Steve Kayser Bio/Archives
Steve Kayser is currently PR Manager for Cincom, and has won screenwriting awards from: The Academy of Motion Pictures Arts and Science Nicholl Screenwriting Competition, Writers Digest Screenwriting Competition, and Project Greenlight. He was also named a “Purple Cow” by best-selling author Seth Godin, featured in a Marketing best practices cases by MarketingSherpa, Innovation Quarterly, and B2B Marketing Trends. His writings have appeared in several magazines, including Business 2.0 and Entrepreneur Magazine, among others. Contact Steve at skayser@cincom.com.
Give Me Liberty or Give Me … an IPO?
By Steve Kayser
The Case for Remaining a Private Company
One of the most celebrated events in American business is the initial public offering (IPO). Many see it as a transforming event that:
• Creates wealth, sometimes almost unbelievable wealth,
• Ensures a company’s near-term survival, and
• Paints a company with the aura of elevation into the business big leagues.
Right now, in America there are approximately 17,000 public companies.
So, Why Remain a Private Company?
Why would a company forego all of the glamour, fanfare, and wealth that a well-publicized IPO would generate?
Believe it or not, a myriad of reasons. When compiling reasons not to go public, one stands out above all the others:
Freedom:
• Remaining a private company gives one the freedom to make decisions based on the needs of customers, not the demands of the shareholders.
• Freedom to make bold business decisions and to create innovation by acting on these bold decisions.
• Freedom from excessive regulatory burdens and to adjust to changes in the business environment that you may happen more than a few quarters down the road.
• Freedom to control your own destiny.
Growth - Complexity
To meet revenue or growth expectations, many publicly owned companies are forced to merge or acquire other companies. This leads to a host of complexity issues such as disparate product lines; product, process and employee redundancies; integration; employee layoffs (which severely affect employee morale); and ultimately, while faced inward trying to cope with these issues, customer service suffers greatly.
Simplicity … the Ultimate Sophistication
Leonardo da Vinci once said, “Simplicity is the ultimate sophistication.” So being a private company, you are not under pressure to grow by merging or acquiring companies to meet shareholder expectations.
Sounds simple.
It is.
Regulatory Money Gobbling ... an Infinitely Expanding Black Hole
The current legislative environment has also made it less attractive to pursue the public path. The Sarbanes-Oxley (SarBox) legislation, spurred by public accounting scandals and corporate fraud of a few to the deleterious effect of the many, has created a compliance burden that would be prohibitive for many small-to-intermediate-size companies that may have considered going public. Today, those companies would incur an unjustifiable compliance cost (millions of dollars per year) just to keep pace with all of the reporting demanded by the legislation.
Most Expensive Words Ever
Section 404 of the 2002 Sarbanes Oxley Legislation is 180 words. Yet estimates of costs for publicly traded companies to comply are between $10 billion to $20 billion yes, $10 billion to $20 billion, or approximately $55 million to $111 million per word.
According to one study, SarBox compliance could cost approximately $1.4 trillion dollars. “The loss in total market value around the most significant rulemaking events amounts to $1.4 trillion,” according to Ivy Xiying Zhang of the William E. Simon Graduate School of Business Administration.
Ouch … for public companies anyway.
A survey by Korn/Ferry International found that Sarbox legislation cost Fortune 1000 companies an average of $5.1 million in compliance expenses last year. Big accounting firms estimate the cost to be an average of $7.8 million dollars.
For small-to-intermediate-size public companies, the law firm Foley & Lardner found that Sarbox has increased the “cost of being public” by 130 percent.
Don’t Focus on the Business … Focus on the BS (Bureaucratic Stuff)
Senior management now, instead of concentrating on planning a future, building a business, filling customer needs, creating jobs and becoming a valuable cog in the economic engine of prosperity, is tasked with design, implementation, assessment, controls and auditing results.
