Looking for the Exit
“What should my exit strategy be?” asked an entrepreneur with whom we were discussing various strategies and tactics to grow his business as part of a strategic planning project for which we had been retained.
Before having a chance to answer, there was a barrage of other questions. Will we become a unicorn? Is it an IPO? Is it an acquisition by a large conglomerate? Is it a windfall and I retire?
The fact is it was none of those, nor should it have been, at least not from the planning point of view. And certainly not for an early stage company, notwithstanding the fact that company was off to a good start after just a couple of years in business.
In our work, we hear questions like those frequently, especially as companies seek independent, knowledgeable advice for both growing their organizations and as a basis for having a viable plan for the business from both an operational point of view and in having their process critiqued as they seek financing.
Thinking about selling the company too early in its life cycle detracts from creating real value, the kind that investors and buyers want. “Counting” on that outcome clouds the way the business should be operated. It is important to think long term to create value.
Indeed, venture funding has decreased in the past year. So have IPOs. In fact, some financiers say that they have become “tightfisted” in evaluating the companies in which they may be considering an investment. Raising financing is not easy. It never has been easy.
The probability of becoming a unicorn, a privately held company with a valuation of at least $1 billion, is extremely low. Recently, several large mutual funds/investment firms have even written down the value for some of their investments as projections of future revenue and EBITDA were not showing the results to support the valuation at the time they invested.
Mary Jo White, the head of the Securities and Exchange Commission in a recent speech in Silicon Valley stated, “The concern is whether the prestige associated with reaching a sky-high valuation fast drives companies to try to appear more valuable that they actually are.”
She, too, was referring to how often the entrepreneurs who ask the “questions” have their mind set on a major payout, not on creating value, which is afterall the real goal, or at least it should be.
That does not mean that success is out of reach, but getting there means hard work and the development of the right mind set and growth strategies. And it also requires some luck.
Companies go through the same development cycles as humans: birth, early years, adolescence and on to maturity. Most never make it beyond the early years, especially in many creative businesses, technology developers, or others, if they do not change their mindset along the way and turn their business into a real business.
Most cannot do so on their own. They need both management and capital, but most attempt to grow organically and do not hire professional managers that can build and implement the necessary infrastructure upon which to grow. More would be better off if they paid attention to the rule of 40, 50 or 60. Many are fearful, or perhaps the word is greedy, about selling a percentage of the company in return for growth capital.
Without the foregoing, it will only be luck that separates success from failure, profit from loss.
Developing growth strategies that are smart and pragmatic is key if the right team is there to execute. Growth must be sustained, if not enhanced.
For a few, there is a big payoff. But for many others, it is the pleasure and satisfaction of building reasonable value and doing so over the long term, for which they may just be rewarded.
If you are looking for the exit, ask yourself a series of questions. Would it be better in 2, 3 or 5 years? Have we developed a sustainable business that someone might be interested in buying because we have created real value? Is the timing is right to move to another challenge?
Depending on your answers the foregoing, then it may be time to look for the exit, or not.
As for The Shindler Perspective
CinemaCon – For those who work in and around movie distribution and exhibition, the CinemaCon Conference (FKA Showest) is the major annual event. We’ll be there for several days during the week of April 11. One of the highlights of the conference is the MPAA’s annual “state of the industry” address.
NABShow – We’ll be at NABShow during the week of April 18 to see the latest in production, broadcast and related industry technologies. NAB is one of the “must attend” events, not only for those who work along the main value chain, but also for those whose businesses intersect with that chain.
In addition to touring the extensive exhibit halls, I will be sitting down with Steve Waskul of Waskul TV and the Intel StudioXperience to discuss the latest in new technologies, content developments and most importantly, a look to the future of what most impacts our clients and the industry as a whole.
In case you missed it, watch my NAB 2015 interview with Steve Waskul.
AFCI – The Association of Film Commissioners International has its annual conference in Los Angeles toward the end of April. We’ll be attending to get the latest on the world of studio production, locations and, of course, incentives.
Digital Hollywood – One of the premier events of the year is Digital Hollywood, a conference where both Hollywood and digital are the subject of a wide range of panels, events, and, of course, great networking.
The two panels that I am producing and moderating will be on Wednesday, May 4, 2016 at Digital Hollywood’s new location, the Skirball Center in Los Angeles.
The first panel is Future of TV – Wall St. Analysts Meet Industry Executives – It’s All About innovation and Disruption – Chasing the New Normal in the Entertainment & Technology Industries. This panel will be held at 7:45 AM.
- Steve Beres, Vice President, Media & Production Operations West Coast, HBO
- Cathy Hetzel, Executive Vice President, Operator Sales & Business Development, comScore
- James M. Marsh, Senior Vice President & Head of Investor Relations, Lionsgate
- Laura Martin, CFA, Entertainment & Internet Analyst, Needham & Company, LLC.
- Larry Namer, Founder of E! Entertainment currently the CEO of Metan Development Company
The second panel is Future of Film – Studio & Indie, Global Content Business, The Changing face of the Film Industry from Imax and Alternative Content to VR and other Immersive Experiences. This panel will be held at 10:45 AM.
- Doug Darrow, Senior Vice President, Cinema Business Group, Dolby Laboratories
- Chris Edwards, CEO, The Third Floor and Chief Production Officer, The Virtual Reality Company (VRC)
- Phil Groves, Senior Vice President, IMAX Corp & Executive Vice President, Global Distribution, IMAX Entertainment
- Robert J. Lenihan, President, Programming, AMC Entertainment Inc.
- Duncan Stewart, Director of Research, Technology, Media & Telecommunications, Deloitte Canada
Trends in the Marketplace and Other
Bricks and mortar – It is too early to determine if this is a bona fide trend, but Amazon is beginning to open brick and mortar book stores. While buying books and many other products online is great, there is something to be said for browsing in a bookstore. We suspect that there are many nodding their heads in agreement while reading this. Will this bring back other stores? Will Amazon rule the industry? The two answers are TBD and probably. We’ll be watching.
Live TV – productions – There have been several over the past couple of years, beginning with Sound of Music and Peter Pan. Recently, NBC announced that Aaron Sorkin’s “A Few Good Men” will be its next live show. Certainly, this is targeting a different audience than has been sought before with the other live programs. The industry will be watching to see if it is a hit or not.
Comics reflect reality – the good news in many respects is that we have multiple ways to connect with others and to share information, especially from an enterprise point of view. Scott Adams, Dilbert’s creator has it right with this comic. It is too soon to say more, but as we think ahead to the Creative Storage Conference in June, this will be a part of the conversation.
PowerPoint Poisoning – It is an often used, sometimes abused and frequently right on term that is used. Dilbert gets it right in another example of comics reflect reality.
Stay tuned to our posts on Facebook, Twitter, LinkedIn, Google + and on Roundtable.Media for information of what is going on in the various parts of the industry in which we all work, , trends in the marketplace, comics that reflect reality and for updates on our speaking events.
Roberta Shindler and I welcome your feedback on this newsletter and inquiries on how we can contribute to your success.
For The Shindler Perspective, Inc.
Chief Executive Officer