Exit Strategy

As this post is being written, we are in the final few weeks of scrambling to get all the incentives, paperwork, money, and innumerable other things lined up to complete my first business acquisition. By the time you read these words, the ink on the deal will be drying and the seller will be many dollars more wealthy (so will the lawyers), having successfully passed the baton to the next generation and earned a large payout for the many years of effort supporting employees families and providing value to the community. 

An interesting note when doing a transaction like this. Every party is not only concerned with what they get out of the deal, they're also thinking about risk. 

So what does "Exit Strategy" have to do with a business acquisition? It comes from the popular Netflix series Love, Death & Robots volume three titled Three Robots: Exit Strategies. "Three robots walk into the post apocalypse... and take a whirlwind tour of humankind's last attempts to save itself. "

"Come on! We've got science to do!!"

In the show: The "poor people" created survivalist camps and looked forward to the day they were free from government control (and government administered healthcare) so that they could self-determine their own future and live off the land. Unfortunately they overused their resources and self-imploded.

Sea-steading (like homesteading, but think of a fully sovereign nation state oil rig for tech millionaires) was a different attempt to utilize technology and fully automate the systems for survival by harvesting fish and sea greens. Unfortunately they were mean to early robots who eventually developed feelings. Having left  anyone with a skilled labour background, the technophiles could operate the technology, but did not have the skills in order to troubleshoot or fix broken parts. Ultimately their technology turned on them as it developed sentience and they could not survive.

Government leaders built themselves bunkers deep in the earth retreated to them in order to wait out the apocalypse.  A fungus wiped out their self-sustaining hydroponic system and they resorted to "extreme democracy." 

Did any humans anywhere survive all this?

No, but somehow a cat colony was established on Mars. Hey, it's a cartoon. 

It got us thinking about what we can do in order to stave off the apocalypse in our business. In order to succeed, we must first ensure survival and attempt to mitigate the risks that are ever present for a business. Inevitably, things will go wrong and we will be forced to make decisions. The key is to make ones that leave the most amount of optionality available. 

1. Always be focused on aligning incentives. Take care of our stakeholders (employees, and support team) and they will take care of our customers. By paying fair wages, creating a great working environment, and doing meaningful work, we can focus on our singular goal. 

2. Master the core skills and principles. Businesses are made up of people, systems, and products that solve a problem for the customer. By knowing exactly what value we are providing, we double down on the things that work and let go of attitudes and practices that not longer fit. 

3. "Flow like water." This saying from Bruce Lee has been a favorite for many years. Change is mandatory, survival is optional, choose wisely. By always learning from our mistakes and being creative in the face of constraints we diversify the risk factors. It also forces us to learn and to be thoughtful about the feedback we receive from customers as patterns emerge. 

And most importantly because we have assembled a great team. From the team that helped to put the deal together and put eyes on the due diligence. To the team that the seller has built and we have inherited. They can all trouble shoot problems when they inevitably come up and work together to create equitable solutions. By new ownership working side by side with the steady hands and minds that have built the business from an idea to a local pillar that employs 20 people and helps many more to access the vast Northern Ontario, we can give our team the best chance at an exit strategy in another twenty five years when it's time for the next generation to carry the torch. 

The Challenges of Raising Capital and Lessons from 'Pillars of the Earth'

Buying a business can be a great way to achieve your entrepreneurial dreams, but it also comes with many challenges. Raising capital to buy a business is a daunting task that requires one to navigate through a maze of financial and strategic decisions. The process is akin to building a cathedral, as illustrated in Ken Follett's historical novel, 'Pillars of the Earth' which I just finished reading. So, let’s dive in and explore the parallels between the world of business financing and the narrative of his best-selling novel.

Raising capital requires a lot of planning, research, networking, negotiation, and patience. Some of the common difficulties that we have faced are:

• Finding the right sources of funding: There are many ways to finance a business purchase, such as bank loans, seller financing, angel investors, venture capitalists, crowdfunding, etc. Each source has its own advantages and disadvantages (some are more costly short term, but leave you with long term flexibility), and you need to weigh them carefully. You also need to prepare a convincing business plan, pitch deck, and financial projections to attract and persuade potential funders.
• Finding the right valuation and deal structure: Valuing a business is not an exact science, and it depends on many factors, such as the industry, the market, the assets, the liabilities, the cash flow, the growth potential, etc. You need to negotiate with the seller to agree on a fair and realistic price, as well as the terms and conditions of the deal, such as the payment schedule, the earn-out clause, the warranties, the indemnities, etc. More than one investor in the latest deal chose to pass because they didn’t like the valuation that was put on the company.
• Finding the right timing and execution: Buying a business is a complex and lengthy process, and it can take months or even years to complete. You need to be patient and flexible, and be ready to deal with unexpected challenges and opportunities along the way. You also need to manage the transition and integration of the business smoothly, and ensure that the employees, customers, suppliers, and stakeholders are on board with the change. With that many moving parts, the capital is one of the most important, but not the only thing that can occupy your attention. It’s better to get it secured early!