A large part of this work is ultimately controlled through the IT department. Business managers already have enough problems trying to align business goals with IT processes, let alone adding a completely vainglorious, monolithic, ever-expanding, costly and complex system.
How to Efficiently Discourage Bold Decisions
If senior management makes an honest boo-boo (mistake) under Sarbox legislation, they could still be subject to 20 years in prison and as much as $5 million in fines.
Sounds like a great incentive system to me!
Where Do I Sign Up?
This is a most efficient (and effective) way to waste good money, human resources, and future potential (societal and business) by throwing it down the ever-expanding regulatory black hole.
Each year government agencies issue approximately 4,000 new regulations.(1) American businesses now pay more than $850 billion (2) in annual regulatory costs and $233 billion in unnecessary or out-of-control legal costs (3) per year.
And now, just for kicks to see how far we can push American business, throw in the highest corporate tax rates among our major competitors.
This is a blueprint for economic disaster.
If the cumbersome regulatory environment continues to increasingly burden business, you will see a drastic downturn in American competitiveness, jobs will be lost, and the economy will be severely battered.
- Public Company=Sarbanes Oxley
- Private Company=No Sarbanes Oxley
A Better Way?
How much better would America be if even a small percentage of this wasted time and money on unnecessary costly compliance was spent enhancing innovation, creating jobs, and aiding competitiveness instead of shackling it?
How much better could we be?
My not-so-bold statement is …
Astoundingly Better
I believe customers and employees are better served by investing the money that would be wasted in unnecessary regulatory compliance into R&D, better customer service, better jobs for employees, and most importantly, I believe job creation.
Creating a Unique Culture
Another clear advantage of remaining a private company is that it is much easier to create a unique corporate culture. If you value loyalty, a fair balance between work and family, and community involvement, then you are free as a private company to promote and reward these values.
A Different Kind of Pressure
Public ownership can make any unique culture difficult to sustain if one bad quarter forces you to lay off 20% of your workforce, or the market drives pressure for meeting certain results regardless of their long-term implications – and that pressure is passed down the line in the organization.
A Really Big Penny
One penny.
One cent.
A paltry pittance … right?
Ouch … again.
In a publicly owned company, a penny difference in predicted earnings can drop the stock value 10%4.
Advantages Considered
Of course there are good reasons to go public. Access to capital is clearly a compelling reason to launch an initial public offering, and many great companies have successfully followed this path.
If you are determined to become a very large company, or if creating substantial wealth for your managers and employees is a key objective, going public could make sense.
Disadvantages Considered
Many public offerings have failed because the disadvantages haven’t been fully considered. For example, after an IPO, future successes have to be shared with outsiders. Typically after an IPO, insiders own only 30-49% of the business, and this range sometimes varies wildly, for example, up to 85%.
Smells Like Bad Flounder
Not only do you have to share your successes with outsiders, they may be in the position to take over the company and fire top staff, or even the founder of the company. If you are a "Founder" of a company I suspect this may smell like bad flounder.
You also lose important confidentiality aspects such as technologies and profitability numbers, which competitors could (and do) seize upon and turn around to your detriment.
What’s Really Important
Many of these companies might be here today, perhaps smaller, but thriving, had they considered what is really important:
• The freedom to innovate without a rigid timetable for a return on investment,
• The freedom to think long term,
• The freedom to build a corporate culture that reflects the leadership of the organization, and finally,
• The freedom to make decisions that make sense, rather than decisions that please the analysts on the quarterly conference call.
The Good, the Bad, and All Things Considered …
The flexibility and freedom of remaining private is fundamentally ingrained into a corporate character, culture, and commitment. This redounds to the greater benefit for customers, employees, and the communities in which they live and serve, all around this wonderful world.
So … in the Case of Private vs. Public
My verdict is in.
And …
It’s an IPO-A-NO-GO!
