When Should I Take My Company Public?
If you own a business, you may find yourself imagining that moment when your company's stock is listed on an exchange. It's a great goal, but there's a lot to think about first. Don't consider going public unless all or most of the following are true:
You've had consistent and predictable revenue. Public markets don't like missed or uncertain earnings.
You have substantial savings. The company will have to pay for certain expenses, including its initial public offering, up front.
Your business is still growing. Few will want to invest in a company that has no opportunity for future growth. Make sure you have a detailed business plan that shows exactly how you're planning to grow in the coming years.
You're already a major player in your industry. Ask yourself how you stand out from the competition. Do your numbers tell a great story?
You have a strong and experienced management team. The markets want to see strong leadership. Do you have C-level executives prepared to speak on earnings calls?
You're prepared to go under the microscope. Every single component of your firm's business process will be scrutinized. You need to show a low debt-to-equity ratio; it may be hard to launch if your company is highly leveraged.
A major process
Going public means providing more transparency to stakeholders, taking on additional complexity as your firm is more scrutinized by the investing public, and adding the extra expense of keeping compliant with regulations. It also includes significant risk, since the price of the offering is mostly out of your hands; you may get two-thirds of the way through the process of going public before you find out your real price range. But if all goes well, the rewards are money, prestige and publicity. Meanwhile, your IPO will likely consume your life — you won't have much time for anything else until after Opening Day, so be sure to have a solid management team in place.
You will have to have strong faith in your company as you proceed. Make sure you know why you want to go public. As you start giving presentations at road shows, you may need to push back on experts who want you to change what makes your company unique.
Of course, an IPO is not a do-it-yourself job. You will need to work closely with trusted legal and financial professionals. Also, seek out CEOs inside and beyond your industry who've gone public. Unbiased opinions are what you want. Your job will change during the process — you'll spend more time with institutional investors and working on regulatory filings. The onus is on you to do your due diligence about the IPO process, learning as much as you can ahead of time.
Finally, keep in mind this is just a brief overview of a lengthy and complex process that will vary from company to company. But ultimately, if you are well prepared and go in with realistic expectations, it can be a positive experience, setting up your business for great things in the future.
We can help you plan, set up the accounting and payroll, and assist you with tax and financial planning. Give us a call.