"Go on, take the money and run."
Steve Miller and his band wrote that catchy song that rings through my mind as a smirk plants itself on my face. That little story about Billy Joe and Bobby Sue builds into the off-beat chorus that has taken on a deeper and more profound meaning in my career. My smirk fades as a dozen or so other stories of business managers, companies, and self-professed entrepreneurs replace the images of the fun-loving and in-love hero and heroine of Miller’s classic rock song. “Go on, take the money and run.”
I watched the news feeds again today as some seemingly innocuous political headline leads to a wealth-generating jump in the DOW and other indices. Wealth generated by nothing more than speculational and spin, cashed in by prudent investors and fund managers who seized the opportunity and benefited just before the indices slipped back into a mild recovery. We see the game being played all the time. Our entire economy has become essentially dependent on it. We don’t talk about P/E ratios or dividends anymore when determining the desirability of an equity. We don’t actually pay attention to the health of a company when we weigh its value. We want to know (or give our best guess, rather) where we can buy in low just before an often nonsensical spike, just so we can get back out, generating personal wealth for ourselves and really nothing else. This is the reality of investment of our day. We have redefined “successful business”. It’s no longer about generational sustainability or even profitability. It’s about near-term returns based on speculation, phony projections, timing, and a roll of the dice. And when one investor considers a company to be an extremely successful investment in regard to his or her personal portfolio, others (often customers or employees or communities) too often consider that same company to be a bust. A bomb. Far more destructive than “successful”.
I choose to operate under the philosophy that, yes, while the purposes of investment and business in general is to “make money” (something we should never apologize for, so long as we go about it responsibly), it is the business itself that should be generating the gains, and not speculation, PR efforts, news feeds, or opportunistic hedging. I see so many businesses that seem to be completely unaware of how to manage factors and details such as direct costs, indirect costs, overheads, and top-line trends and ratios, which together spell the true success or eventual demise of a company. Or worse, they simply choose ignore them. Too often, the only strategy that drives the company is its exit strategy. There is no drive to make money on the operating statement. The goal is to simply try to lose less operating the company than what you’ll eventually make when you sell it.
Now, of course, buying and selling is important. All companies, like all living things, come to an end, and even the most successful ones do eventually sell (or “merge”, which is really just selling by a different name). This is normal, and even healthy (or can be) in the world of the free market and business community as a whole. But when a business’s focus is operational performance as opposed to exit strategy, in my experience, those that benefit are not just investors and owners, but there is a much higher likelihood that employees, customers, and communities benefit as well.
Business done well generates wealth through operating profits in the real-time. And eventually in the exit strategy. Easier said than done, I know. It’s far easier to “take the money and run”— to let the expenses outpace the income, window-dressing the outer shell of a business concept while the inside is slowly dying, and hope some sucker likes your idea or product or technology enough that they’re willing to pay more than what you’ve lost creating and developing it.
We are interested in companies and entrepreneurs who aren’t looking to take the easy route. We love to hear and experience the stories of those who understand that growth that is not profitable is not growth at all. That profitability means better wages for workers, and internal investment that leads to better customer satisfaction. These enterprises understand that true business success, by this definition, serves to benefit far more than the individual investor or entrepreneur. Successful business, when done right, benefits entire communities. And an owner’s or stakeholder’s valuation of the business is far more than a number on the ticker or a multiple of EBITDA. The true value of business ownership is in the unique product or service that differentiates that business from the rest of the world— coupling the “good” it brings to this world with the ability to deliver that “good” profitably.
So best of luck taking the money and running, Billy Joe and Bobby Sue. But I think some of us actually do have something better that we’re called to do.
-Tyson Aschliman