No Exit: Why Exit Strategies Can Be Bad For Business

Posted on May 29, 2011 by antiochantidote

by Freddy J. Nager, MAOM Associate Faculty & Entrepreneurial Advisor
In a business plan the “exit strategy” describes how the entrepreneur intends to unload her business in, say, five to ten years. Common options include going public on the stock market or selling the business to someone else.

Even if you want to run your business for life, you’ll have difficulty attracting financing if you don’t cite an exit strategy, since the investors aren’t giving you their money out of benevolence — they want returns (and many happy ones at that).

So you do what you have to do to appease the finance gods. (Though considering what’s happened on Wall Street over the past few years, should we still be doing their bidding?) After all, there’s no harm in saying you’ll pull an IPO or sell your company to Google in the distant future — right?

Except that your investors will likely hold you to it.

Now, even investors know that long-term projections in a business plan are nearly as fictitious as the term “affordable housing.” Plans often change. The problem arises when a single-minded obsession with an exit strategy overrides all commitment to building a profitable business.

As depicted in my satirical article, Lemons 2.0: If Everything were Run like a Dotcom, many Silicon Valley entrepreneurs forgot the other integral part of their business plan called “the revenue model.” I knew one company that was so eager to get bought out, they launched a publicity campaign even before their product was even finished.

From Feast to Famine
These entrepreneurs all salivated like pitbulls in a sausage factory when Google bought YouTube for $1.65 billion before the video site even turned a profit. Consequently, hundreds of start-ups launched with no realistic revenue model but, rather, an eye on having some mega-corporation snap them up.

Then the recession struck all this corporate matrimony like a bucket of cold water, and some of those mega-corps started looking for saviors of their own. Yahoops. Consequently, many of those exit-oriented start-ups beceme bottom-ups, landing in the TechCrunch Deadpool, with most people not knowing they ever existed.

Consider these links that Wikipedia provides for “Exit Strategy”:

Surrender
Withdrawal
Iraq Study Group Report
Pyrrhic victory
No-win situation
Total U.S. Withdrawal in the Vietnam War

Not exactly inspiring, huh?

An Alternative To Investors And Exit Plans

SRC Holdings, an American manufacturing conglomerate, emphasizes profitability, thinks through all contingencies, and has never laid a single employee off. The Inc. magazine interview with SRC CEO Jack Stack is a must-read for entrepreneurs who are serious about running a business. You won’t find any obsession with exit strategies here — indeed, the company remains privately held after 26 years, with ownership firmly in the hands of its employees.

The Verdict
So should you have an exit strategy? Yes, if you invade another country or enter a PhD program.

If you absolutely need to entice and appease investors, then put an exit strategy in your business plan; but before buying your first Aeron chair, engrave these words into the front door of your spanking new office:

“To have and to hold, from this day forward, for better for worse, for richer for poorer, in sickness and in health, to love and to cherish, till death do us part.”

Keep repeating these words to yourself and to all your partners and employees. Sure, marriage vows may not hold a lot of weight in these here parts, but they’ll at least have you thinking in the right direction — and not towards the nearest escape.

Guest Blogger Freddy J. Nager teaches courses in social media, entrepreneurship and marketing at AULA. The founder of agency Atomic Tango LLC, Freddy has over two decades of professional experience in marketing and media, including 17 online. He previously worked for music label MCA Records and major ad agency Saatchi & Saatchi, and served such clients as Nissan & Infiniti, the NFL on Fox, Royal Caribbean Cruise Lines, National Lampoon and numerous startups. He holds a BA from Harvard University and an MBA from the University of Southern California

The Courage of Commitment, Part 2: Burnout and Perseverance

Posted on May 24, 2011 by antiochantidote

by David Norgard, Associate Faculty, MA in Organizational Management Program

Burning bright now, but... (photo by Sebastian Ritter via Wikimedia Commons)

As mentioned in my first article on courage of commitment, most leaders of faith-based and community and membership organizations genuinely want to make a positive difference. We want to have an impact – on individuals, on their communities, on the environment.

Sometimes the vision is even grander. We want to change our society, our world – or some aspect of it anyway. And this is all very good because we know that change doesn’t happen without people willing to step up as change agents.

Yet sooner or later, the road toward progress no longer invigorates us with exciting challenges and illuminating vistas and meetings with inspirational figures. On the contrary, the problems seem intractable. The views have long since become tedious. The individuals with whom we contend generate more stress than comfort. What we dared to call our mission, our calling, has become our burden, depleting us more than invigorating us.

The Road Too Long, the Summit Too High

We call it burnout and the metaphor is apt. It is as if, in serving as a light to our chosen corner of the world, we have not stopped to put more oil in our lamp and our flame has nearly gone out.

