My favourite talk this past year was one called The Five Constraints, which I gave three or four times. In it, I explain the world of Blairtopia, where I am in charge of all laws – judicial, scientific and economic. All creative firms thrive in Blairtopia because the principals of these firms have to live by these five laws, or constraints.
The first constraint is No Exit. In Blairtopia you can never sell your business and you can never retire.
The effect of this law is profound, even when you try it on as a thought experiment. Go ahead, take two or three minutes to consider what you would change about your business if you knew it was a life sentence.
Now take another couple of minutes and think about the things in your personal life that you would change if you knew there was no exit from your business.
Do you see how you have been avoiding some difficult decisions in the business, and how the business has been impaired as a result? Do you see how you have allowed your work/life balance to get out of whack because you’ve got one eye on the reward, the payday?
The closer a principal gets to his target exit age, the less risk he takes. At some point, within the five year window, the firm quits evolving altogether, and just when he should be building something strong that will survive the transition to new owners and therefore be easy to sell, the firm begins to deteriorate. The last few years in the business are poor ones. If it gets sold at all, it’s not at the price hoped for. The result is underfunded retirement for a burned out entrepreneur who put all his eggs into the end-game basket. The journey was unnecessarily painful and stressful because of the decisions deferred, and the payout wasn’t there in the end. Lose, lose.
If I had the power to take all exits away from you, I would do it and I know that you would invest more – money yes, but also risk & courage – into your business, and you would not only make yours a better business, you would create a better life for yourself.
What Do You Invest In?
My friend Carl Richards writes an investing column for The New York Times. He emailed me last week with two questions he has put to hundreds of entrepreneurs: 1. What do you invest in? 2. Why?
My answers were “1. Growing my business,” and 2. “ROI.”
His reply was “All successful entrepreneurs give the same answer.” (He wrote about this and our exchange in his column this week, with the following lead: “If you’re an entrepreneur, traditional financial advice, starting with the drumbeat of diversification, does not apply to you…“)
I have other investing goals – stocks I like, real estate – but every time I think of directing money into them, it’s so clear to me there’s a better return – financial and emotional – on investing in growing my business. And it’s an investment over which I have the largest amount of control.
The day I decided I would never sell Win Without Pitching and never retire was the most liberating, most empowering day of my career. Nothing sharpens your focus and makes you get it right like eliminating the alternatives. Burn the ships, baby, and warm yourself by the fire.
But, What If You Fail?
Failure, to me, is inconceivable. I can’t fail – I’m all in! It’s just not an option therefore it will not happen. To ensure this I have to confront the challenges, make the difficult decisions, keep moving forward, keep taking risks, keep learning and developing my skills and those of my team. We can’t stop learning, growing or evolving – as individuals and as a business. Ever. In 2017 we will more than double our investment in professional development.
As we keep doing these things, investing in ourselves and the business, the enterprise value grows. It grows faster than the stocks and real estate properties that I like. Faster, with more control and less risk. There is no risk. Like I said, I’m all in and therefore will not fail.
The Exit Paradox
Michael Gerber, in his book The E-Myth, advises us to run our businesses as though we intend to franchise them (while understanding that it’s unlikely we will.) This is now accepted wisdom across most small businesses. My challenge to you is similar: run your business and your life as though you will never sell and never retire. If you decide one day that for health or other reasons you must sell then you will have something of value to sell, or you will be able to move out of growth mode and into obscene profit-taking mode for a few years as you wind down.
It’s a paradox. With one eye on the exit you will build a lesser firm that bleeds ceaselessly into your personal life. With a determination to never exit, to die with your boots on, you will create the life you want now, and, you’re more likely to have lucrative exit opportunities if you really need them one day.
At the end of my talk on The Five Constraints I ask the audience how many of them have decided in the last 60 minutes that they will never sell and never retire. About 25% raise their hand.
These are the people I would bet on, the businesses I would invest in, if I didn’t already have a sure thing.
Are you in that group? Would I bet on you? Are you betting on you? Or are you hedging your bet, investing your money and risk in people you trust more than yourself as you build to an imagined exit?
Burn your ships. Consolidate, don’t diversify. You’re an entrepreneur. Invest in growing your business and never, ever sell; never, ever retire.
PS: If you’re interested, the Five Constraints of Blairtopia are:
- You can never sell or retire
- No more than 10 clients at any time
- Unpaid written proposals cannot exceed one page
- You cannot sell or track time
- You must always say what you are thinking to clients and prospects
PPS: We’re configuring virtual classrooms now for the next Win Without Pitching program that kicks off in January. Do you want to have a chat about joining us in Blairtopia?