Capital and Financial Strategies for Private Companies: Lessons from Their Publicly Traded Brethren

Abstract

Most businesses monitor their sales, marketing, and supply chain strategies. However, the companies with the best governance and risk management also regularly evaluate their capital and financial plans, understanding and thinking ahead about their needs for liquidity, their mix of different types of funding, and the eventual need to return money to their investors. The exigencies of public markets, as well as the law, require public companies to carefully monitor their capital and financial strategies in this systematic way—and to make timely adjustments when this ongoing evaluation points out the need to do so. This necessity has created a process that well-run private companies would be wise to emulate. Accordingly, this article will explore how private companies adopt the governance and risk management practices of public companies to enhance their performance. More precisely, it will explore how they overcome the challenge of having little visibility into capital market conditions for private companies, a problem that public companies do not have because they must abide by regulations that mandate the disclosure of critical financial and operational information.