Floating the company you founded on the stock market is the dream of many entrepreneurs. After all, what’s not to like? You can free yourself from the grind if you want, make lots of capital to reinvest, own shares that could be worth millions in the future, and potentially see your business go on to new heights.
But many great founders have resisted the temptation; entrepreneurs such as Johan H. Andresen founder of the Ferd Group, Andrew Nisbet founder of The Nisbet Trust and Fernando Simões, CEO of family-firm the JSL Group. All doubtless had the opportunity to go public, but for various reasons decided to keep their businesses privately owned.
Here are just three reasons to think twice about floating your business, however tempting it might seem.
You’re at the mercy of your shareholders
It might seem obvious but when you float you effectively lose control of your business and almost every big decision becomes subject to shareholder approval. This is a significant issue and most privately held companies understate the impact. It’s worth being very clear in your mind before you float that shareholders often have a very different view of how the company should develop in order to turn a profit.
Many companies that float have been turning a good profit for years but suddenly they have a whole new set of pressures to deliver short term. Most shareholders, certainly the smaller individual investors, want to see returns quickly, and they have considerable power to veto many strategic decisions that are designed for steady long-term growth.
This can undermine cash flow and reduce overall profits. As a private businesses, this is not such an issue. But when you have a bad year as a PLC everyone will know about it, which can lead to increased media scrutiny, and negative press. This is no small matter. As soon as you float, you become the public figurehead of your business, and many entrepreneurs have found themselves subject to unwanted attention.
You’re also at the mercy of shareholder activists, and if they feel like you’re making the wrong decisions, or even accidentally aligning your company with unethical suppliers, you can find that you’re subject to a takeover bid.
Costs and regulation increases exponentially
Floating is an incredibly expensive undertaking, costing up to something in the region of £300,000, or 25% of the cost of money raised in the IPO. It’s not an inconsiderable sum. Plus the paperwork is huge. One well-quoted executive of a company that listed its shares on the London Stock Exchange reckoned he had processed around 200,000 sheets of paper in the form of documents during the process.
Before you go public you’ll also need to undertake a whole raft of expensive procedures. These include in-depth due diligence reports, analysis of all your supplier contracts, disclosure of your financial forecasts and making public your directors’ pay.
But even if that’s doable, once you’re a public company you become subject to a huge amount of new regulation, which can trip you up at any point down the line. Your reporting functions will need to grow to accommodate statutory financial and governance reporting; every six months as well as ensuring any changes or events are reported on an ad hoc basis.
You are no longer running a private family business
One of the key reasons why firms do not float is that many founders think very long term, and are drawn to the idea of creating a legacy. In fact, the majority of private business owners are happy to keep things in the family.
According to the Institute for Family Business, as it stands today 85% of all the private sector firms in the UK are family owned and operated, and they account for 50% of private-sector employment in the country. In the US, the figures are similar: there are more than 5.5 million family businesses and they employ more than 63% of the workforce.
These numbers speak for themselves. Most business owners are happy with the state of play, they don’t want to float their companies and they don’t want to lose the ability to create a multi-generational business that they can pass down through the family.
So at the same time as you consider the obvious positives surrounding taking your business public, and there are many, don’t forget to factor in what you’ll lose too.
A warm thank you to Sharon Fishburne for this contribution.
4 Tasks That Your Business Should Outsource
With every period of business growth, there is more to do. Often a growth spurt can take a business owner by surprise and leave them with too much to do, and not enough time to do it.
Existing personnel are expected to take on tasks and responsibilities outside their comfort zone, and maybe you too need to upskill in areas you’ve got little hands-on experience, just to get the job done. What a recipe for ‘mountains of stress’!
Almost half of all entrepreneurs are taking too much on, and Gallup Wellbeing Index says it the women who are reporting their stress more than men. Hence, it’s hard to say which gender is better at delegation.
