One of the most celebrated events in American business is the initial public offering or IPO. Many see it as a transforming event that ensures a company’s long-term survival and signifies an arrival into the business big leagues. Currently, in the U.S., there are more than 19,000 public companies. So, why would a company actually choose to remain private?
Believe it or not, there are many good reasons not to go public, and I offer for consideration some insights that may cause one to reconsider why being private can be advantageous.
Many people question whether or not a private company can compete against a public company. We have been doing so for decades.
My company, Cincom Systems, is a privately held software company founded in 1968. It has thousands of customers on six continents and specializes in providing software and services to simplify the management of complex business processes. Cincom regularly competes with mega-companies like Oracle and SAP.
Not accepting financing from venture capitalists can often hurt a private company when competing against well-branded and publicly funded competitors. But, it can help you develop innovative, flexible and adaptive ways of thinking along with well-articulated value propositions. We have continued to pioneer software innovation in a rapidly changing business environment, focusing upon delivering outstanding value and competitive advantages for Cincom customers.
When compiling reasons not to go public, one stands out above all the others: freedom.
Remaining a private company can give you the freedom to make decisions based on the needs of your clients and interests of your staff, rather than upon the demands of shareholders. It helps you make business decisions that best serve the interests of clients, staff and the company itself. Remaining private will keep you free from excessive regulatory burdens and free to adjust to the changes in the business environment as you see fit.
You will have the freedom to run your business without a rigid timetable for an ROI and have more freedom to think long term.
By avoiding public financing, you are freer to control your own destiny. You will never be forced to merge out of existence or acquire other companies at excessive prices just to meet revenue or growth expectations. Because of this, you do not face the issues that mergers and acquisitions create, such as disparate product lines, product and employee redundancies, integration and employee layoffs.
Private companies are also freer to share their success as they choose. Public companies must share their successes with outsiders, whereas private companies are able to invest in R&D, better customer service and job creation.
Another clear advantage of remaining a private company is that it is much easier to create a corporate culture. At Cincom, we have created a unique, family-oriented atmosphere that encourages a sense of participation in the organization. For this reason, we have attracted a loyal and committed team.
Additionally, by being privately held, your customers will remain loyal because you base your decisions on their needs, rather than those of shareholders. Ultimately, what has made Cincom successful is being a customer-driven organization. As a result, we have an extremely high average tenure among our clients, some for more than 35 years.
The flexibility and freedom of remaining a private company is ingrained into a corporate character, culture and commitment. It is seen as a greater benefit for customers, employees and the communities in which they live all around the world.
For more than 42 years, we have shown that it is possible to progress as a private company, and we intend to continue to innovate in the software business for decades to come. For now, it is clear that an IPO is a “no-go” for us.
About: Thomas M. Nies is the founder and CEO of Cincom Systems Inc. Since its founding in 1968, Cincom has matured into one of the largest international, independent software companies in the world. Cincom’s client base spans communications, financial services, education, government, manufacturing, retail, health care and insurance. For more information, visit tomnies.cincom.com/about.
