Build a Viable Business, or Build Toward an Exit?

If you’re a CEO, board member, or investor in a high tech company, growing shareholder value is a top priority.  The obvious challenge is taking the right steps and avoiding the wrong ones. Two divergent views on how to grow value are commonly held:

  1. Focus on growing a viable business and let the exit take care of itself, and
  2. Base each corporate decision on your targeted exit strategy.

Business v. Exit

For years I was certain that the former view was the best one. Simply keep evolving the business with desirable products and services offered at a reasonable price with good support, then at some point you’ll be acquired or else the conditions will be right for an IPO.

In today’s increasingly competitive environment, I’ve reconsidered that position. Most companies find that an IPO is out of the question for now, so if they articulate an exit strategy, it’s “to be acquired.” While building the business continues to be important, the complexity of the current market landscape and, even more importantly, the speed at which the market and market perceptions change, demands a more sophisticated approach.

Taking a stand at either end of the continuum above can result in failing to reach the preferred exit. If you focus only on growing a viable business, you may survive but you may not trigger the financial event that the investors and shareholders want to occur. On the other hand, if you focus solely on the exit, the business can suffer and your company may be eliminated from consideration by potential acquirers.

The purpose of 20/20 Outlook is to ensure that the proper balance between these extreme positions is achieved, i.e. that the company’s value increases through relationships with potential acquirers and potential acquisitions while you continue to grow the business. The process defines clear steps that enable you to (1) view your company through the eyes of potential acquirers and potential acquisitions, (2) define a realistic exit strategy, (3) align your product strategy in light of what you’ve learned, and (4) define and execute partnerships that move you closer to an exit.

More on this next time. In the meantime, additional information about 20/20 Outlook can be found at www.2020outlook.com.

« Previous Page