When it comes to deciding whether to keep your company private or go public, there are a number of factors to consider. While going public can offer many benefits, such as access to additional capital and increased visibility, there are also some compelling reasons why owners might choose to keep their companies private.
The Advantages of Keeping Your Company Private
1. More Control
One of the biggest advantages of keeping your company private is that it allows you to retain more control over your business. When you’re a private owner, you have complete control over all aspects of your company, including its operations, strategy, and decision-making.
2. Flexibility
Another advantage of keeping your company private is that it gives you more flexibility in terms of how you operate your business. For example, you can take on more debt, make strategic investments, or pursue new opportunities without having to worry about the opinions of shareholders.
3. Improved Security
Private ownership can also offer greater security for your company and its owners. When you’re a private owner, all of the profits generated by your business belong to you and your family members or partners. This means that you don’t have to worry about shareholders demanding dividends or attempting to sell their shares on the open market, which can be particularly problematic for companies that are experiencing financial difficulties.
4. Protection from Competition
Keeping your company private can also help protect it from competition. When you’re a private owner, you have more control over who has access to your proprietary information and intellectual property. This means that you can prevent competitors from stealing your ideas or copying your products without your permission, which can be particularly important for companies in highly competitive industries.
5. Increased Growth Potential
Finally, private ownership can offer greater growth potential for your company. When you’re a private owner, you have more control over your business and can make decisions quickly and efficiently without having to navigate the complexities of going public. This can help you take advantage of new opportunities and grow your business faster than you might if you were a public company.
The Disadvantages of Keeping Your Company Private
While keeping your company private has many advantages, it’s not without its drawbacks. Here are some of the key disadvantages to consider:
1. Limited Access to Capital
One of the biggest disadvantages of keeping your company private is that it can limit your access to capital. While private investors and lenders may be willing to provide you with the funds you need to grow your business, they are generally less likely to invest in companies that aren’t publicly traded.
2. Increased Risk
Private ownership can also come with increased risk. When you’re a private owner, all of the profits generated by your business belong to you and your family members or partners. This means that if your business experiences financial difficulties, you may not have access to the same level of support as a public company that can tap into its shareholder base for additional funding.
3. Reduced Visibility
Another disadvantage of keeping your company private is that it can limit your visibility in the market. While going public can offer increased visibility and exposure for your business, private ownership means that you may not have access to the same level of media coverage or attention from investors and industry experts.
4. Difficulty Scaling
Finally, private ownership can also make it difficult for your company to scale up quickly. While private owners have more control over their business and can make decisions quickly, they may not have access to the same level of support and resources as public companies that can tap into their shareholder base for additional funding and expertise.
Case Studies: Success Stories of Private Companies
To help illustrate the advantages and disadvantages of keeping your company private, let’s look at some real-life examples of successful private companies.
1. Zoom Video Communications
Zoom Video Communications is a privately held software company that was founded in 2007 by Eric Yuan, Jean Huang, and Alex Liang. Despite facing significant competition from larger, more established video conferencing companies like Cisco Systems and Microsoft, Zoom has become one of the fastest-growing technology companies in history, with a market capitalization of over $150 billion as of 2021.
One of the reasons for Zoom’s success is its private ownership structure. As a private company, Zoom was able to make decisions quickly and efficiently without having to navigate the complexities of going public. This allowed the company to take advantage of new opportunities and grow rapidly in a highly competitive market.
Additionally, as a private company, Zoom was able to retain more control over its operations and strategy, which helped it stay ahead of the competition and adapt to changing market conditions.
2. Shopify
Shopify is another successful private company that has been able to grow rapidly thanks to its private ownership structure. Founded in 2006 by Trevor McKenny, Andrew Chen, Zach Holmes, and Austin Chesky, Shopify is a cloud-based e-commerce platform that allows businesses of all sizes to create and manage their online stores.
One of the reasons for Shopify’s success is its ability to retain more control over its business and strategy as a private company. This allowed the company to make decisions quickly and efficiently without having to navigate the complexities of going public, which helped it stay ahead of the competition and take advantage of new opportunities in the rapidly changing e-commerce market.
Additionally, as a private company, Shopify was able to maintain its focus on innovation and growth, which helped it become one of the most successful technology companies in history.
3. Warby Parker
Warby Parker is an online eyewear retailer that was founded in 2010 by Neil Hunt, Andrew Hunt, and Aaron Raider. Despite facing significant competition from larger, more established retailers like LensCrafters and Oakley, Warby Parker has become one of the most successful startups in recent history, with a market capitalization of over $5 billion as of 2021.
One of the reasons for Warby Parker’s success is its private ownership structure. As a private company, Warby Parker was able to make decisions quickly and efficiently without having to navigate the complexities of going public. This allowed the company to take advantage of new opportunities and grow rapidly in a highly competitive market.
Additionally, as a private company, Warby Parker was able to maintain its focus on innovation and disruption, which helped it become one of the most successful startups in recent history.
Final Thoughts: Is Keeping Your Company Private Right for You?
Ultimately, whether keeping your company private is right for you depends on a variety of factors, including your business goals, industry, and financial situation. While private ownership can offer many advantages, such as increased control, reduced risk, and limited access to capital, it’s not without its drawbacks, such as difficulty scaling, reduced visibility, and limited access to resources and expertise.
To make the best decision for your business, it’s important to carefully weigh the pros and cons of private ownership and consider all of your options before making a final decision. By doing so, you can set your company up for long-term success and growth in today’s highly competitive marketplace.