Strategy · Organising to Scaling
Your exit goal
You pick an amount and a year for what your company is worth, work out whether it's achievable, and know what you want when the moment comes.
Does this sound familiar?
- Someone asks what your company is worth. You give a number you once heard from an acquaintance.
- A competitor gets bought and you wonder whether you'd want that too. You don't know.
- If you're away for three weeks, work stalls. Customers call you, not your team.
- Your business partner wants to stop in five years, and you want to carry on for another twenty. You only found that out last month.
Who it's for, and when
For owners who work hard on growth but have never written down where it should leave them personally. Even if you've no plans to sell. It starts to matter in Organising, when the company needs to run without you, and in Scaling it's the standing question.
The model
“Begin with the end in mind.”
Your exit goal is two things: an amount and a year. How much do you want your shares to be worth, and when? On the canvas it's the marker three to five years out. The lesson 3HAG: your company in three years covers what the company will look like by then. The exit goal says what that company should then be worth to you.
Warrillow shows that most companies can't be sold because everything runs through the owner. Customers buy from you, the team waits for you, the knowledge sits in your head. A buyer won't pay for a company that stops when you leave. A company that runs without you can be sold, handed over to your team or your children, or kept, with you taking dividends. Then you have the choice. Without an exit goal, life chooses for you: an illness, a business partner who wants out, a buyer who turns up out of the blue.
Burlingham brings in the founder as a person. People who sell without knowing what they want next often regret it. So the amount isn't a number on its own. It depends on what you want to do with your life once the company is no longer yours.
John Warrillow, Built to Sell (2010). He built and sold a company himself, and describes what makes a business sellable: it runs without its founder. Bo Burlingham, Finish Big (2014), talked to founders after their exit and found that those who knew beforehand what they wanted came out of it happiest.
The amount
What the company is worth at the moment of your exit. Work back from what you want to keep after tax. Say you want €2m in the bank after the sale. Roughly 30% goes in tax in the Netherlands, so the gross amount is about €3m. If you own half the shares, the company needs to be worth around €6m. That last figure goes on the canvas. The tax depends on your situation, and it works differently with a holding company: ask your adviser.
The year
When do you want to have the choice? Look at your age, your family and how much longer you want to do this. Three to five years is long enough to make the company sellable, and close enough to do something about it now. If your real stopping point is further off, put down the year you want to have the choice, and roll it forward when you get there.
Check it against today
Put the amount next to what your shares are worth now, in Company valuation. Work out how much the value has to grow each year until your exit year. Going from €3m to €6m in five years is about 15% a year. If your company has grown 5% a year recently, something has to change, or the year or the amount is wrong.
The form
Selling to a buyer, handing over to your team or family, or staying on and taking dividends. You don't have to choose now. The amount and the year apply to all three.
What you want afterwards
What do you do on the Monday after the exit? Burlingham found that founders who had an answer to that found it easier to let go. Write it down too, even though it doesn't go on the canvas.
Pitfalls
A year that never gets closer
'In twenty years or so' is still twenty years away every year. Pick a year. You can move it later, but then you know you're moving it.
Only you know it
Your business partner has a different year in mind, your partner at home a different amount. An exit goal nobody has talked about clashes at the worst possible moment.
Waiting until it's time
If you only think about your exit when you want to stop, there's no time left to make the company sellable. That takes years.
Watch and read
The man behind the model, briefly: why owners decide to step out, and how that moment often comes sooner than they expected.
Watch on YouTubeDutch dealmakers on what really happens in a sale: months of tension, deals that still fall through, and founders who drop into a black hole after their exit. In Dutch.
Watch on YouTubeA British founder on the day after selling her company. Burlingham's point, from someone who lived it: know beforehand what you want next.
Watch on YouTubeTo go further
Warrillow on why you build a sellable company even if you never want to sell. That's exactly why the exit goal is on the canvas.
Watch on YouTubeRead
Built to Sell: Creating a Business That Can Thrive Without You
John Warrillow · 2011 · ISBN 9781591845829
The model in this lesson, told as a story: the owner of an advertising agency learns from a mentor how to make his business sellable. Short enough to read in an evening.
View the bookFinish Big: How Great Entrepreneurs Exit Their Companies on Top
Bo Burlingham · 2014 · ISBN 9781591844976
About the founder at the point of exit: who you are and what you want once the company is no longer yours. Built on conversations with many founders who've already been through it.
View the bookApply it
- 1
What do you want after the company?
What will you do, where will you live, how much do you need a year? Add up what you already have, such as a pension or property. What's left is the amount you want to take out of the company after tax.
- 2
What value goes with that?
Add roughly 30% for tax and divide by your share of the company. Use the sum shown alongside, and ask your adviser to check the tax.
- 3
In which year do you want the choice?
Sell, hand over or stay: three to five years ahead. Write down a year, not an age or 'some day'.
- 4
Can you get there from here?
Put the amount next to today's value in Company valuation and work out the growth per year. Route to your goal shows which routes lead there from your current value.
- 5
Who needs to know?
Your business partner, your partner at home, any other shareholders. If your years or amounts are far apart, you'll find out now. Then put the amount and the year in the Exit goal box.
Examples
The sum to copy
After tax: €... Plus roughly 30% tax: €... gross Divided by your share of the company (...%): €... for the whole company Exit year: ... Value now (Company valuation): €... Growth needed per year: ...% (doubling in five years is about 15% a year, in three years about 26%) Growth in value in recent years: ...%
An installation company
The owner is 52 and holds all the shares. He wants to keep €2.5m after tax, so about €3.6m gross. On the canvas he puts €4m in 2031. Company valuation has his company at €2.5m today: the value needs to grow just over 9% a year. He also sees that he writes every quote himself, and that pulls the value down.
Two business partners in a consultancy
They own half each and write down an amount and a year separately. One wants €1m after tax in 2030, the other never wants to sell. They work back to €3m for the company in 2030. Then one can step out and the other can buy his share or find a new partner.
A third-generation family business
Selling isn't the plan; the daughter takes over in 2029. The exit goal is the value at handover, €2m, and that year. That turns the family conversation about the price into a business one.
Not only your goal
If you're a managing director without shares: ask the owner about their exit goal, because it decides where the company goes over the next few years. If you're the partner at home: the year is about your life too, so have your say.
Do this in your own business
Everything up to here is free. What you fill in for your own business, you keep in Boldcaster.
- You write the Exitdoel section of your strategy, and it stays on your strategy page.
- You assign the lesson to your team and see who has done it.
- The quiz counts towards your progress, and you see which lesson comes next.
Four weeks free. You'll land straight in this lesson.
Quiz
6 situations. You need 5 of 6 right. You can try again at any time.
1.An owner says: 'I'm never going to sell, so an exit goal isn't for me.' What do you say, according to this lesson?
2.Your company makes a good profit, but all the big customers only ever call you. What does that mean for your exit goal?
3.An owner with half the shares wants to keep €1.5m after tax once the company is sold. What amount does he put on the canvas?
4.Your shares are worth €3m now. Your exit goal is €6m in five years. What do you do with that gap?
5.Two business partners turn out to have different exit years: one in five years, the other never. When is the best moment to find that out?
6.A founder sells for a good price and six months later is sitting at home with nothing to do. According to Burlingham, what should he have known beforehand?
Nothing is saved here. In the app, the quiz counts towards your progress.
Read next
- 3HAG: your company in three years · In five or six sentences you describe what your company looks like on a date three years from now, specific enough that your team can make their own choices based on it.
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