Mark Cuban has written 12 Rules for Startups
Why do I have the audacity to disagree with a charismatic and respected member of the Shark Tank, owner of Landmark Theatres and the Dallas Mavericks? I’ll explain.
I wholeheartedly agree with Rule No. 1,which is the basis for any successful business. But Rule No. 2 is where we part company.
Rule 1-Don’t start a company unless it’s an obsession and something you love. YES! YES!
Rule 2-If you have an exit strategy, it’s not an obsession. NOT SO!
I actually agree with Mark Cuban’s sentiment about exit strategies, because depending upon motives and how it is set up and written, the strategy to exit can be about preparing for the breakup by having one foot out the door.Nevertheless, Mr. Cuban, (you are my favorite Shark) in my experience as Rescuer of business partnership relationships, it is important to have an exit strategy from the very beginning.
The exit strategy I refer to is to be crafted within the context of love and obsession for the business (Rule No. 1) not a preparation for a winner/loser breakup type of exit. “Why is it needed?” you might ask. Because “things” happen and being prepared is better than being blindsided.
The exit strategy I advocate has as its goal, protection and assurance that the business can continue to prosper even when the inevitable “what if scenario” occurs.
In my role as Rescuer, I have seen many of the“life happens” scenarios where emotions reigned over the resolution to the crisis of an unprepared for exit. Writing a partnership agreement based on Rule 1 is essential. It should be written to enhance the relationship between partners throughout the life of the business including the exit. The section on exit strategies is there as your contingency plan when something happens.
The most important thing about having an exit strategy is to plan it well in advance and cover all possible bases that can be imagined. Having a buy-sell agreement in place is a good start.
Do not to wait until a partner is under financial pressure, has unexpected family circumstances, becomes temporarily disabled or other health issues or even loses interest in order to figure out what to do about it.
Is one partner hoping to retire sooner than a younger partner? In the event of death of a partner, divorce or incapacity, do you want that space filled by their spouse? Maybe you do, but possibly you don’t.
What kind of compensation will occur in these events?
How do your state laws play into your preferences?
Some partners lose interest in a business, or burn out.What requirements of each of you will need to occur to allow his departure with no harm to the business?
What will you do in the event of an unsolicited buyout?
Decide long before the need for a sale or exit occurs to minimize the stress, feelings of loss and to maximize the value of your business.
Knowing that you have made some decisions at least as a starting point to the conversation before you need it is valuable information. Knowing that the decision made long ago can be modified if necessary.Having it should allow for peace of mind so that you can live in the space of Rule No. 1-your obsession and love for this business, enhanced by trust and respect you’re your partner(s).
Paying attention to the details up front will save you not just financial loss in the long run.
So Mark, perhaps you will modify Rule No. 2…if not, I stand my ground to respectfully disagree.
If you have a question or comment email email@example.com and I will be sure to reply. And if you enjoyed reading this and would like more including my new Free Report about Business Partnerships and Joint Ventures, just sign in the box at the top of this page.
Best wishes for your success,