Understanding the Private vs. Public Growth Strategy Decision: A Critical Consideration

As entrepreneurs and business leaders, we are faced with a small but pivotal number of decisions that can shape the future of our companies. One of the most significant decisions can be whether to remain a private entity or to go public.

A topic that should be of great debate.

While the allure of public markets can be tempting, this decision should not be taken lightly, even if someone presents a deal that seems too good to be true.

In this article, we will delve into the intricacies of this choice, exploring both the opportunities and challenges associated with public and private growth strategies.

The Allure and Reality of Going Public

The public markets offer several attractive benefits. Access to capital is often cited as the primary reason for going public.  A company can raise significant funds to fuel expansion, invest in new technologies, and acquire other businesses by issuing shares, almost like having your own currency. Additionally, being publicly traded can enhance a company's visibility and credibility, potentially leading to increased market share and customer trust.

However, these benefits come with substantial regulatory costs and requirements. Maintaining a public company is a full-time job—or three. The rigorous financial reporting and compliance obligations imposed by regulatory bodies such as the SEC are extensive. These regulations are designed to protect investors and ensure transparency, but they also place a significant administrative burden on the company.

The Dual Priorities of Public Companies

One of the most critical aspects of being a public company, which is often overlooked, is the need to balance two very demanding priorities: Executing your business plan while also managing public and investor sentiment.

Growing the business remains paramount, but now, you must also address the market's perception of your company and your stock's trading volume and price. This dual focus can be both painful and even deadly if mismanaged.

If either leg of the business falters, the repercussions can be severe. Missing your business targets or failing to manage investor expectations for a quarter or two, and the consequences can be catastrophic. The market's response can be swift and unforgiving, leading to plummeting stock prices and, in some cases, hostile takeovers or bankruptcy.

It is not all doom and gloom, as the opposite can be true: positive investor sentiment and share price runs can bring new eyes, new investors and unsolicited offers!

Staffing and Leadership: Public vs. Private

The staffing requirements of a public company often differ significantly from those of a private company. Public companies are expected to have leadership teams with impressive resumes capable of steering the company through the complexities of the public markets. These leaders are often more strategic, focusing on long-term growth and shareholder value.

In contrast, private companies may thrive with a different type of leadership. Hardworking, head-down leaders focused on day-to-day operations and organic growth can be more suitable. These leaders may not have the same high-profile backgrounds as those in public companies, but their dedication and hands-on approach can drive substantial growth.

Deciding between a private and public growth strategy is one of a business's (and owners') most consequential choices. While public markets offer substantial capital and visibility, the associated regulatory and administrative burdens, as well as the need to manage public sentiment, can be overwhelming. 

On the other hand, remaining private allows for a more focused approach to business execution and often requires a different type of leadership.

It is crucial to thoroughly assess your company's specific needs, goals, and capabilities before making this decision. The path to growth is fraught with challenges, and understanding these nuances can help ensure that the chosen strategy aligns with your company's long-term vision and objectives.

"Sometimes the best deals are the ones you don't do." Take the time to evaluate all aspects of this critical decision and ensure that you are prepared for the journey ahead, whether it leads you to the public markets or keeps you grounded in private growth.