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Footnotes
1. The National Archives and Records Foundation
2. Office of Advocacy, U.S. Small Business Administration
3. U.S. Chamber Report on the State of American Business
4. Harold Burson – Greatest Generation of PR Speech, May 17,2005
Posted by SteveKayser on August 31, 2005 at 10:26 AM in Business Growth | Permalink | Comments (0) | TrackBack
Corporate Gobbledygook ... The Four Too's vs. The Four Tools
Corporate Gobbledygook
by Steve Kayser
From personal experience and conversations with many experts in the field, there is reasonable agreement that most corporate sales, marketing and PR lingo suffers from
"The Four Too’s."
· Too wordy
· Too complex
· Too confusing
· Too Valueless
Agree or Disagree?
Why is that?
Essentially it boils down to:
1. Trying to be all things to all people at all times
2. Not knowing you can’t be all things to all people at all times
3. Trying to sound really sophisticated, cool, intelligent, intricate and inclusive
And finally, the biggie, not understanding your customer/buyer.
For example, in a recent Yankee Group study of executives who are likely to buy enterprise software, it was discovered that large ERP vendors promoted speeds, feeds and technology innovation to their marketplace. These promotions more often than not entail lengthy and wordy descriptive obfuscations (yes, I know what it means, I’m trying to sound really sophisticated, cool, intelligent and inclusive).
But Guess What?
Buyers don’t care about that. Nope. They essentially want one thing: understanding.
Simple understanding.
Clear, short, concise messages and understanding.
Understanding of What?
Understanding them, their businesses, their processes. They don’t want or need the wordy intellectual technical features and functions tomes. Keep it simple! Less is more. They throw away all of your cutesy, excessively long-winded brochures as soon as you leave the room.
Some other findings of the study were interesting as well. Buyers would pay for
· high integrity,
· fast return on investment,
· inexpensive operation,
· easy implementation, and
· excellent service.
But how is that different from 20 years ago? And isn’t that applicable to any buyer?
Buyers Want What They Want
Buyers are pretty basic. They want what they want. Understanding and practicality.
Would You Buy From This Company?
"We provide"
· low integrity,
· no return on investment,
· expensive products,
· hard-to-implement products, and
· the world’s worst customer service.
Just a wild guess. But I’m thinking not.
So, we should be able to develop a simple message based on the above attributes that buyers are seeking … right? I mean. C’mon. Simple … right? Okay, then what about
· high value,
· low cost,
· rapid ROI,
· quick, guaranteed implementation, and
· proven customer service?
Nahhh …
Never work … not enough words.
Ohhh … since I referenced the Yankee Group study, I will point to their corporate tagline:
"Accurate. Reliable. Trusted."
Nahh …
Won’t work either. Needs more words. I guess I’ll have to pass the bad news on to them.
On Being a Simpleton
I like simple messages (I’m a simpleton) that give me four tools to combat the four too’s.
The Four Tools
1. What do you do?
2. How do you do it?
3. What makes you different from your competitors?
4. Why should I buy from you (value proposition)?
I know.
Too simple.
But, having recently read this message,
"We build, sell and support hypothetical superluminal quantum particle applications with ERP, CRM, BPM, MRM and PLM functionality targeted at vertical market particularities with platform-neutral ‘LMNOP" interoperability.’ "
I find I still prefer
1. What do you do?
2. How do you do it?
3. What makes you different from your competitors?
4. Why should I buy from you (value proposition)?
Thoughts to Ponder (From Really Smart People)
· "Less is more." - Browning
· "Simplify, simplify." - Thoreau
· "Everything should be made as simple as possible, but not one bit simpler." - Einstein
· "If you have to look the meaning of a word up … don’t use it." - Stephen King
· "Elegance of language may not be in the power of all of us; but simplicity and straightforwardness are. Write much as you would speak; speak as you think. Be what you say; and, within the rules of prudence, say what you are." - Alford
· "Simplicity is the outward sign and symbol of depth of thought." – Lin Yutang
Posted by SteveKayser on August 24, 2005 at 02:48 PM in Customer Dialogue | Permalink | Comments (0) | TrackBack
