When Should An Entrepreneur Exit From A Venture?

Entrepreneurs often ask me, “Should I start a company now?”

My answer to them always is “No!”

Entrepreneurs who have a firm conviction about their new venture do not need external validation.

Similarly, entrepreneurs who are firmly convinced of the value their company is creating and who are focused on building their organization, capturing new customers, enhancing the customer experience and providing enriched value for their stakeholders, don’t see planning for an exit as a priority. They are convinced their company is providing a critical resource that the world needs.

At some stage during a company’s growth the entrepreneur starts focusing on managing risks. Whether it is from competition or changing markets or other fronts, risk mitigation begins to dominate their thinking. The job that was once all about managing exciting growth becomes one of managing risk.

It is at times like these that manager’s start thinking of exits. That inflection point can happen anytime and depends on the personality of the entrepreneur.

I have known entrepreneurs who have built very large companies. They were so confident of the future potential value they could create that the risks seemed insignificant in comparison. They reset their growth goals repeatedly. When $100 million seemed achievable, they raised it to $250 million. As $250 million approached they reached for $1 billion. An exit was the last thing on their mind.

On the other hand, some entrepreneurs start to worry about things when they are still small. If you spend your time worrying more about the risk factors than the growth opportunities, it is a sign that you should be thinking of an exit, either personally or for the company.

Of course there are extreme situations when companies might be on life support due to factors beyond their control or otherwise. In that case you have no choice but to come up with an exit strategy.

If you spend your time worrying more about the risk factors than the growth opportunities, it is a sign that you should be thinking of an exit, either personally or for the company.