There are two kinds of burnout:

The road too long. In the first instance, we do not blame ourselves. We recognize that our efforts are sound, our motivations sincere. Yet the pace of progress seems agonizingly slow, the force of our impact distressingly minute. We have worked so very long and so very hard, yet the end is not in sight. And eventually, it is only sane to wonder: Is it worth it? Or, is it futile? This is the burnout of perceived hopelessness – hopelessness despite our best efforts.
The summit too high. In the second instance, we do blame ourselves. We come to the sinking realization that we were not the right person at the right time after all. We are not up to the challenge. We know how to empower volunteers, perhaps, but what is actually needed is a magic piper to elicit major gifts. We have skills and good intentions. But in the given context, we really don’t have what it takes. This is the burnout of perceived inadequacy, when our best is not good enough.

Avoiding Burnout

So how do we avoid these self-defeating interpretations of our situation? How do we avoid either turning back or just wandering away? The answer depends on whether the perceived challenge is a road too long or a summit too high.

In the first case, it is fundamentally a matter of perception of context. If we are engaged in one of the great historical struggles and wearied by the likely prospect that we will never see a battle won, let alone the final victory, then the hopelessness on the surface may be covering a deeper problem. Perhaps the real issue (yes, ironically) is hubris. In the great works – against war, against global warming, for peace, for a humanity in harmony with the rest of creation – even a moment’s reasoned reflection will remind us that our entire life-work is, after all, but a short leg in a long relay. When we are at our best, we are all team players, and to the team with the most courageous and persevering players goes the victory. In any profound struggle, there are but a few Mandelas and Salks and Churchills who are cheered as they cross the finish line. Most of us are here to ensure that the baton is passed to the next runner. Our hope and our satisfaction rightly come from ensuring – simply yet crucially – that the forward movement continues.

In the second case, there are two possibilities. Maybe we have been deceiving ourselves. Maybe we are in the wrong position or the right position for too long. If that is so, then the courageous thing to do is to step aside and let someone else step up.

But it could also be that we have simply not been good stewards of our strength. We have let ourselves get too tired, and with the exhaustion has come self-doubt.

Then, What To Do?

We take rest. We stop and reflect, even if the voice of duty keeps chirping, “There is still work to be done.” We rest anyway. We close the inbox. We step away from the conference room. We turn off the mobile phone… And we look back. We look on what has been done thus far, what has transpired to date because we have stayed true to our mission. In the words of Dag Hammarskjold, we say to ourselves, or perhaps a confidant, “For everything that has been, thanks.” …and most critically… ”For everything that will be, yes.”

And at the first stirring of renewed creativity, which is the signal of renewed hope, we proceed to act. We banish the hope and we act, with confidence

A Final, Personal Reflection

When the conflicts are waxing and the money is waning and the glow of accomplishment is growing dimmer rather than brighter, it is tempting sometimes to say, “Enough.” But a mission is there to be done, a calling is made to be answered. And so, if the call is indeed heard and the mission remains true, what can we do? We can go on. We may need to rest… but in the service of saying – again – “Yes.”

In addition to being an Associate Faculty member in the M.A. in Organizational Management Program of Antioch University Los Angeles, David Norgard is the founder of OD180, a consulting firm that develops strategies for nonprofit organizations. He has also held leadership roles on various nonprofit boards and committees. At present, he serves as the President of Integrity USA, the Episcopal Church’s LGBT advocacy group. A graduate of AULA’s M.A. in Organizational Management program, David currently serves as Chair of AULA’s Alumni & Community Advisory Board. He also holds a B.A. magna cum laude from Augsburg College and an M.Div. from Yale Divinity School, where he received a Dean’s Citation for Community Service and an Award of Distinction among Alumni.

Nonprofit Leadership and the Courage of Commitment

Posted on May 15, 2011 by antiochantidote

The Common Predicament

"Meetings and speeches and decisions — oh my!"

We all have personal reasons for working or serving in the nonprofit sector, and they are not necessarily all altruistic. Perhaps we appreciate the distinctive organizational culture nonprofits tend to have (in comparison to commercial enterprises) or the community connections that we often gain by being associated with a nonprofit.

Yet nearly all of us have joined the nonprofit sector, whether as professionals or volunteers, because, whatever else we might desire from the experience, we also want to make a positive difference. We want to make some contribution to the common good, however defined.

So we get involved. We join a board or we take a new job. Then, either quickly or gradually, we become immersed in the ebb and flow of the organization’s life and we are content that we are “doing a good thing.”

Yet no matter what the organization is or what it does, that contentment is eventually disturbed. One scenario is that we come to a crisis. We need to make a decision (or support one) that will be controversial and incite criticism, even opposition. It is a situation that calls for the courage of boldness.

The other scenario is less dramatic but no less problematic. We become exhausted and start to burn out. The road to progress – to actually having an impact – begins to appear endless, and we wonder if we will ever accomplish anything even close to what we originally set out to do. It is a situation that calls for the courage of perseverance.

The Courage of Boldness

It is often said that leaders are recognized by their ability to do three things consistently well:

lead a meeting
deliver a speech
make a decision

Taking a stand on matters of substance comes with the territory of leadership. It cannot and indeed must not be avoided.

Sometimes it is easy, of course. We take positions which are popular with our constituencies and doing so brings joy to us and to them. At other times, though, it is just the opposite. Responsible stewardship of our institution requires that we make tough decisions which will be unpopular at least and give rise to virulent objection at worst.

