Bill Green knows a thing or two about growing a business. An entrepreneur with over forty years of experience, Green got his start in high school selling plumbing and hardware merchandise at flea markets.
He soon graduated to opening his own hardware store, then founded successful supply distribution company Wilmar Industries. Wilmar Industries offered one of 1996’s best IPOs, according to Fortune Magazine.
In addition to growing Wilmar Industries from a small retail company into a $630 million market leader, Green has also founded private equity firm WSG Partners (now Crestar Partners), tax lien business Crestar Capital, real estate business Crestar Homes, and lending company LendingOne.
What can this experienced business leader tell young entrepreneurs about taking their companies public? Here are a few takeaways from my recent interview with him:
1. Long–Term Planning Is Essential
Green’s general managing philosophy can be boiled down to the importance of long-term planning. He explains his current strategy for running his lending company, LendingOne:
“My team is laser-focused on 2018, and I’m certainly not precluded from that thought process, but my head is in 2019 and 2020. These guys are doing the blocking and tackling, but I need to focus on next year.”
Founders have lots of responsibilities throughout the IPO process, but it’s important to delegate some tasks rather than micromanage. Founders have as much responsibility for the company’s future as they do for its present.
2. Make Sure the Resources Are There
“I don’t think there’s necessarily one answer,” Green says about businesses trying to decide whether to go public. “You’ve got to really make sure it’s right for your company. Again, you can’t be too small, and the cost to go public is so much now. You have to be a certain size to have an infrastructure, to manage that.”
Launching an IPO, and especially launching a successful IPO, requires resource expenditures and new responsibilities that could derail a company unprepared for them. Founders must balance these considerations against the capital IPO offer.
3. Buck Trends
There are downsides as well as upsides to going public, and a disadvantage that owners sometimes overlook in their excitement over an impending or successful IPO is their newfound responsibilities to the whims of stockholders.
Stockholders constitute a significant source of funding, but they also might have different ideas than company founders about the direction a newly public company should take.
The stock market is highly susceptible to trendy technologies and bubbles, whether they fit with the company’s long-term business success or not. Green recounts how during the early 2000s dot-com bubble, many investors demanded Internet stocks despite his company’s success:
“We were one of the largest distributors in the country of plumbing, hardware, electrical products, but we were just a dodgy old company. So, they left us. And when the liquidity came out of our stock, the stock price went down.”
4. You Don’t Have to Reinvent the Wheel
There’s a common notion in the broader public imagination that companies who genuinely “make it big” and succeed in going public have to invent something that’s never been seen before.
Some headline-grabbing IPOs belong to companies who offer new ideas, many more of those ideas never make it to market, and plenty of very successful IPOs come from companies who take existing business models and make them better. Green explains:
“My mantra’s been: ‘I never invent anything; I just take existing businesses and make them better,’ whether that’s value engineering of a product offering or just really enhancing the customer service experience.”
5. Weigh the Benefits of Staying Private
Founders who have thought through the costs and risks associated with going public have a more tempered and realistic view of what the move could do for their company. With that information, they might decide not to go public at all.
Green advocates for more companies investigating private financing options that could bring them the same cash infusion as a public offering, without the baggage that comes with it. Green took his public company private during the dot-com boom.
“I realized that Wall Street was not going to reward us for our great organic growth and our great strategy, and private investors would. And that’s exactly what happened.”
IPOs have a certain glamour in the entrepreneurial community, but they’re only useful capital-raising tools when planned and deployed wisely. Entrepreneurial leaders such as Bill Green can show founders how to grow their companies, whether that entails a public offering or not.Opinions expressed here by Contributors are their own.