The Lessons from The Pillars of the Earth

Ken Follett’s novel tells the story of the building of a cathedral in the fictional town of Kingsbridge, England, in the 12th century. It is a story of ambition, resilience, and the human spirit's ingenuity when faced with adversity. The novel covers the time between the sinking of the White Ship and the murder of Thomas Becket, but focuses primarily on the Anarchy, a civil war between King Stephen and Empress Maud for the throne of England.

The novel is not only a fascinating and captivating saga of medieval life, politics, religion, and architecture, but also a rich source of inspiration and wisdom for entrepreneurs who want to raise capital for buying a business. Here are some of the lessons that we can learn from the novel:

• Have a clear and compelling vision: The main protagonist of the novel, Prior Philip, is a devout and resourceful monk who is driven to build the greatest Gothic cathedral the world has ever seen. He has a clear and compelling vision of what he wants to achieve, and he communicates it effectively to his team, his funders, and his supporters. He also adapts his vision to the changing circumstances and challenges, and never gives up on his dream.
• Have a skilled and passionate team: Prior Philip is not alone in his quest to build the cathedral. He is supported by a skilled and passionate team of people, such as Tom Builder, the master mason who becomes his architect; Jack, the orphan boy who becomes his apprentice; Aliena, the noblewoman who becomes his ally and lover; and Ellen, the mysterious woman who becomes his mentor and friend. They all share his vision and contribute their talents, resources, and ideas to the project. Just as Tom had to navigate politics, scarcity, and human nature, so too does a business owner when seeking capital.
• Have a diversified and creative funding strategy: Prior Philip faces many obstacles and enemies in his attempt to raise capital for the cathedral. He has to deal with the corruption and greed of the church and the state, the violence and chaos of the civil war, the scarcity and inflation of the money, and the competition and sabotage of his rivals. He overcomes these challenges by having a diversified and creative funding strategy, such as collecting tithes and donations, selling wool and relics, obtaining grants and loans, hosting fairs and markets, and forging alliances and partnerships. He also leverages his reputation and influence to attract and persuade potential funders.
• Have a realistic and flexible plan: Prior Philip knows that building a cathedral is not a quick or easy task. It takes decades of planning, designing, engineering, constructing, and decorating. He also knows that he has to deal with many uncertainties and risks, such as weather, accidents, fires, wars, plagues, etc. He has a realistic and flexible plan that allows him to adjust and adapt to the changing conditions and opportunities. He also monitors and evaluates his progress and performance, and seeks feedback and improvement.

While the challenges of raising capital and building a cathedral are distinct, they share common elements. Both require vision, determination, and the ability to negotiate and adapt to changing circumstances. However, there are also significant differences. The risks involved in raising capital for a business are often financial and can impact one's personal and professional life. In contrast, the risks in 'Pillars of the Earth' are more physical and life-threatening, reflecting the harsh realities of the 12th century (we are grateful to be alive at this point in time).

Regardless of the century or the task at hand, the lessons of determination, resilience, and adaptability remain timeless and relevant.

Indistractable

 If you were to look around at the people who are really succeeding in life, I think that you would find that they all have the ability to focus for a sustained period of time on one particular skill-set or course of action. Yes we can get into debates about what success really means... However I will pose several examples to reference how I think about it. Malcolm Gladwell wrote in his book Outliers that 10,000 hours was needed in order to become world class at any particular skill. In order to do that you need to be able to put in the time. 

• Brene Brown - vulnerability, courage, authenticity, shame, and the things that get in the way of connection
• Timothy Hollingsworth - chef and winner of The Final Table Netflix series
• Stefani Germanotta - singer and actress selling over 150 million albums and known as Lady Gaga

Each of these have poured countless hours into their chosen area of talent and have made choices to continually pursue cultivating greater skill-sets.

So what gets in the way of sustained focus? Distraction!

For myself, one distraction that I've struggled with is EVERYTHING... It's a challenge to narrow down to just one thing. But I'll say that usually I find myself getting pulled into using my phone far more than engaging with real life. In order to combat this, I employed one of the techniques that Nir Eyal talks about in his book Indistractable. By utilising the Do It Now RPG habit app, I find myself building the good habits that I've been putting off for months and years. 

