If you are looking to increase your company’s value without the hassle of going public, here are five ways that you can do so!
In today’s volatile markets, many privately-held companies are looking for ways to increase their value without going public. Therefore, non dilutive funding has become a popular alternative to an IPO or a private equity deal.
In case you’re wondering, non dilutive financing is a financing model that doesn’t rely on diluting the company’s ownership by issuing new shares. Instead, the capital comes from debt or assets that the company owns.
While there are many different non-dilutive financing models, they all have one thing in common: they don’t require new shares to be issued as part of the deal. This means that the founder and early investors maintain their majority stake–which is essential for keeping control and staying private.
There are many ways for companies to get ahead without going public than people realize! Here are 5 of them…
1. Buy back stock from employees
While it’s not a widely-used tactic, private companies can buy back stock from employees. This means that an employee who owns shares in the company can sell those shares back to the company. This usually happens in small increments and at a discount, but if the company is doing well, this is a nice perk.
It also helps keep control in the hands of management and ownership if there are shareholders who might be thinking of selling their shares. If you consider buying back stock from employees to keep your company private, it is essential to know this is a non-dilutive transaction.
The buyback of shares does not increase the number of shares in the marketplace, and it does not cause an increase in the number of shares outstanding. It may be the most radical of the options. But this theory will avoid a Pre IPO or IPO and keep your company private.
2. Issue dividends
This is another form of capital raising. A company can issue dividends to the public shareholders without diluting its ownership stake. This is a popular method for fast-growing companies who want to keep their ownership stake high. This is because the dividends do not dilute the stockholders’ ownership and can be paid out by using cash reserves or money from operations.
If you don’t know, dividends are payments made by a company to shareholders from net profits after taxes, excluding any capital gains or losses. When a private company has excess cash and does not want to go public with an IPO, it may choose to issue dividends as a form of non-dilutive financing. This is feasible if the company’s current assets exceed liabilities by an amount more significant than the equity allocated for dividend payment plus retained earnings.
3. Provide equity compensation in lieu of cash compensation
Keeping your company private is a good option if you want to avoid public scrutiny. You can provide equity compensation in lieu of cash compensation if you are looking for non dilutive funding.
Investors are generally more willing to invest more in companies with limited exposure to the public markets. They are not interested in investing or Pre IPO funding in companies with high exposure to the financial markets.
Moreover, investors are also usually willing to provide non dilutive funding in lieu of cash compensation for early-stage start-up’s. It is an important consideration for entrepreneurs looking to grow their companies without giving up ownership.
4. Buy assets rather than stock
Evan Williams, the founder of Twitter, said that he would have kept Twitter a private company if he could do it all over again. He was right. Buying assets rather than stock is a better way to keep your company private. The reason is simple: If you buy assets rather than stock, you will have complete control over your company without having to worry about outside investors pushing you around.
You will be able to do whatever you want with your company, regardless of what anyone else thinks. You won’t have to listen to any naysayers or deal with any legal issues. Besides, Bezos and Amazon have been one of the great success stories of the last 20 years. Bezos has faced a number of challenges in his career, and he has always chosen to keep his business private.
Today, Jeff Bezos is the richest man on earth. It is quite possible that we will soon see a day when companies like Google, Apple, Facebook, and Snapchat go public. That would be a disaster for those firms and their long-term shareholders because a share price published every day would be driven by short-term performance expectations instead of long-term value maximisation.
5. Build an advisory board
It’s hard to manage a company by yourself. You need help. Your first instinct is to go out and hire an employee or two. But what if you want to keep your company small and private? You can build your own advisory board. These are just people who will meet with you on a regular basis and give their opinions.
They don’t have to be paid, and they don’t get equity; they just provide free advice. A company can’t grow without the help of advisors, and they’re often the first ones to see your vision and back it up with their resources and expertise. Getting a grip on this concept will help you take your business to new heights.
Public and private companies are valued differently. Suppose you’re thinking of increasing your company’s value. In that case, it’s essential to understand what makes a company more valuable in the eyes of investors, as well as how much a company can be valued at.
But in the end, your company’s value is going to be determined by how much money it generates and how profitable it is. Therefore, we recommend that you make sure to focus on these five areas in order to help your company succeed.