To implement a wealth realization strategy, private companies need to evaluate how to realize business wealth as it is being created. When they do so, they will serve their shareholders better by:  The first step is to evaluate future cash-flow generation capability, sustainability, volatility and future capital needs. The goal is to determine the amount of free cash flow that can be expected to be available to shareholders over the next three to five years.  Next is to evaluate alternative business capital structures and shareholder distribution strategies. The goal here is to meet the current and future capital requirements of the business while partially realizing previously created shareholder equity through one-time or recurring shareholder distributions. A variety of options should be evaluated, such as recapitalizing the business through debt or sale-leaseback transactions; spinning off non-core assets (such as real estate) into separate companies; selling underutilized assets and outsourcing; improving working capital management and improving business operations to increase cash flow.  Read MoreJack Bogle's 8 simple principles for a $3 trillion success  In the final step, alternative business scenarios, capital structures, shareholder distribution strategies and investment management policies need to be evaluated. Financial models need to be created for each scenario to determine which plan will best support the business while maximizing realized shareholder returns.  A large cushion of conservatism is always recommended. In certain instances, we have suggested transferring distributions into a special purpose LLC with the same ownership group as the business. A "standby LLC" can tax-efficiently support the main operating business if funds are needed, loans need to be guaranteed, or asset protection strategies separate from the operating business are deemed important.  Private companies have the benefit of longer time horizons for performance measurement. They do not have the pressures public companies have for increasing quarterly earnings. But public companies are focused on delivering shareholder value, and that is something private companies need to do better. Once they do, private companies will have the best of both wealth-creation worlds.  —By George Isaac, founder and managing principal of George Isaac Consulting, which advises private company and family business clients on succession planning, governance, family dynamics, operating performance improvement and business wealth realization. Isaac is also a member of the CNBC-YPO Chief Executive Network.  CNBC and YPO (Young Presidents' Organization) have formed an exclusive editorial partnership consisting of regional Chief Executive Networks in the Americas, EMEA and Asia-Pacific. These Chief Executive Networks are made up of a sample of YPO's unrivaled global network of 20,000 top executives from 120 countries who are on the front lines of the economy. The opinions of Chief Executive Network members are solely their own and do not reflect the opinions of YPO as a whole or CNBC.
Private firms don't face activist shareholders' wrath, but that's not a good thing. It can lead to laziness and wipe out company wealth.