Running a company with shareholders is one of the most interesting aspects of being in business. Not only is there a sense of nobility in working to help others grow their own personal wealth (most of the time use for retirement), but there is also the aspect of working on behalf of those who directly depend on the survival of the company. Focusing on the former, you can use the following checklist to ensure that shareholder value increases long-term.
The trap that many executives fall prey to is that they focus on every quarter as though it is the end of the world. Quarterly earnings are important, and they will be reflected in the share price, but so long as there is profit, they are not the be-all-end-all of the company.
Engaging your customers will increase revenue. Engaging shareholders will increase wealth. Imagine if for every 500 shares owned a hotel granted a free night’s stay in a luxury suite. Shares would be held by many with this in mind, and others would aspire to have that in their portfolio. If you can communicate with your shareholders in some way – especially to show appreciation, it will make a big difference.
Where are we going? This is precisely the question that David Katz asked when he was an intern at SunRay Power Management. The question was posited to one of the company’s accountants, Christopher Pascale, and the answer was that they were striving to go public, but there were some processes “gumming up the works.” Mr. Katz saw the roadblock, removed it, and the gum in the works was taken care of. Since then, shareholder value in this private company has soared. An IPO is rumored to be just 2 years away.
Controls must be in place so as to help a business function more transparently, and with more efficiency. This is especially important when it comes to financial, professional, and social risk. For example, when Twitter was still young, part of its oversight was that they wouldn’t get involved in politics. This policy (which has since changed) was the oversight. Another example would be having a CFO who checks the work of a controller.
If you don’t pay your talent appropriately, you will lose them, and their contributions can no longer benefit the investors. While it may cost a significant amount of money to retain a VP, what would it cost to lose her? Having said this, when increasing one’s pay is not possible, funds can be made available in other ways, such as through per diem, encouraging people to get out on the road, or by opening an account at a local eatery where they are approved to use the tab, which will lead to them staying in the office more.
What does your company stand for? This means a lot to some investors. For example, Mark Cuban noted that CEOs who layoff American workers to boost short-term earnings are unpatriotic. Those who agree will not want to invest in such a company. On another side of it, if you have a culture of innovation, like any business run by Nolan Bushnell, you’ll attain more money from creative people.
By following this guide you can increase shareholder value, and the results can be very surprising.