Impressive, right? Based on these figures, Inc. readers should just rush out to integrate Facebook into their websites.
How many of those visitors from Facebook are NEW customers? If they’re just existing customers coming through a different entry way, the company doesn’t gain much.
What are the customers doing on the site once they visit? Are they reading articles, rating products, or best of all, buying something? Or, worse, are they filing complaints, posting spam, trying to sell something, or spying for the company’s competitors?
If they are buying stuff, how much are they spending? The article states that revenue has nearly tripled, but that could mean it went from, say, $2 to $5.
What was the cost of the Facebook program? Did the company pay someone to do it? If the company’s owners did the work themselves, how much time was spent on this instead of on product development, customer service, or other activities that could also make money?
The article doesn’t say. That’s unusual for Inc., which usually provides the critical underlying details, but that only proves that even trusted sources occasionally need to be questioned. Well, at least 135% of the time.
In a business plan the “exit strategy” describes how the entrepreneur intends to unload her business in, say, five to ten years. Common options include going public on the stock market or selling the business to someone else.
Even if you want to run your business for life, you’ll have difficulty attracting financing if you don’t cite an exit strategy, since the investors aren’t giving you their money out of benevolence — they want returns (and many happy ones at that).
So you do what you have to do to appease the finance gods. (Though considering what’s happened on Wall Street over the past few years, should we still be doing their bidding?) After all, there’s no harm in saying you’ll pull an IPO or sell your company to Google in the distant future — right?
Except that your investors will likely hold you to it.
Now, even investors know that long-term projections in a business plan are nearly as fictitious as the term “affordable housing.” Plans often change. The problem arises when a single-minded obsession with an exit strategy overrides all commitment to building a profitable business.
As depicted in my satirical article, Lemons 2.0: If Everything were Run like a Dotcom, many Silicon Valley entrepreneurs forgot the other integral part of their business plan called “the revenue model.” I knew one company that was so eager to get bought out, they launched a publicity campaign even before their product was even finished.
These entrepreneurs all salivated like pitbulls in a sausage factory when Google bought YouTube for $1.65 billion before the video site even turned a profit. Consequently, hundreds of start-ups launched with no realistic revenue model but, rather, an eye on having some mega-corporation snap them up.
Then the recession struck all this corporate matrimony like a bucket of cold water, and some of those mega-corps started looking for saviors of their own. Yahoops. Consequently, many of those exit-oriented start-ups beceme bottom-ups, landing in the TechCrunch Deadpool, with most people not knowing they ever existed.
SRC Holdings, an American manufacturing conglomerate, emphasizes profitability, thinks through all contingencies, and has never laid a single employee off. The Inc. magazine interview with SRC CEO Jack Stack is a must-read for entrepreneurs who are serious about running a business. You won’t find any obsession with exit strategies here — indeed, the company remains privately held after 26 years, with ownership firmly in the hands of its employees.
So should you have an exit strategy? Yes, if you invade another country or enter a PhD program.
Keep repeating these words to yourself and to all your partners and employees. Sure, marriage vows may not hold a lot of weight in these here parts, but they’ll at least have you thinking in the right direction — and not towards the nearest escape.