The Advantages of Being a Private Company
If you’re running a privately owned business that is growing at a rapid rate, you may be mulling the idea of going public. In the digital age, the lure of an initial public offering that makes you an instant millionaire is difficult to resist – but you should hit the pause button on that idea until you fully understand what’s at stake. Before you make any decision about going public, it’s important to know the benefits of remaining a private company. While a major advantage of becoming a publicly traded company is access to more funding possibilities, a private company also has advantages not available to publicly traded entities.
As the owner of a privately owned company, you retain full control over all business operations. If you decide you want to grow the business by investing in a risky venture, you can make that decision without having to persuade a board of directors or stockholders that your plan is sound. As the owner of all stock shares, you retain the power to sell some without ever losing your majority ownership stake. That flexibility means you will always maintain control over how you run the company, even if other people have stock in your business. It also means you won’t be beholden to the fluctuations of stock prices like publicly traded companies. In publicly traded companies, shareholders tend to lose confidence when stock prices decline or yo-yo over time, which can lead to conflict – and even a takeover bid.
When you go public, everything your company does also goes public, because you are required to file financial documents with both state and federal agencies. While a private company that's structured as a corporation has to disclose its articles of incorporation and the number of officers and shareholders to the secretary of state’s office, public companies are required to disclose quarterly financial statements to the public.
In 2000, the U.S. Securities and Exchange Commission established the Regulation Fair Disclosure rule that required all publicly traded companies to disclose material information to every investor at the same time. In other words, owning a publicly traded company means keeping up with a number of SEC regulations and living with a level of intrusion that won’t be an issue with a privately owned company.
Chasing after a big IPO can be a fun and exhilarating exercise, but after the company goes public, employees can lose focus on the day-to-day activities of the business because they’re so invested in selling off their shares as soon as possible and cashing in.
When your company stays private, you can maintain a workforce that works diligently to grow the business, because there’s no magic IPO at the end of the rainbow, and no stock price to create stress and tension in the workplace. Instead, employees focus on the continuing and long-term success of the business without the distraction of wondering about stock prices, shares and how Wall Street views the company. In the long run, this helps your company deliver the value that is often the difference between success and stagnation or failure.