Can private companies achieve success by asking the right questions?

By

David Fabian

EY Americas Assurance Private Client Services Co-Leader

Focused on assisting clients expand and diversify their business units across borders. Love playing tennis and spending time with my two children and new puppy.

3 minute read 16 May 2019

A company’s ability to innovate and reinvent itself is critical, but as a company grows and expands, innovation can be difficult to sustain.

As every private company CEO knows, leadership is key to growth and long-term success. Whether the ultimate goal is revenue growth, sale of the company, succession for the next generation or IPO, each company’s ability to innovate — and reinvent itself to continually add value — is critical. But as the company grows and expands, it can sometimes be difficult to sustain momentum and stay on course.

We’ve spoken with a variety of businesses, from family-owned businesses to private equity portfolio companies and venture-backed firms. The path and the end game for every private company is different, yet one thing is consistent. Every decision along the way — from start-up to growth stage to mature business to transition — requires the ability to consider a variety of implications and outcomes, and demands innovative approaches and problem solving to unlock their ambition.

For most, growth is an essential component of the strategic agenda, but that growth can look very different depending on the stage of the company, the sector and even company size. Not all are looking for top-line revenue; some are focused on margin improvement or operational efficiencies. The key for business leaders is to navigate the journey with the right perspective as it can be the difference between success and failure and millions of dollars.

One of the challenges facing private business is understanding the critical areas to focus on based on where they are in their life cycle.

Execution. In the early stage of executing a business strategy, private company CEOs need to put the right foundation in place, asking questions such as:

  • How do we identify credits or incentives for which we are eligible?
  • What should our accounting standard be? 
  • What type of assurance do we require for our financial statements?
  • What should we consider if we want to expand our business internationally?
  • We are considering an acquisition — what do we need to know?
  • We need financing — what are our options?

Evolution. During this phase, private company CEOs are typically the chief architect of growth, driving expansion into new markets, product innovation and customer stewardship. Success depends on understanding the EY 7 Drivers of Growth , addressing the core elements of a financial strategy including: 

  • Can we better protect our assets from contingencies? 
  • As owners, how do we maximize our return on investment?
  • Should we consider going public?
  • Are we properly managing our human capital?
  • What do we need to know about indirect taxes?
  • What do we need to know about transfer pricing?
  • Is our cross-border structure efficient and compliant? 
  • How do we save or defer on taxes?

Transition. There comes a time where CEOs begin to plan for the next chapter for their company. That may include considering: 

  • How do I transition the business to my children?
  • How do we create an exit plan for our private equity investors?
  • Why is my business not as profitable as it should be?
  • Is our organizational structure optimal for our business?
  • Should I sell my business?
  • How do I restructure my company?

No two private company CEOs are the same – but the most effective ones share these common traits: a passion for their business, a drive to succeed and a strategic mindset that has them constantly focused on what’s ahead. Being tenacious, asking the right questions and evolving the business strategy across the business life cycle is key to unlocking the potential of the business and making ambition a reality.

Summary

The path and the end game for every private company is different, yet one thing is consistent. Every decision along the way — from start-up to growth stage to mature business to transition — requires the ability to consider a variety of implications and outcomes. It also demands innovative approaches and problem solving.

About this article

By

David Fabian

EY Americas Assurance Private Client Services Co-Leader

Focused on assisting clients expand and diversify their business units across borders. Love playing tennis and spending time with my two children and new puppy.