This was a question that I heard in the halls of Expo West last week, "how will an economic downturn affect access to capital?" It made me think of this article penned a year or so ago. The best guard against any potential risk, in my opinion, is to build a business with a clear path to profitability. A business that you can live with.
Big exits are exciting even intoxicating. But, they are still the exception to the rule. Yes, strategics are buying innovation. Yes, there is more money in the food and beverage space than ever before. Yes, the multiples are crazy.
Given all of this, it is understandable that a big exit is often the goal. Many founders start with that end in mind. However, building a brand is different from running a business. You better make sure that you are prepared and excited by the latter as it very well could be the outcome.
Even when the big exit does occur, it rarely happens as soon as hoped or expected. That means most companies find themselves transitioning from startup to a business. It’s a giant step from birthing and commercializing an idea to running and leading an enterprise.
Knowing this is critical, preparing for it, vital. The first step is an honest evaluation of what you do well and what you don’t. Closely linked to that is what you enjoy doing and what you try to avoid.
When you begin building a business, you have the unique opportunity to create your ideal role. Here is a bit of a radical thought. That role doesn’t always have to be as CEO and leader.
I recently conducted an interview with Noah Alper, the founder of Noah’s Bagels, which eventually sold to Einstein’s Bros. Bagels for $100 million. Noah told me that he understood that CEO would be the wrong role for him and the business.
Alper shared, “I recognized shortly into the game that the CEO job was probably not the best place for me, so not all that far after my brother and I joined up and created the company together, we hired a CEO.”
It’s your business, carve out the role you want to play. One that brings you the most enjoyment and in which you deliver the most value to your team. If that is not as CEO, so what. Noah stuck to marketing as he loved promoting the brand. Nobody could do that better because he did so with a founder’s passion. He let a professional CEO take the company forward. It was the right decision for both Noah and the company.
If you are going to be running a business for a while, you might as well do it in an environment you enjoy. So, build a culture that appeals to you and is aligned with your brand.
Kevin Cleary of Clif Bar & Company told me in an interview, “We win in large part today because of our culture. We are now a company of roughly 1,200 and that’s different than when we were a company of 50.”
Lastly, build a business with a strong EBITDA. I recognize that sounds simple but it is amazing how often that focus gets blurry. A business with a good EBITDA and a strong brand is always going to be ripe for acquisition.
This is yours, develop a role in which you flourish. Create a culture that you find invigorating, exciting, and aligned with your values. Build a business with a good EBITDA and a strong brand. If that delivers a successful exit, great. If not, you’ve created a pretty cool place to go to work every day. So, don’t forget to build a business you can live with.