Being part of a successful start up is invigorating. Even for those with no equity stake, the energy and excitement is contagious and makes it easy to work hard for the good of the whole.
In the face of growth and strong performance, some may begin to wonder if the good times will soon end as founders, owners, and investors look to pocket the value that has been created through a sale of the organization to larger firm. Leaders sometimes struggle to keep up employee morale in such circumstances.
It can help for leaders to remind everyone that the best thing, in all scenarios, is to build the best possible business because doing so leads to:
- Making the most positive impact in the market served.
- Creating the most value for owners.
- Creating the most opportunity for employees to assume new responsibilities, earn increased compensation, learn new skills, and be in position to take on attractive roles upon an acquisition.
Nearly all ventures eventually either go out of business or they get sold. A start-up might fold, for example, if it failed to consistently and predictably perform and grow.
The way to create the most value, and therefore attract the best sale price, is to do what the organization should also do to attract and retain the best talent and make the most positive impact in the market it serves, which is to build a business that grows and that consistently performs well relative to its past, its plans, and its peers.
Consequently, the best strategy is to build a strong, stable, growing business which leads to making a greater impact, creating more value, and more opportunity for employees. The owners of such an organization will someday have the enviable opportunity to choose between continuing to perform and grow or to sell. Either way everyone is better off by building the best business possible.
There are several ways for founders, owners, and investors to “realize” the value of the organization they build. One is to sell the enterprise to another organization. Another is to refinance by, for example, by taking on or restructuring debt, selling part of the company to outside investors, or by becoming employee owned. A third way is to sell shares to the public via an Initial Public Offering. One of these will most likely happen to any successful venture. The choice as to which, and when, is driven by the objectives of the majority owner.
The way things will change when part of an acquiring organization will be determined by the particulars of the players involved and the reasons that coming together make sense. As long as there are no known suitors it is pointless to speculate further. It is much more important for leaders, and everyone else, to concentrate on building the most valuable and successful growth business they possibly can.