Why does it work?

Because their is a laid out reward path that if I do the tasks, it will accumulate reward points and allow me to enjoy the fruits of my labor. Nir calls this an effort pact. 

For more information about how to become Indistractable, read this summary.  

My Search for Meaning

 "everything can be taken from a man but one thing: the last of the human freedoms—to choose one’s attitude in any given set of circumstances, to choose one’s own way."

This is the quote that starts Viktor Frankl's book, Man's Search For Meaning. I had heard of the book through the years but ultimately it was a podcast with Tim Ferriss interviewing Jacqueline Novogratz that ultimately got me to make the purchase and start reading. 

Through the book, Frankl discusses his experiences as a prisoner in the Auschwitz concentration camp and how it further informed the work that he had begun which would later become logotherapy. He declares that "there are three main avenues on which one arrives at meaning in life. The first is by creating a work or by doing a deed. The second is by experiencing something or encountering someone; in other words, meaning can be found not only in work but also in love... experiencing can be as valuable as achieving is therapeutic because it compensates for our one-sided emphasis on the external world of achievement at the expense of the internal world of experience. Most important, however, is the third avenue to meaning in life: even the helpless victim of a hopeless situation, facing a fate he cannot change, may rise above himself, may grow beyond himself, and by so doing change himself. He may turn a personal tragedy into a triumph."

And how does a human being go about finding meaning? As Charlotte Bühler has stated: “All we can do is study the lives of people who seem to have found their answers to the questions of what ultimately human life is about as against those who have not. In my background, this usually meant that the sports heroes I had as a child helped to form not only my playing style but also how I wanted to live. I admired Arvydas Sabonis, Tim Duncan, Hakeem Olajuwon, and Kobe Bryant but myself as a moderately talented basketball player from small town Saskatchewan, I didn't know how to put in the work to take my basketball skills to their maximum potential. It was only in later years by studying the people who had achieved being the top in their field that I understood the preparation and work needed to become the best. 

Creating a work or doing a deed

There has always been a desire for me personally to create something that will change the world. Yet I've struggled for years to find out what that one thing is. Finally after reading this book and combining it with many other experiences, I decided to let go of the outcome and trying to find that one thing which would define my legacy. Instead, I'm choosing to focus on the present. This flows into the next point, however I know that my creativity is bubbling under the surface and as I continue to live life, experience more, and meet new people, the opportunities to do deeds and create work will arise.

Experiencing something or encountering someone

When I was experiencing my previous relationship, it was the most challenging and frustrating time of my life in that area, up to that point. However without that person and those experiences, I wouldn't be the person that I am today. I think this sentiment is shared by many and often it leads to a feeling of gratitude. It also led to doing a shit ton of work for myself personally. That meant reading books, listening to podcasts, trying to figure out where it had all gone wrong. What I realised was that there was nothing wrong with me, but I could improve my skills in being present, communication, vulnerability. Also that I couldn't think my way out of an emotional situation. Through counselling, intensive workshops, and supportive people in my life showing me that there could be a different way to live, I was able to transition from unpacking my past and making sense of it in a 4 quadrant way (body, spirit, emotions, mind), today I am working on my future (logotherapy and the search for meaning). 

Because of the work over the past number of years I've had the good fortune to meet a great number of people who have been influential in my life and brought me new experiences and helped to redefine what love is and can be. 

Through witnessing people in both the highs and lows of life and choosing to be present, supportive, and loving in those moments, I feel the world becomes a better place (with healthy boundaries of course).

In unchangeable circumstances, choosing to suffer well

Set against the backdrop of a German concentration camp, it is hard to imagine more unchangeable circumstances on an individual level. It's important to point out that Frankl notes unnecessary suffering as masochistic rather than heroic.

When my mother passed away at the age of 6, that was a situation that couldn't be changed. At the time, there was no other option than to continue on and I give a lot of credit to my father for doing the best that he could given the circumstances. It's not easy to raise two growing boys, run a busy farm, and still take care of yourself. Learning from that example I now understand what it means to persevere and also some things I would choose to do differently.

In my experience, all three ways of finding meaning are experienced in life. For the people who choose to rise about their circumstances, to create something beautiful, to experience love fully, or to suffer with dignity, they always will remain a minority. And yet I see therein the very challenge to join the minority.  The world is in a bad state and has been since Frankl first wrote the book, but everything will become still worse unless each of us does our best to first change the world by changing ourselves and finding meaning.