This latter scenario could be the fate of many of you as programs are downsized and staffing is reduced and cash reserves are depleted. We are entering a time when boldness will be called for repeatedly.

In such a time as this then, it becomes critically important to accept the sober reality of authentic leadership: In order to reach the farther goal of contributing to the common good, periods of painful steps are unavoidable.

In these periods, equal measures of self-confidence and openness to others is critical to survival. On the one hand, you must not waver once having reached the point of personal conviction. On the other hand, you must not close yourself to the possibility of receiving new information and insight which lead to new conclusions.

Lincoln (who has been much in the press again these days) held this balance of self-confidence and openness extraordinarily well. It was one of the essential factors of his political genius. Thurlow Weed, one of Lincoln’s political associates, said, “His mind is at once philosophical and practical. He sees all who go there, hears all they have to say, talks freely with everybody, reads whatever is written to him; but thinks and acts by himself and for himself.”

We could not have a better example to which to aspire amidst the present economy.

A Final, Personal Reflection

In a second installment, I will focus on the other aspect of courage of commitment, that of perseverance. For now let me close with a personal observation from my twenty-plus years in the nonprofit world.

At its best, every organization holds to a single essential noble purpose. It has been created to teach or to heal or to preserve or to provide.

In any given context, a leader, too, is given a single essential mission, the success of which is critical to the organization’s success. It may be that the leader’s mission is to rebuild. Or it may be to reorganize. In good times, it may be to expand or to professionalize. Whatever it is, the authentic leader will know it… and proceed with determined commitment. And while open to new understanding, he or she will not be swayed by passing storms of criticism. He will do the right thing, thinking and acting by himself and for himself.

In addition to being an Associate Faculty member in the M.A. in Organizational Management Program of Antioch University Los Angeles, Guest Blogger David Norgard is the founder of OD180, a consulting firm that develops strategies for nonprofit organizations. He has also held leadership roles on various nonprofit boards and committees. At present, he serves as the President of Integrity USA, the Episcopal Church’s LGBT advocacy group. A graduate of AULA’s M.A. in Organizational Management program, David currently serves as Chair of AULA’s Alumni & Community Advisory Board. He also holds a B.A. magna cum laude from Augsburg College and an M.Div. from Yale Divinity School, where he received a Dean’s Citation for Community Service and an Award of Distinction among Alumni.

Why Johnny Runs Screaming From His Reading Assignment

Posted on May 3, 2011 by antiochantidote

by Freddy J. Nager

When Johnny first began trying to decipher this textbook, he was 16 years old.

Forget the question of why Johnny can’t read. For today’s students, ask “Why does Johnny dream of dropping out before he gets his master’s degree? Why does Johnny’s professor feel like running, too?”

Ladies and gentlemen, I present the average business textbook.

Most business textbooks read like an IRS instruction manual first translated from English into Urdu then back into English by an iPhone app developed in an Uzbekistani sweatshop under the direction of a bad Shakespearean actor with a migraine.

And that’s when they’re interesting.

When they’re boring, they sound something like this excerpt from Advertising Media Planning (Seventh Edition):

“The marketing goals that the company and the agency agree upon should, if achieved, result in the solution of the marketing problem.”

It’s hardly the worst sentence I’ve ever read in a textbook, but let’s clean that up anyway, shall we?

“The marketing goals shared by the company and the agency should solve the marketing problem.”

Notice the issue here: after we eliminate the junk words and clauses, we find a sentence that’s so dull and obvious, even a caveman would say “duh.” “Marketing goals should solve marketing problems.” Yeah, that insight is worth the price of a textbook. No wonder the authors fussed that sentence up.

Here’s the next sentence:

“Marketing goals are measurable in most cases and provide a means of determining whether the strategy employed has been effective.”

After a slim-fast diet:

“Usually measurable, marketing goals can tell us whether the strategy works.”

When stripped of its accessories, the statement doesn’t sound very enlightening, does it? And if anything, a textbook must sound enlightening even if it doesn’t have anything to say.

So we put all the junk words back in, along with an army of subordinate clauses, fill 428 pages with similar prose from Dante’s Terms & Conditions, and (ta-daa!) we’ve got a textbook — a textbook that students won’t read, and that instructors like me have to translate before a live audience.

A textbook’s top priority should be education. (Insert caveman “duh” here.) For a major publishing house in a country filled with millions of professional writers desperately seeking work, there’s no excuse for sloppy prose — particularly in an advertising textbook developed by advertising experts.

What? A book that's informative AND readable? We can't take that seriously now, can we?

At the same time, I’ve been rereading Ogilvy on Advertising— not a textbook, but a professional’s ruminations on his craft. As could be expected from a legendary ad copywriter, the prose is concise and lucid and even passionate. Succinct sentences like “You can’t bore people into buying your product” slide right off the page into the brain for future reference.

So Johnny, don’t run yet. I’m trying to replace the overpriced 428-page tomes with slimmer volumes from professionals who not only do the work, but know how to explain it. I’ll just have to translate everything else for you. Hopefully, someone will soon invent an app for that.