5 Exits of Every Successful Business Owner

Hey, this is Hector Santiago. I'm the producer of Business Lunch. And today's episode is another snackable episode with Roland. Something that is bite sized that you can get through while you are washing the dishes, cleaning up around the house, or on that quick drive to the grocery store. But we want to make sure that we give these to you because Roland has been on a mission over the last little bit to really help as many entrepreneurs take their life and their business to the next level. And so these snackable episodes are going to come out every week so that you can have bite size, actionable tactics and strategies that you can start to use right away. And if you know another entrepreneur that's looking to invest, acquire, or one day sell their business, we ask that you please share an episode with them as well. Thanks for tuning in today. We're going to get into the episode with Roland right after this quick break.

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So I want to talk about the.

Five exits of an entrepreneur. Sometimes people have called this the five evolutions of a business, but really, when I created it, I wanted it to be specifically focused on how are you exiting as an entrepreneur over the course of your entrepreneurial journey. So the first level is that you're wearing all the hats, you're doing all the services. If you were to draw an organizational chart, it would be you as CEO, you as cmo, you as CEO, you as janitor, you as marketing person, you as salesperson, you're doing everything in the company, and you're probably a solopreneur. So the first exit is that you are exiting from the line, meaning that you are on the front line of the business, doing the basic things that the business does. And you're moving from that actual performance of the services or actual rendering of the services or the creation of the product into being a manager. And you start to go from doing to delegating. Okay? So that means that really when you hire your first person, you're starting this exit from the line into being a manager. Now, as you go along, and if you were to draw that organizational chart where it's UU everywhere, I call it a UU chart, and you're gradually changing those boxes to the names of other people, and those people are becoming the frontline people, then you've exited from the line to the management. Okay? That's the first level of exit that you're going to make. The next level of exit that you're going to make is you're going to go from manager to leader. And that's typically when you're going from manager to becoming the CEO of the company and not the CEO. Like most people who are entrepreneurs think I'm the CEO of my company and then they do all the stuff that's not a true CEO. A true CEO is a leader that has people who are reporting to her or him that are getting their marching orders. And the CEO is truly leading the company. The CEO is responsible at that point for saying what is the board of directors of the company's vision and how do I implement that and how do I interact with the directors of the company? How do I direct, how do I motivate and interact in communicating the vision of the directors to my direct reports who are typically other C suite people like the chief executive, excuse me, chief operating officer, chief financial officer, chief marketing officer, and so on. So that's the. The second exit is when you stop managing and delegating and you're responsible for bigger things and being an actual leader of the company and communicating and channeling the vision that the directors of the company have for where the company should go implementing the governance that the directors say should be presence should be present in the company. And that's the second exit. So the third exit is when we go from being the CEO to being on the board of directors. We go from being the CEO to being on the board of directors. Then that's our third exit. And at that point we are really responsible for the strategic direction of the company, where the strategic vision of the company, the governance of the company, how, how it's doing in the world as a corporate citizen. And then we're communicating with the CEO and saying, this is our vision, Ms. Or Mr. CEO, your responsibility is now to communicate that within the organization and have it execute that. So at that point, you're not the leader of the company. You've stepped off the organizational chart of the company, but you're still very involved in it. You may have at that point sold a minority or majority part of the company, and now you're responsible for kind of shaping the direction. That's your third exit. Your fourth exit is when you go from board to investor. So you've gone now at this point, you're going to sell maybe some of your company, if you haven't already, maybe you sell more of it, or maybe you just decide that you don't want to be burdened with or responsible for creating the vision of the company anymore because there are responsibilities and liabilities that are associated with being on that board of directors. So at that point you're saying, I'm going to move from being a member of the board to simply being an investor in the company. So that's that fourth exit is from board to investor. And as an investor, you obviously are interested in what the company's doing and you are a shareholder of the company or an owner, depending on the form of the company. So you have the ability to impact who will be elected to the board of directors that will communicate, that will create the strategic vision for the company and communicate it to the chief executive officer, who will then communicate it to the managers, who then communicates it to the line. Right, but we've moved back several levels at this point, four times to simply being an interested investor. Okay, we're in it now to see how is this asset going to perform for us in terms of appreciation and income generation and do we want to continue to own it that way. And then the last exit, the fifth exit, is when you actually exit the ownership. And at that point you've run the full gamut. You've gone through the line. I'm working in the business dealing with the front lines of it. I've. I've become a manager to delegate instead of do. Then I've escalated myself up from being a manager to being a leader in the form of the CEO. And I'm balancing now the interests of the board of directors and the People in the company and the customers. Then you've elevated yourself out of that into the fourth level of being a board member, where you're communicating with the CEO, but still an investor. Now you've cashed out of the company to become an investor, that this is the fourth level. You've come out to become an investor. And now we're, we're to where I'm talking about, which is the fifth level. Whereas now we're saying I'm not even an investor anymore. I've decided that I've got enough return on my investment that I'm ready to exit the company. I'm ready to exit the entire relationship that I had with the company. I'm no longer line manager, CEO, board of directors, person or investor. And you're at that point a free agent with your capital, ready to go and do whatever else you want to do. So that's the five exits of an entrepreneur. And you may, wherever you are in the company, you may be at a spot along that spectrum where you're perfectly happy. I think it's good to know what are the other spots along the spectrum so that you can say where is the evolution of where I go from here if I want to move along the path?

Path.

There are many people that remain the CEO and on the board of directors and an investor in their company forever, till they die, basically. And that's fine. But it's good to know that you have options. So if you are working in the company and you're working too hard, then you have the ability to delegate. Start hiring people to work under you and become a manager. If you are that manager level, but you'd really like to be more of a leader and you're finding that you're spending too much of the time managing the people under you, then think about escalating yourself to the CEO position and get good managers that will manage those day to day people. If you decide that the responsibilities of being a CEO are more than you want to shoulder, then it's a good thing to know that you can move back to the board of directors, take a step back away from the actual operations of the company, but still have the opportunity to impact it strategically and still kind of be the, the person who is handling your investment in the company that way. And when you decide that you just would like to be an investor, you step off the board and you could still be an investor in the company. So you're still having impact at all of those levels. You don't lose the ability to impact the company until you step away from everything and you're no longer line, you're no longer manager, you're no longer CEO, you're no longer on the board and you're no longer an investor. So that's kind of how the five levels of exit for an entrepreneur work and I hope that's helpful. That insight has really helped me be able to kind of see where is my place in the company and based on this company and where I see it is going and the duties and other commitments that I've got. Where do I want to be in that spectrum?

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