Why Building for the Long Haul Matters

Create Value in Your Organization with a Succession Strategy

Creating an organization that has an enduring quality is the best way to create shareholder value over a long time. Warren Buffett is famous for the long-term hold, saying “when we own portions of outstanding businesses with outstanding managements, our favourite holding period is forever." Buffett buys companies that can create generational value. It’s a great theme to build on.

Our client George understood his goal was to scale and sell. He started an operation and pitched his big idea to a multi-billion dollar international manufacturing company. They were intrigued because his value proposition changed the way they would buy — instead of paying for input materials one way, he would sell them inputs based on their value to their process. the manufacturing company told him to prove it and he could work in their supply chain. 

He did — George pitched his idea to another company with the means to make his plan a reality. Soon, he found himself with an equity partner and they were scaling a contract with a decades-long supply agreement. In the back of his mind, George was positioning the company for a sale, positioning all facets of the business for procurement, efficiencies, quarterly reports — all tailored to the best position to his potential suitors. Keep in mind that this is one viable path and not every business owner should or wants to target this type of path. 

You can look to iconic brands for more proof of why succession strategies matter. Public companies have a duty to shareholders that holds them accountable. In turn, these companies work hard to ensure they can endure leadership transitions. Apple, Microsoft, Google, General Electric, Toyota, Ford, and Coca-Cola have turned the page from founder to CEO and beyond. It’s not a guarantee they will remain in their current form, but the underlying parts endure.

Apple endured after Steve Jobs decided to exit with Tim Cook leading the charge. Microsoft has gone through many shifts after Bill Gates left the CEO role and now Satya Nadella has revitalized the company. Boards are making great decisions that are building enduring corporations.

Not-for-profit agencies have also navigated this concept. The value they disperse to stakeholders is crucial. Think about your local charity. You probably haven’t thought about their staffing and leadership. They endure because they are mission driven; the work they do is simply too important to fail at enduring. Boards certainly help and they are a common link between not-for-profits and public companies.