Answer: It’s looking after everyone’s best interests
If you are thinking about selling your business, you can start by shoring up your numbers. But numbers won’t be the only thing that can affect the valuation of your business and ability to attract potential buyers. Some enlightened buyers today want to acquire companies that (intentionally or unknowingly) practice conscious capitalism that benefits all of its stakeholders.
The buzzword was first introduced in the book “Conscious Capitalism: Liberating the Heroic Spirit of Business” by Whole Foods co-founder John Mackey and marketing professor Raj Sisodia.
In his book “Selling without Selling Out,” Sunny Vanderbeck of Satori Capital explains why business owners who practice conscious capitalism are more likely to sell their businesses in a way that will let them more fully enjoy their post-sale lives.
Vanderbeck defines conscious capitalism as “the notion that a business makes itself fit for the future when it works to benefit all of its stakeholders.”
Why It Matters to Your Business
Selling your business is about much more than getting the most amount of money for you and your family. After spending so much time and effort to build the business, you don’t want to be remembered for disappointing the people who helped you succeed.
Instead, you should leave your business in a position to grow, thrive, and offer even better opportunities for everyone you work with.
Here are a few points from “Selling without Selling Out.”
Connections among stakeholders are the life force of your business. Stakeholders in the success of your company include investors, employees, vendors, strategic partners, customers, and the community. Business people who focus solely on achieving short-term financial gains often overlook how workplace culture shapes the long-term success of a business.
The connections among stakeholders become especially obvious as you prepare to sell your business. Vanderbeck compares it to a biological ecosystem that self-regulates when everything stays in balance:“When you take care of the ecosystem, the ecosystem takes care of you.”
How you apply capital affects the future for all stakeholders. Focusing solely on short-term gains for the benefit of investors often leads to short-sighted decisions that adversely affect how you treat employees, customers, vendors, and partners. Vanderbeck contends that taking a longer-term view of how you apply your capital can “generate better returns, improve the economic lives of all stakeholders, and contribute to the community.”
Other CEOs understand conscious capitalism more than private-equity investors who only have experience in investment banking. Investors who only care about getting a good return on the business in a five-year timeframe don’t properly understand the value of culture because it can’t be calculated on a spreadsheet.
On the other hand, CEOs understand the cultural norms of their industries and how employees respond to certain types of pressures. CEOs and entrepreneurs know from experience that a culture that emphasizes integrity and ethics in all of its relationships yields valuable dividends long past the traditional five-to-seven-year life of a typical private-equity investment.
How I See It
Even though private equity groups provide the financial backing to make many deals possible, some M&A deals today originate when the CEO of a platform company acquired by a private-equity group speaks directly with the CEO of an acquisition target company.
If the two CEOs like and trust each other and see eye-to-eye on values and best business practices, a deal to buy the seller’s company might move forward.
CEO-to-CEO conversations are constructive because potential M&A deals that may look good on a spreadsheet often turn into disasters during the post-sale transition period.
If the acquiring company doesn’t fully appreciate the importance of treating employees, customers, vendors, and partners with the respect they aren’t likely to achieve the financial returns they expected to achieve. If valued employees, customers, vendors, and partners leave the acquired company after the sale, the acquirer will be forced to waste valuable time and money making up for the loss.
Thankfully, the concept of conscious capitalism has grown wide acceptance, particularly in companies that calculate environmental, social, and governance (ESG) scores.
In fact, a 501(c)(3) nonprofit organization called Conscious Capitalism, Inc. exists to fulfill the potential of capitalism by providing business leaders with support to run their businesses in a conscious way.
According to a a statement explaining the Conscious Capitalism Inc. philosophy, “We believe that business is good because it creates value, it is ethical because it is based on voluntary exchange, it is noble because it can elevate our existence, and it is heroic because it lifts people out of poverty and creates prosperity.”
They also state that “Conscious businesses have trusting, authentic, innovative and caring cultures that make working there a source of both personal growth and professional fulfillment.”
Call me at 561-543-2323 and I can explain my own experiences with conscious capitalism and how it can affect the long-term success of a business sale.