“In theory there is no difference between theory and practice [when selling a company]. In practice there is.” Yogi Berra
As I began to read Bo Burlingham’s latest book, I was again reminded that the term “gazelle” refers to the classic entrepreneur of myth and reality, someone who starts a new business venture (or a new way of doing business) and aims for it to explode into a white-hot phenomenon such as Home Depot, Facebook, Jenny Craig, Netflix, Under Armour, and Instagram. The term was coined by the economist David Birch. His identification of gazelle companies followed from his 1979 report titled “The Job Generation Process” (MIT Program on Neighborhood and Regional Change), wherein he identified small companies as the biggest creators of new jobs in the economy.
In 1994, however, Birch revised his thesis, isolating job-creating companies he called “gazelles.” Characterized less by size than by rapid expansion, Birch defined the species as enterprises whose sales doubled every four years. By his estimates, these firms, roughly 4% of all U.S. companies, were responsible for 70% of all new jobs. The gazelles beat out the elephants (like Walmart) and the mice (corner barbershops). When you hear politicians say, “Small businesses create most of the new jobs,” they’re really talking about young and fast-growing firms. They are talking about gazelles. Many (if not most) of them were founded by entrepreneurs. Some of them have since moved on to new adventures in the vineyards of free enterprise. Others remain with the company but not as CEO as still others do.
According to Burlingham, every entrepreneur exits eventually: “It’s one of the few absolute certainties in business. Assuming you’ve built a viable company, you can choose when and how you exit, but you can’t choose whether. It’s going to happen. You can count on it.” One ancient Chinese axiom suggests that the best time to plant a tree was 100 years ago. The next best time is now. Great entrepreneurs have followed that advice. That is why, as Burlingham explains, they are able to “exit their companies on top.” Of course, entrepreneurs tend to be considered “great” if their companies achieve great success. Eventually, all of them — “the good, the bad, and the ugly” — retire or are removed.
These are among the key insights that Burlingham explores within his lively as well as eloquent narrative:
o Now is the time to start thinking about your exit.
o It begins with knowing who you are (and aren’t), what you want (and don’t), and (especially) why.
o Build a business that can be sold when and to whom you want to sell it.
o A good exit takes time — measured in years, not months.
o In choosing a successor, leave enough time to be wrong.
o The best advice comes from people who’ve been through it themselves.
o No one builds a business alone. So what about everyone else?
o Make sure you know why potential buyers want to acquire your company.
o Your exit isn’t over until you’re fully engaged in whatever comes next.
Burlingham shares what he learned from dozens of great entrepreneurs and organizes his material within a framework of eight common characteristics. He urges his reader to take them into full account:
1. Have a crystal clear understanding of who you are, what you want, and why.
2. Look at your organization through the eyes of a potential buyer or investor.
3. Commit years — not months –to completing preparations and creating options.
4. Make certain that you leave the organization “in good hands.”
5. Enlist the counsel of those best qualified to provide it (e.g. entrepreneurs who know the dos and don’ts)
6. Take into full account your responsibilities and obligations to all stakeholders.
7. Thoroughly understand those to whom you’re selling and why they’re buying.
8. Have a clear vision of what you will do if/when the sale is completed.
“These eight factors, I found, went a long way toward explaining the vast differences of the entrepreneurs I interviewed, and I couldn’t help but think that current and future business owners would benefit by knowing about them. That said, my purpose in writing this book is not to provide a how-to guide, but rather to illuminate the exit process by telling the stories of entrepreneurs who have gone through it.”
Actually, Bo Burlingham combines in this volume stories of dozens of entrepreneurs but also an abundance of relevant knowledge and wisdom he has gained from his vast and deep real-world experience. That is indeed true but I want to make one other point: Those who read this book will be well prepared to accelerate their own personal growth and professional development while helping others within and beyond their organization to do so…and thereby increase substantially the value of that organization. In other words, much of the material in this book — and the mindset it encourages — can have impact now, today, as well as during a sale years from now. This book is a brilliant achievement. Bravo!