While there’s no single solution, mainly if the growth spurt is unpredictable, outsourcing tasks to third parties can lessen the strain on management. You may not need to use third party providers and being locked into lengthy service contracts instead look at a more flexible workforce.
Delegating appropriate tasks to freelancers or external teams allows you to focus on doing what you do best – and what makes you happy. This is leadership.
Managing everything in-house is unrealistic for most businesses today. However, some tasks require your special touch. It’s those that are too tedious, complicated or expensive that you’ll benefit from outsourcing. Here are four such functions.
There are several reasons to outsource marketing. Working with the right agency can give you a fresh perspective that’s backed up by professional insight. It will also be easier to scale up your efforts, not to mention lower overhead expenses.
Moreover, you can gain access to the latest technologies to improve efficiency and achieve more significant results, and this is especially valuable for smaller businesses that aren’t familiar with current digital trends in marketing. You can gain a significant competitive advantage by implementing a digital strategy that’s developed by experts.
In a whitepaper by Harris Poll, staff spend an average of 40% of their day handling administrative tasks. Most of it involves repetitive, menial activities that can be done by someone else for a fraction of the price. This includes data entry, document management, travel arrangements, inbox organization and proofreading.
Thanks to websites like Upwork, Fiverr and Guru, you can easily find a freelancer to do these things for you. The key is to pick someone who you can rely on to do the job right. This guide details where to start in the selection process.
As you may be aware, in-house lawyers aren’t cheap. But if you want the peace of mind that comes with knowing your business is compliant with all relevant rules and regulations, you need to have access to legal expertise. This can spare you the (much higher) cost of running into a lawsuit or another unforeseen legal issue.
These days, you can access legal services through online marketplaces like Avvo and UpCounsel, while Rocket Lawyer and LegalZoom provide legal documentation
Every new employee increases your human resource responsibilities exponentially, so it’s a good idea to consider hiring outside help. Plus, several risks come with being unable to keep up with the demands of human resources, such as failing to make payments and file documents on time, not to mention hiring the wrong employees.
Outsourcing to a provider can ease the load and reduce your risk. Depending on your circumstances, you might not need to ship off everything. For example, a payroll company can process compensation while you handle the rest.
Businesses need to be more nimble to survive recessions and staff up when business demands it. Also, make sure you’re not overloading yourself with mundane jobs. Think carefully about the tasks that take up most of your time and outsource some jobs.
5 Ways Your Business Can Slash Expenses Now
When you feel the time has come to slash business expenses to reduce overheads, then there are plenty of different approaches to achieve this goal. Needless to say, when there’s been too little attention on spending less up until now, they’ll be greater opportunities for savings. However, don’t despair – there are always a few ways to make it happen.
Here are five ways that your business can save money.
1. Purchase Recycled Office Furniture
Whether you’re wanting to replace tired desks or chairs that are now proving unstable or a new office is being equipped, it’s necessary to set the office up with what the staff needs.
While companies often only look at buying new furnishings, there is another option, and that’s used office furniture, including workstations, chairs, desks, tables. Near new workstations, for example, are a good purchase for startups with a limited budget. With more than half of all new businesses going to the wall every year, many of these companies sell off their office equipment and chattels making it a far more affordable option for businesses keen to improve their carbon footprint. Used office furniture from reputable suppliers is high-quality and often comes with a warranty.
2. Optimise the Marketing Plan
Instead of marketing across many different channels and seeing varying results with each one, try narrowing the marketing strategy down. Examine the results to determine which channels and marketing campaigns have delivered the most customers at the lowest customer acquisition cost. In case that’s unclear, the customer acquisition cost is based on the average amount that it was necessary to spend to secure one new customer.
Once you know this information, it’s possible to tweak advertising plans to only spend on the most profitable campaigns from a customer acquisition standpoint. This optimises the current marketing approach to reduce the total marketing spend while delivering the same results.
3. Reduce Recruitment Costs
Look for ideas that will cut down on recruitment costs.
