Company styles fall along a continuum ranging from Lifestyle companies to Equity Growth companies. Equity growth companies create greater economic value than lifestyle companies. There are three key characteristics of equity growth companies:
- Equity growth companies are built to be (eventually) sold;
- Owners treat the company as an investment;
- Management places a premium on being “evidence-based” and “empirically-driven” in operating the company.
By viewing the company as a valuable asset, business owners building an Equity Growth company are willing to make the tough calls, defer gratification into the future by investing profits back into the company, and embrace business practices sophisticated buyers value. Even if the decision is made not to undertake an exit, the business will be more valuable by treating it as an Equity Gowth company.