When you decide to start a company, what's the best possible outcome? Most founders start to think about it way too late.
What's the best possible outcome for your start-up: going public, selling to a large company or staying private?
Here's an easy answer: The best possible outcome is the one you planned for.
That's not as glib as it sounds. While it looks like a simple answer to the question, it's one that I find many companies and company founders haven't considered: Where do you want to end up? In my experience advising start-up founders who don't have the end in mind, the failure to define an ultimate goal leads to dissatisfaction and even fallout because the driving forces behind the organization are not in agreement.
And it's not just about long-term planning. The desired ultimate outcome has a far-reaching impact on how a company is run day-to-day and what investments are appropriate at a given point or milestone in a company's creation. A few examples:
• Keeping a company private allows the founders more flexibility in how and what the company pays for on their behalf. There is greater freedom in the day-to-day control, and the founders are more than likely setting themselves up for a lifestyle business.
• Selling to a larger company means that the processes, procedures and structure must be defined and repeatable and that the business has something of value (a customer list or product set) that would be complementary to another, larger entity. This approach means the founders must work diligently to make sure they are not as important--or at least not irreplaceable--to the day-to-day operations of the enterprise.
• A decision to go public is its own laborious undertaking requiring a gaggle of lawyers, an attractive offer (unique technology, product or approach) and the chutzpah to drive demand for the company via a road show or PR blitz. The company founders need to be in it to make a big splash and have the backing to get the attention of the public to drive the strike price and the infrastructure to keep it climbing.
Each of these approaches includes mutually exclusive goals, which mean the company must make a decision and move toward it. That's not always easy--few company founders caught up in the early-day challenges of raising their first round of angel investment or working to keep the doors open spend the time to think through their ultimate goal.
A decision to change the end goal mid-stream can be painful and disruptive to the overall business. That's why it's important, especially if there is more than one founder, to determine this target earlier than later.
ERIC V. HOLTZCLAW is a serial entrepreneur who has founded multiple startup companies, including one of the first profitable Internet enterprises. His last company appeared on the Inc. 5000 list three years in a row. Eric advises clients on the “whys” of business – why customers buy, why teams work and the all-important “entrepreneurial why”. He is the author of Laddering and his weekly radio show, The 'Better You' Project, shines a spotlight on entrepreneurs' individual business journeys and successes. Learn more about Eric at www.ladderingworks.com or e-mail email@example.com. @eholtzclaw