Successful private and family-owned companies can have significant competitive advantages over larger, publicly owned firms. These include faster response to customers than larger competitors; ability to finance and execute well-conceived long-term growth plans; freedom from need to report continuously rising quarterly earnings; and direct control by owners over the rate and timing of wealth creation.

As they grow, private companies also contend with daunting financial and operating challenges. In many instances there are no financial reserves to cushion operating or marketing problems. Knowledge of industry trends and competitor capabilities may be limited. Rapid growth can produce unforeseen problems and large losses if management has not experienced it before.

Owners of private companies know that growing a business and adding value requires taking risks. But they also know that in a highly competitive economy there is no alternative to growth, and thus no alternative to risk taking. Their challenge is balancing growth and risk so as to build value and wealth.

 

Successful owners and managements
always focus on building the value of their
businesses. But building value can require
taking unfamiliar risks.