For instance, ask existing outperforming staff for a recommendation of a friend or colleague who might be interested in joining the company. Also, see if there’s anyone that you’ve been impressed with who could be invited to come on board.
When you’re using recruitment consultants, get the best deal in terms of what they charge. Check around on different job boards for the industry and other alternatives. See if you can do some of the recruitment work in-house to avoid the often-extortionate recruitment fees by putting in a bit of legwork.
4. Improve Systems and Limit Staff Meetings
Most workers aren’t that productive. Repeatedly, research has shown that office workers tend to grind for half the day and lose the other half to inefficient processes and procedures, overly long meetings, excessive breaktimes, gossiping, using social media and the internet, and more.
Breakdown each role so that there are systems and processes to follow. Remove all redundant steps to cut out the time-wasting elements. Also, have the staff members suggest better ways to get their work done, which often results in time savings there too. With meetings, go in with a plan, stick to it, set a time limit on the meeting, and get everyone back to work right after.
5. Be Greener
Use green technologies and ideas to save money on energy expenses.
Look at everything from energy-efficient light bulbs, dropping PCs down from performance modes to lower energy ones, and turn off what’s not being used all the time. Ask the staff for their suggestions on other ways that the company can be greener – employees often have amazing ideas in this area that can be implemented quickly.
There are a good many ways to save money as a business. Thankfully, it doesn’t mean it’s necessary to operate like a Scrooge either.
How Agile Training Can Improve Project Performance
Project management is a complex practice that requires the many stages of planning, execution, monitoring, and others. Usually, you work with a planned set of activities that are completed in a rigid sequence, with little to no room for changes. The ultimate goal is to achieve a particular result within a specific time while considering constraints.
Over the years, the agile methodology has become more popularly used in organizations. The approach has proven to be effective in improving project performance and responding to market dynamics compared to traditional forms of project management. However, given the differences between agile and traditional styles, agile training is crucial to making the shift in management practice.
Agile is About Increment and Iteration
Agile is essentially a mindset or framework that you can adopt in your organization’s projects. It is about breaking down work into smaller and more manageable pieces called user stories that are delivered in repeated cycles called iterations.
The rationale of the approach is to have shorter cycles so that you can continuously respond to changes and adapt to them rather than trying to deliver everything in one go at the end.
As its name implies, agile refers to being able to move quickly, especially in today’s volatile market. With such an approach, you can measure performance at the end of each cycle, so you immediately know how consumers respond. Although agile was initially targeted at software development, it has, over time, emerged as a global strategy that can be used in any organization.
Benefits of Agile Methodology
Nowadays, managers are embracing the agile methodology because the short iterations help lower risk and take action at the early stages. With an agile approach, you can expect to get a higher product quality since you are frequently testing it during the development stage. Since agile is flexible, you can make adjustments and developments incrementally to improve your product.
The agile method can also help you increase customer satisfaction since you can respond to dynamic and changing needs in the market. Likewise, being able to deliver products to the market quicker will merit positive reception from the consumers. Another benefit of adopting the agile approach is that the fast iterations will help you generate quicker returns on investment (ROI).
Agile Training is Critical
To successfully adopt the agile methodology, getting agile training is crucial. In the agile approach, collaboration among team members is critical, so ensuring that each member is well-versed with the strategy will help maximize its benefits. You have to train your team to be consumer-focused so that you are always addressing needs.
There are many agile training frameworks existing today, with one of the most popular ones being Scrum. The Scrum team typically consists of a Scrum Master, Product Owner, and developers.
The Scrum Master leads the team and ensures that the development team is effectively fulfilling its goals. The Product Owner then makes decisions for the projects, which include writing the user stories. Finally, the developers create the software and conduct continuous testing throughout cycles.
With the popularity of the agile approach today, you will find several training courses available to get you started. Courses typically tackle different project life cycle frameworks, essential agile values and principles, and the roles of each team member. Once you complete your training, you will become a certified practitioner, something that will surely give you an edge in the workplace.
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