Hello everyone, thank you for being here today as we delve into a topic that’s close to the hearts of many of us—entrepreneurial journey, life cycle if you will, and the often challenging decision to exit a business.
- A note! Balance here between academic speak and commercial speak. I was not an academic but I am now. So forgive me if I bang on about academic nonsense.
Let’s keep it real. Research on why entrepreneurs decide to hang up their hats is a bit like searching for a needle in a haystack. The journals in academia exploring these specifics are as rare as a unicorn. And guess what? We need more of them. Because There’s a definite gap between the theory of planned behaviour (Azjen) an intention or how I think I will act, and what actually happens, or actual behaviour.
Academic journey begins with a small and quite similar group of entrepreneurs from Ronstadt primary studies from Babson college understanding entrepreneurs on an exit program. Of course that’s a massively biased sample. As we navigate through various studies and theories, from DeTienne in 2010 to Coad, Shepherd, and Wennberg & DeTienne in subsequent years, we start seeing a pattern. They all point in one direction—understanding exits is a vital part of the entrepreneurial life cycle. It’s like the rollercoaster ride of emotions that entrepreneurs experience—sometimes thrilling, sometimes nerve-wracking. One of the main challenges is academia’s access to real life. The two want to engage but they are frankly hopeless at it.
And there is the catch. Despite our efforts, we’re still a bit in the dark. I found just 35 papers with relevant research, mostly based on theories and assumptions rather than real-life stories. To contextualise that, since 1996 64 million academic papers have been published, about 5.15M globally a year. Furthermore, We’re relying on assumptions, readily available data (cross sectional), and existing hypotheses rather than digging deeper into the life cycle from the birth of an idea to its eventual end. (longitudinal study)
Social position forms a big influence, especially in failure of sales and in some cases failure of businesses. Coad even argues that exit, even if forced, isn’t necessarily a sign of failure. It’s more like a moment, a passage, just like in life.
So, what’s the key takeaway here? Failure is not the end; it’s part of the journey. Entrepreneurs fail, not because they didn’t succeed, but because they dared to try. They wanted to improve, develop, and learn.
Now, let’s talk about the road ahead. Future research calls for a deep dive into the entrepreneurial life cycle, demanding rich data. If 70% of entrepreneurs believe having an exit strategy is essential, we need to explore the internal and external factors influencing the decision to exit and how these factors play out during the exit journey—from planned to actual exit. This isn’t a snapshot; it’s a movie, capturing the entire journey over time.
- I talk about why you would enter a building, a house, an airplane, a commitment, without knowing how to get out (marriage)
Moving on to the practical side, our original question—why do construction owners leave or stay—has taken us through various typologies and the psychology of lifestyle business owners. We’ve answered the first question minimally. We know about the structural process there are three path ways, academics hate being told there are three pathways and will challenge this, but the correct construct is that there are multipathways before these three, stewardship (family, MB)) harvest, trade sale, PE sale and liquidation, all of these you may say are voluntary exits, not forced, but not the ‘why.’ Why exit. And you know what? The second question about how planned and actual exit differ—well, that’s mostly uncharted territory. We need to dive deeper into the changing dynamics between planned and actual exits, exploring the influencing factors through the exit stage that may well start at the embryonic stage.
What we do know is there is come unchartered and untested link to employee turnover. The role of the shock in decision making. Entrepreneurial inertia is an unexplored phenomenon however the concept of shock isn’t just wed to the employed world. Covid 19 was a prime example of shocks (that are still being felt) to entrepreneurs. Most external macros, think political, social, economic, environmental, tech and legal can precipitate a shock. But so can a death, a marriage breakdown, a burn out, health, somethings just aren’t navigable. Entrepreneurs aren’t infallible, there is really good research linking entrepreneurship to mental health, stress issues, the dark side of entrepreneurship is often skipped over in favour of those attributes commonly associated with being an entrepreneur, invincible.
Now, what does all this mean for the world outside academia? For one, we can expect more entrepreneurial mergers and acquisitions. We can educate budding and existing entrepreneurs about the factors affecting their journey. Exiting entrepreneurs, despite potentially affecting regional growth plans, can also contribute to redistributed wealth based on their exit strategies.
And here’s a nugget—self-funded entrepreneurs might take a different exit route than venture capital-backed ones. It’s not just about the money; it’s about emotions too. Im currently designing a heriarchy of entrepreneurial exit needs! Governments, understanding the entrepreneurial life cycle, can plan for small business creation, growth, and strategically support entrepreneurs. It’s about spreading the entrepreneurial spirit to areas that need it the most. Deprived areas, regeneration etc.
In conclusion, our journey has been about discovering and highlighting the gaps in our understanding of entrepreneurial exits. The literature is light, and it’s signaling the need for empirical research to fill those gaps. The systematic review is a challenge. We’re aiming to pinpoint entrepreneurial exit to the entrepreneur, not just the firm. The study scope has found limited resources, especially in qualitative and longitudinal literature. But it’s a crucial part of a broader research effort that needs to understand the planned and actual exit from the embryonic stage.
By focusing on the exit stage—from internal acceptance to commitment and actual exit—we’re starting to grasp, and unpick, how this journey changes over time, the pathways it creates, and the influences that shape those pathways. The research that follows must learn from exited entrepreneurs, regardless of their exit strategy, to uncover the motivations from commitment to exit to the final act.
In the end, we’re on a quest to discover the distinguished attributes that shape exit outcomes from the experts themselves. It’s not just about data; it’s about the stories, the journeys, and the wisdom shared by those who have lived through it. Thank you.
- The first issue for any entrepreneur with a business sale in mind, is to understand that not only is it a minority of businesses who are ever approached by a purchaser – 70% of the entrepreneurs we surveyed have never had an offer for their business – but an even smaller number end up attracting a buyer: our last round of research put the figure at 7%. (coutts 2018)
- It is not uncommon for entrepreneurs to realise the sale they once hoped for is not a realistic option for them anymore.
- Advice – This is something which is consistently underappreciated by entrepreneurs. Although the majority of those who have sold a business (64%) say they left it until they sold up before getting advice, around half of that number (33%) said they underestimated how much preparation they needed before they could sell.
- Nearly every entrepreneur we spoke to for this research could tell a story of a failed deal, a change in the markets or a rejected buyer which had a material effect on the nature and timing of their exit. So whether or not you choose to call it luck, it is critical to acknowledge you won’t always be in control of your own destiny when it comes to selling your business. (my research looks at the three pillars, the entrepreneur, external macros and internal factors (could be staff, management team, systems etc)