to you, as an Enterprise Leader

Keeping control of your business –

product-market perfection

If you are an MBA, you probably have been taught to believe that the purpose of business is to grow forever.

If you are a student of humanity, you will see that the true goal of your enterprise, and every enterprise, is to achieve what may be called product-market perfection.

This is the state where the core learning that defines your enterprise and gives it value in the marketplace – a social contract with popular choice – has been so fully and well developed that there really isn’t much more that can be done – it is pretty near perfect; and also that the market that you serve, the customers with whom you have a social contract of popular choice is so large that adding more customers at more than incremental rates is pretty near impossible.

At that point, happiness for enterprise is to just keep it going. Constantly, and consistently. Indefinitely.

If you got to that point by incorporating your enterprise and issuing shares for trading in the public markets for trading in listed shares (or private or public alternative unlisted markets), however, that is not allowed.  You must keep growing your share price. Otherwise the price will languish, and in the fullness of time your company will come to be seen as undervalued. Some sharp operator will buy up control, and cost-cut, break apart, sell off, acquire new or otherwise reorganize and “re-energize” your company, to give the Market what it wants and needs: Growth in share price.

What if you don’t want to do that, or let that happen?

You have to find a way to exit the markets, and escape the tyranny of the trading tape, with its incessant demand for constant growth in assets, earnings and share price.

You have to take your public corporation private. That can cost a lot of money. More than you can borrow from the bank, most likely.

Where are you going to get that money?

You can talk to any number of so-called private equity investors, any of whom will be able and willing to give you the money you need.  As you learn more about what their so-called “private” equity means, however, you will see that mostly what they are offering is, at best, a time-out from trading. They will still demand cost-cutting reorganizations and strategic realignments of some kind. And they will begin talking to you about exits almost immediately. By exit, they will mean returning to the public markets, either directly, through an IPO, or indirectly, by trade sale to some existing public company that sees buying your company as a way of delivering growth in their share price!

The good news is that there is a slowly growing community of evergreen private equity funds.  These funds will talk about long term, buy-and-hold strategies, and dividend pay-outs instead of exits  Still, you will find that many of them are not fully evergreen, in the sense of having full embraced the real estate model of the equity payback contract. Eventually, they will want you to sell, so they can take their profit.

The money all these private equity funds are spending for the most part comes from stewardship sources: pensions and endowments.  We are working to lead these and other stewardship investors in going fully evergreen, that is, in fully embracing the real estate model of an equity payback contract.

There are two big hurdles we have to come. One is competency. The other is deal flow.

The competency hurdle is not that high.  These stewards already know the real estate model. It is not that hard to adapt that model to enterprises of other kinds.

The deal flow hurdle is the bigger challenge.  Stewards need to see that they can find good companies to put their money in, as well as good people they can trust to guide them in putting that money to work wisely and well.

You can help.  You can join the evergreen network of enterprise leaders who say Yes! to stewardship as an alternative to transforming your enterprise-as-corporation into a corporation-as-mutual-fund, dancing to the tune of the trading tape, with its incessant demand for constant growth in share price.

Should you exit to evergreen?

Why not discuss with Cody Thornton Lawyers this concept of “exiting to evergreen”?

Their team can  explore with you multiple examples of currently public companies that might do well to go evergreen, and then compare with your situation to sketch out a few campaign ideas you might like for organizing an evergreen Macro Project for making you exit to evergreen.

Initial consultations are always free.

Cody Thornton

a new kind of law firm expert in the skills of evergreen prudent stewardship investing

enter the BonBillo accelerator to design your exit

get HIP certified by Invest In Peace

host your evergreen Macro Project in the EdLab (or other fiduciary venue)

help us wake the Sleeping Giants