Does Your Company Have an Ownership Strategy?

When a growth entrepreneur starts their company, the focus should be on researching customer needs, developing the company’s service, and handling the practical aspects of building the business. In other words, on important operational matters.

As the company grows, managing operational matters alone is not enough. Something more is needed to ensure everyone moves in the same direction. This is where drafting an ownership strategy and assembling a good board of directors come into play.

What issues should a good ownership strategy address? For example, the following:

(1) What are the owners' values and goals? Even large companies reflect their owners. The owners' values and goals determine, for instance, the types of businesses the company can engage in.

(2) What are the company’s main objectives? Is the aim to build a rapidly growing and internationalizing company that is ready to take on new owners to accelerate growth? Or is moderate growth sufficient?

(3) What kinds of risks can the company take? How much debt financing can the company take on, and what is the target equity ratio?

(4) What are the owners' expectations regarding profit distribution? This is another matter the owners should clearly communicate so that the company management can consider the owners' expectations for dividends.

An ownership strategy is like a map that guides the company towards success. It helps the owners, management team, and staff understand the goals they are working towards and how to achieve them. It is the foundation upon which the board can confirm the company’s strategy, which the executive management then implements.

A clear ownership strategy not only increases transparency and efficiency in the company’s operations but also strengthens the company’s competitive edge in a changing business environment.

Does your company have an ownership strategy? And has it been communicated to others?

The text has been published in Kauppalehti on 21 August 2023.