At the recent 2019 Stanford Search Fund Conference we attended a panel session with CEOs of a small, medium and large organisation.
They were not only sharing their philosophies on capital allocation and shareholder returns but deconstructing what has happened over time to create value for their shareholders.
The lessons are universal:
- Use debt wisely to fund growth and manage your debt relationships as if they were a strategic partner;
- Avoid capital raising unless necessary (which means the business has to be sound and financially structured appropriately from the start);
- Where you have excess cash, don’t hang on to it; return it as early as possible to your shareholders; and
- You don’t have to just pay dividends, also consider buying back shares, as this can create superior returns for remaining shareholders.
Great advice and good to see it work so well for these incredibly talented entrepreneurs.