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Last Update: Monday October 23, 2017

Key Idea: Understand Investors and Risks

The founders of Tires Plus decided that going public would be too distracting.

Key Question:

A: 

Tom and Don decided not go public.

As Tires Plus grew, opening additional company owned stores in large markets and franchise locations in smaller markets, Tom and Don gave serious consideration to going public. A public offering would have provided them with a significant source of capital to finance store openings. Eventually, they decided to keep Tires Plus private, even if it meant a slower pace of growth. You heard Tom say that he wanted to keep his focus on customers (guests) and employees (teammates) and he was wary of the time commitment necessary to keep investors happy.

Q: A public offering provides a company with an infusion of capital to finance expansion. "Organic growth", expansion by re-investing the profits of the business back into the business, is typically much slower. What's the downside of a public offering?

A:
Tom talked about the downside in terms of juggling balls. He focuses his efforts on taking care of his customers and his employees. He recognized that outside investors would place demands on him as CEO of Tires Plus. Meeting those demands would detract from the time he had available for his coaching activities. He made the choice to opt for slower growth so that he could focus on just two balls.

Going public is expensive and being a publicly traded company is also expensive. There are responsibilities for managing investor relations as well as the reporting requirements of the SEC. Accounting and legal fees are significant, as well as the internal costs of corporate management. Publicly held companies sometimes buy back their stock to privatize just to avoid these responsibilities. If you are in a position to finance the growth of your business internally, you should give it serious consideration. Even if the growth rate is slower, it may still be more economically advantageous over a longer period of time. Also, if you do not have the depth of management required to meet your obligations to your investors and the public at large, organic growth is your only option. 

Think about it

Does being the CEO of a publicly traded company sound fascinating to you? If so, what can you do to explore the possibilities?
 

Clip from: Tires Plus with Tom Gegax and Don Gullet

Minneapolis: In 1978, Tom Gegax and his partner Don Gullet, bought a few gas stations and opened for business. By 1998, they had 150 tire stores with 2,000 employees generating $200 million in annual sales.

That's a good story unto itself, however, in this episode of the show, we learn from a master entrepreneur about the meaning and value of life. Tom Gegax is pulling and pushing us up the ladder. When they sold this business, he became an author. His third book, The Big Book About Small Business  builds on his first two,  By the Seat of Your Pants: The No-Nonsense Business Survival Guide, and Winning in the Game of Life.

The first editorial title for Tom's book was The Enlightened Executive. And with all these self-help books and continuous improvement cycles within our lives, enlightenment is actually breaking out all over.

Tom Gegax was a founder, the Head Coach, as well as Chairman and CEO.  In 1999 they were being courted for acquisition.  In 2000 Bridgestone/Firestone sealed the deal to buy 100% of the company.

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Gegax Management & Tires Plus

Tom Gegax, founder

Gegax Management Systems
PO Box 16323
Minneapolis, MN 55416
612-920-5114

Visit our web site: http://www.gegax.com

Office: 612-920-5114

Business Classification:
Education

Year Founded:

Understand Investors and Risks

TOM: We paid that back and our growth was out of retained earnings. We did consider: do we do a public offering? Do we take on a larger financial partner? And we have decided no.

HATTIE: Why?

TOM: I believe that there are two things to keep your eye on. One is your guests or customers. The other is your teammates.

HATTIE: Right.

TOM: Now if you inject a third thing like a public offering and have lots of shareholders, then we'd be spending a lot of time with regard to shareholders (and not on our customers and teammates).

HATTIE: What do you know now about tires that you didn't know then?

TOM: Well, we know a lot about tires-- that's critical-- knowledge is one of the keys. But I think we need to know a lot about people, too, both our own people on our team as well as our guests. We call our employees teammates and we call our customers guests.

So if we know about our teammates, we know about our guests, and we know about ourselves. Because you first got to be able to understand yourself before you can understand your guests or our teammates. And you have that circle and then the wider circle, the community, and if your mission vision values all address all those needs, then you go forward.

There's got to be need at the very start, a niche, in order to be able to do it. I didn't figure I could improve on the computer industry, so we we went into something that we believed was not being done well and then went for it to make it better.
 

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