Give Me Liberty or Give Me an…IPO? The Case For Remaining A Private Company

One of the most celebrated events in American business is the initial public offering (IPO). Many see it as a transforming event that ensures a company’s long-term survival, signifies an arrival into the business big leagues, and creates wealth - sometimes almost unbelievable wealth. Currently, in the U.S., there are approximately 17,000 public companies. So, why would a company actually choose to remain a private company?

Believe it or not, there are many good reasons not to go public, and I offer for consideration some real-world insights that may cause you to reconsider, or at least pause. Many people question whether or not a private company can actually compete against a public company.

We have been doing it for decades. Our company, Cincom Systems, is a privately held software company that was founded in 1968. We have thousands of customers on six continents and specialize in providing software, services, and hosting to simplify the management of complex business processes. Cincom employs over 1,100 people worldwide and competes with companies like Oracle, SAP, Siebel, and others.

Cincom has generated over $3.5 billion in sales and achieved 20 straight years of producing over $100 million in revenue - a feat matched only by one other software publisher in the world, Microsoft. Throughout our 37 years, we have steadfastly remained a private company. We’ve never accepted any form of financing from venture capitalists or other equity investors. Throughout the history of the company, all of our financing has been through cash flow and when necessary, debt financing through banks.

This never hurt us when competing against our well-branded and publicly funded competitors in the industry. In fact, it helped us to develop innovative, flexible, and adaptive ways of thinking along with well-honed and passionately articulated value propositions. We have continued to pioneer software innovation in our rapidly changing business environment. Surrounded by well-financed competitors, Cincom has an impressive list of “firsts” in the software industry. In 1984, President Ronald Reagan hailed Cincom as “the epitome of the entrepreneurial spirit of American business,” and we’re recognized by the prestigious Smithsonian Institute as one of “the pioneers and builders” of the software industry.

When compiling reasons not to go public, one stands out above all the others: freedom. Remaining a private company gives us the freedom to make decisions based on the needs of our clients, not the demands of the shareholders. It helps us to make bold business decisions and to create innovation by acting on these bold decisions. We are free from excessive regulatory burdens and free to adjust to changes in the business environment as we see fit. By avoiding the lure of public financing, we are free to control our own destiny.

Another clear advantage of remaining a private company is that it is much easier to create a unique corporate culture. If you value loyalty, a fair balance between work and family, and community involvement, then you are free as a private company to promote and reward these values. At Cincom, we have created a unique, family-oriented atmosphere that encourages openness and a sense of ownership in the organization we call the “Cincommunity.” For this reason, we have attracted an incredibly loyal and committed team, with very low turnover. At the senior-management level, it is not unusual to have 25 years of tenure with Cincom.

Additionally, our customers remain astoundingly loyal because we base our decisions on customer rather than shareholder needs. Ultimately, what has made Cincom successful is being a customer-driven organization. As a result, we have an extremely high average tenure among our clients, some as long as 30 years.

For almost 40 years, we have shown that it is possible to run with “the big boys” as a private company, and we will continue to innovate the software business for decades to come. For now, it is clear that an IPO is a “no-go” for us.

##



About Cincom: Privately held Cincom Systems sells both strategic enterprise software products and support capabilities for clients looking to develop applications internally. The company competes directly with global giants like Oracle and SAP by offering comparable products at a fraction of the cost and deployment time. To help clients consolidate their vendor channels, the company now offers hosting, outsourcing, and other IT services, again at a lower price. The company’s sales network was built around marketing partnerships, and new relationships are continually pursued. Asia is viewed as a key growth market. ROIC has averaged 80% over the last decade while earnings have grown 700% in five years. Management is seeking expansion opportunities.