The importance of an exit

As we look around the broadcast industry, we see a number of dominant suppliers who control the vast majority of the dollars that are spent. But whether they advertise or not, whether they have a small presence at NAB or no presence at all, this industry is dominated by smaller suppliers, in some cases very much smaller. They enjoy the niches that smaller companies everywhere have had to find when the superstore moves into town. In many of these cases the companies invented the niche, and many dominate their arenas.

The really small companies are normally safe from predatory corporations and are unlikely to come to the attention of the larger operations - which often could compete with the company's products quickly by simply turning a little of their resources in that particular direction, but do not, having bigger fish to fry.

When a small company needs an exit plan, all bets are off.

I have always felt - and I have a couple of family examples to show for it - that pure business partnerships are the most difficult to keep going for any length of time. When things start tough and then get tougher, the reasons for staying together seem to be fewer and fewer. The most enduring partnerships are when the parties involved are related, and the act of splitting the business part inevitably has to be balanced with the chances of splitting the family. I have consulted with a number of such companies and the most obvious failing, time-and-again, is the absence of an exit strategy. What happens if one of the partners dies, is disabled or simply doesn't want to be involved any more?

In one memorable example I managed one afternoon to persuade a substantial family business to fire the CEO/president (their mother/aunt) and appoint another much more aggressive, more qualified member of the family into that position. This poor woman had been forced into the business by the death of her husband and had no idea how to get out of the predicament in which she found herself: in a business she disliked and knew she didn't know how to run.

Fatigue is a major reason why people divest themselves of what they have built up. One example that is close to home for me is a company that happens to be in the broadcasting market. Well established in its niche, internally the company had suffered business decision disagreements between the closely-related principals. The partners had taken over 20 years to build their business and they wanted out. It was clearly both a wrench for them and a necessity.

A buyer was found at the opposite end of the country and a deal was completed. Most of the principals decided not to stay, but a few key players did. After so much work, so much grind, over so many years, one cannot feel anything but joy for them for getting out in one piece with sufficient funds for their old age. But the rest of us also have to look at what is the inheritance of the sale - for the employees, the town and for a company put in the same position halfway across the country.

One other locally-acquired company (not in broadcasting) has seen the local CEO give up and leave town, making the future of what was a superb organization tenuous at best. The broadcast company I mentioned has not been left in good hands and is now incapable of defending the company's local interests. The head of R&D saw the corporate light, liked it not, and left.

So I'm watching a company with some fine individuals - not all, of course - who are rudderless. The hand on the helm is far away, as I can gauge by counting the number of neckties seen in our town. It is usually few: ministers, the mortician, the postmaster, and for some reason the appliance store owner. A tie coupled with a rental car stands out as a very obvious sight. At the beginning of this acquisition, they were in town thick and fast; now they are rarely seen. To me that says they have lost interest. I can foresee a squeezing of the talent in the company, continual pressure on reducing expenses, and a continuous worsening of morale.

It is sad to see talented, confident and honest employees increasingly having to ask themselves whether they should be looking for jobs somewhere else. It is even sadder that things could have been entirely different; that the problem should have been how to recruit even more talented people to the town. With an exit strategy in place in earlier years, everybody would have benefited and the founders could have continued to enjoy what they had accomplished.