Anyone who has run their own business knows that most days are filled with worries about personnel or cash-flow, finding new customers, getting suppliers to supply what they promised and trying to find some time for the family in-between. And as the business grows, not much really changes, except if you are lucky, you do not need to worry about finding customers anymore but only how to keep them happy. And all the time your mind is not really on the topic that one day will become the most important of all – your company’s share value.
If you had just arrived on planet Earth, you might be forgiven for thinking that business leaders were simply the shareholders puppets. What might miss your attention is the millions of small and medium sized businesses whose management teams are also the principle shareholders.
And while many multi-nationals struggle to get their employees to think more like their shareholders, many small businesses leaders do not think about their share value at all, or certainly not until it is too late.
In the naughty nineties many businesses focused their strategies solely on creating share value and that was in most cases a total disaster but today I believe we have gone too far the other way. I’ll tell you why:
- When you’re having a bad day, it’s always nice to know that you could, if you wanted to, sell your business.
- It’s good to be able to demonstrate to ones employees that what they are helping to build is going in a good direction and is ‘desirable’
- Investors like to compare between companies and to decide in which one they want to gamble their money. Sure they look at past performance and EBITDA and growth, but they also look for possibilities for creative mergers and acquisitions and trying to make two plus two equal five.
In my experience, too many small companies like to milk the profits in the good times, without really having a long-term strategy. But what is a strategy? It’s only a fancy word for a plan to achieve their overarching objective. The saddest thing of although is that most companies, when challenged, do not even have one.
Returning an end of year profit might be enough for the management team, but for investors, it is more a question of what would have happened had they put their money somewhere else? Management teams fear comparison, shareholders thrive on it.
So perhaps it’s time to check your exit strategy, to look at your company’s true value and who might be interested in it? You might be surprised to learn that others may find value where you fail to see it and reject what you think as being the crown jewels as worthless trinkets, spoiling an otherwise beautiful opportunity.
Have a good week,