.

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