Additional benefits of industry aggregation.

The entrepreneur owner of each aggregated entity benefits dramatically in four ways: 

1.    Jack of All Trades, Master of One – In their original company, the entrepreneur owner is likely the primary person responsible for the management or operational capability of all the essential business disciplines. Some of these they like and are good at, others they dislike and are not good at. Their success on their own could usually be attributed to the fact that they were so good at what they liked and did well that the business succeeded despite their poorer performance in the other areas.

Under the aggregation model, each entrepreneur owner is freed to focus on the areas they like and excel in. The result is more enjoyment and more profits as each of the essential disciplines is managed by someone who loves doing it and is great at it.

2.    Move From Scarcity of Resources to Abundance – Whereas the individual company on its own struggled to maximize results from scarce resources, the combined company facilitates growth by providing cost justified resources in abundance, particularly capital and business infrastructure.

3.    More Personal Wealth, Greater Liquidity – The entrepreneur owner trades equity ownership in an independent business that is non-liquid (hard to sell, to a hard-to-find qualified buyer) and that will tend to be undervalued when it is time to leave, for shares of a public company which will tend to be overvalued and highly liquid not only when they want to leave, but even while they are still active. The entrepreneur owner does not have to wait until they leave the company or retire to raise money from the value of their shares.

Furthermore, cash can be raised by borrowing from a lender who will take the stock in a public company as collateral for a loan. In addition, partial amounts of the owner’s shares can be periodically sold over time even while they are still active and running the company. If the company is growing rapidly and wants to do a second public offering to raise even more capital, that will present an opportunity for the owners to participate in the offering by selling a substantial portion of their shares in the same offering. Proceeds from the sale of the owner’s shares go into the owners’ pockets while proceeds from the sale of the company’s shares go to the corporate treasury for additional capital.

4.    Globalization and Survival – There will always be a place for the “very small” or the micro-niche player in business, however the days of the independent small to mid-sized company are numbered in most industries. The reason is globalization. To compete successfully in the new every company will require a global reach:

- Cheap or less regulated capital from Hong Kong or the UK

- Less costly production in China, India, Jakarta or Bangladesh

- Trans-shipment from China to Chile to the US to take advantage of free trade agreements;

- Distribution or extension of the client base into North and South America, Europe, Asia, Australia and Africa

- Integrated supply chain and financial management to insure safe, timely, dependable delivery of products and services from every world market

- IT facilitated systems to coordinate orders, with inventory, with shipments, with delivery to the end user with payment in any currency over global networks.

These are just some of the factors affecting every company’s ability to compete in any local market--never mind follow the movements of a world traveling clientele. The impact is already being felt today. But, it’s only a matter of time until the wave washes over us all.

Entrepreneurs with vision will come to see that HPU bears a great gift for them.

The integrated aggregation entity is the Business Model for their future survival. For those that get on board early, they have the opportunity to thrive past the competition and beyond to market domination.

5.    Dramatic Reduction or Elimination of Personal Income Taxes – In some instances there will be a bonus fifth benefit which results in more net income available to the entrepreneur owners for personal spending or investing from the same compensation they were receiving before the combination. While most of the aggregated companies probably leased their facilities while independent, together they have the combined balance sheet and P & L to facilitate a very profitable and tax advantageous real estate transaction to be personally owned by the owner entrepreneurs. New facilities can be acquired and/or constructed by the entrepreneur owners who do so with a long-term lease in hand from the combined company, which given the strength of its balance sheet and earnings, enables the acquisition and/or construction to be 100% financed by institutional lenders. Properly structured, this provides a tax write-off for depreciation and interest with a positive cash flow to the owner entrepreneurs.

Taken to the next level, globalization offers the opportunity to establish business entities in tax favored nations, hold income offshore and repatriate it after years of tax free growth or spend it overseas with no tax ever.

However well the entrepreneur owners would have done with their individual company, the financial leverage of the public combined entity, its economies of scale and diversity, its ability to redeploy assets for the highest good (even across national boundaries), the cross-fertilization of the various components, its amplified competitiveness through its enhanced global reach, the ease of exit at the appropriate times for owners and investors, and the possible tax savings enable the owner to dramatically increase the rewards of success.

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