When You Have to Exit — Do it at Maximum Value

From a business owner’s perspective — most businesses follow the same lifecycle. First, the business is started or acquired. Next, the business grows. And, eventually, you might exit the business.

These second and third phases prove that higher-tier entrepreneurs have a distinct advantage over lower-tier entrepreneurs. Entrepreneurs who are able to maximize their value and exit their businesses at prices significantly greater than what they paid to acquire or start their businesses are the best entrepreneurs.

And, in my opinion, you can’t get any higher-quality of an entrepreneur than Mac Lackey.

In more than 24 years as an entrepreneur, Mac has founded, built, and sold six companies — each of which achieved 7 or 8 figure exits — an incredibly rare entrepreneurial achievement. I find it even more impressive that he didn’t have to sacrifice his time with his family, health, or living a meaningful life in the process.

Want to know how Mac achieved that rare feat? Check out our conversation from July 2021, where we discuss that you must do it at maximum value when it’s time to exit.

 

Don’t Wait Until Financial Milestone to Start Living Your Dream Life

One of the most insightful things I heard from Mac was when he told me, “it’s not like you have to arrive at some financial destination before you say, ‘Now, I’m going to live my life, travel the world, spend time with family, pursue passions,’ like I made that decision consistently, regardless of my net worth.”

I think so many people put off living the lives they truly want until they reach some financial milestone. And this is especially true when you decide to exit a business.

When Mac exited his first company, it wasn’t because he had a surplus of money. Instead, it was because it was time for him to have experiences with his family. That meant he was willing to risk it all, if he had, to move abroad to Barcelona and give his family a once-in-a-lifetime experience. And, that far outweighed any financial decision he had to make.

How to Avoid Million-Dollar Financial Mistakes

But, to reach that mentality, Mac also made costly mistakes during his journey. Mainly being asset-rich but cash-poor. In other words, your assets are significant. But you don’t have much in terms of cash flow. The dollars aren’t there since your money is tied up in growing the business. If that company succeeds, it’s a game-winning goal. If it doesn’t, then you lose the game.

So, with Mac, he was making sacrifices in his personal and professional lives to grow one of his businesses, a tech startup. Despite not having any money and being locked up with this one asset, Mac kept using every dollar to help the business prosper.

With this type of thinking, you can’t simply walk away from your business and follow your dreams — like living abroad in Spain. You’re too invested in your assets. And this also leads to another costly mistake; you can’t diversify.

“I thought this company was going to go to the moon, and that’s what the analysts are saying, so why would I sell one share or diversify?” he asked. “And the idea of any other asset class made no sense to me because why would you pick a bond or real estate or something that I don’t understand and seems like it gives a lower return?”

“So, I basically was heavily concentrated in one security, and then the only other securities I held were also technology stocks because that’s what I understood.”

Impressively, Mac was able to sell this business for seven figures. But, it wasn’t just about the money. It was the lessons he learned. He was overextending himself by investing too heavily in one asset class. And that held him back from living his best life and pursuing additional income streams to achieve that financial freedom.

You Want the Option to Exit

Here’s another valuable Mac shared with me — when you’re a founder of a company, you want to have the option to exit instead of having your back against the wall. For example, Mac had another company where a business crashed following the Nasdaq crash in 2000. With only enough cash for 30-days, they could have raised a venture. But, that would have meant that they would cobble up 20% to 25% of the company. Not only would this limit the decisions involving the business, but it would also eat into the profits.

It was easier and more lucrative for Mac and his partners to just sell the company.

But, what exactly does having an option to exit really mean?

Having an option to exit — “just means you want someone to want to buy your company, want to pay you a lot of money for it, want to invest in it, but you control if, when, how, and why,” Mac explains. “And that option is powerful because you have leverage. So, you are literally able to walk away in the eleventh hour only because you have the option and you had leverage. If your back was against the wall and you are going to run out of money unless you sell — you are basically going to take whatever terms they give you.”

Another option? Special Purpose Acquisition (SPACs).

SPACs are companies that have no commercial operations and are formed exclusively to raise capital through an initial public offering (IPO) to acquire or merge with another company. Also called “blank check companies,” SPACs have existed for decades but recently have gained popularity.

SPACs aren’t just faster than traditional IPOs; they’re also less risky as you can maintain a lot of leverage.

Want to Scale a Business and Exit it Successfully? You Need to Get Off the “Critical Path”

There’s a misconception that you need to hustle if you want to thrive professionally. But, of course, the trade-off is that you sacrifice your personal life. For Mac, he did the opposite by making his family a priority.

For many, this may sound counterintuitive? How can his business thrive to the point where he has the option the exit when he’s leaving meetings because it’s time to go home to dinner?

“The best thing you can do is get out of the critical path because the company is going to do better,” he says. Someone else will step up and run the meeting. They’ll also learn faster, be more productive, make smarter decisions. And, “when you exit, they’re going to recognize that your team manages the business. It’s not all relying on you, and you can never maximize value if you are the value because people can’t buy you.”

Conclusion

I loved my conversation with Mac. It was so refreshing to hear him say that if you want to be a successful entrepreneur, you don’t have to choose between your startup and family — that has always been my belief and quest.

Instead, you can do both by learning how to maximize your business’s value, build a solid exit strategy, and sell at a premium without costly trade-offs.

And, if you’re a founder who wants to eventually successfully exit, consider joining Mac’s ExitDNA program to turn the dials and achieve great outcomes.

Image Credit: Cottonbro; Pexels; Thanks!

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