Building a business is a deeply personal journey for many founders and owners. For these individuals, legacy in the form of company reputation, culture, values, tradition, identity and impact is often just as important as the product or service they offer. A founder’s legacy can extend well beyond the business and transcends into the lives of others. It can inspire future generations to continue the success of the business, as well as serve as a source of pride and inspiration for employees, customers, and partners. However, the need for innovation or evolution in business may require the involvement of a capital partner or a new ownership structure. During such times, it is crucial to choose a capital partner that understands and honors this legacy as an integral part of your business’ future strategy and success.
Many founders considering the next stage of growth and ownership for their business often underestimate the significance of their legacy and how it will be impacted by a new partner. A new owner may have a different perspective on the employees, community, processes, investments, and timeframes that are involved in new initiatives, which can result in changes that are unintended and inconsistent with the founder’s beliefs and values. A new partner with a different mindset can alter things quickly. When reflecting on the right long-term partner for the next stage of growth and leadership, it is essential to discuss the meaning and importance of your legacy on the company, and its stakeholders, and reach alignment around anticipated changes before finalizing any transaction to ensure continued growth and success of the business.
For example, in a sale to a traditional PE firm, pressure for quick wins easily leads to short-sighted decision making, as well as diligence distractions, transaction costs, and changing ownership dynamics. The typical time frame of three-to-five-years before another sale as a PE-backed company, impacts longer-term decision making and can impede strong business building. In a sale to a strategic, there may be some incentive for an earnout, but after a short time frame, a founder no longer controls outcomes and rarely receives further upside. In both traditional paths, there is often the potential for misalignment of incentives, expectations, and visions. Lastly, the liquidity in an IPO should be weighed against the requirement to disclose sensitive information to the public, including customers and competitors, the time and infrastructure required to meet public company requirements, and the correlation between a company’s size and the success of its IPO.
Choosing the right long-term focused partner can greatly impact the longevity and continued success of your business, as well as preserve the core values, beliefs and identity that inspired its creation and the impact you hoped to have.
Here are a few essential considerations for a founder or owner when looking for a capital partner in its next stage of growth so that your legacy can thrive:
As you consider your next steps, explore all options, talk to others who’ve been through the process and remember to consider what happens after you embark on your next stage of growth. Make sure you give strong consideration to how you will feel when there is another owner, another voice in shaping the company you’ve worked so hard to build and the legacy you hope will continue into the future. A well-aligned long-term focused partner will help ensure the success and longevity of your business for generations to come.
“Having run a major PE firm for 20 years, what concerned me most was having to sell our very best companies, rather than continuing to invest in and grow them. I started Cranemere as an alternative partner to ‘short-termism’ so prevalent in financial markets today.”
Vincent Mai, Founder, Chairman & CEO, The Cranemere Group.