There are few moments in the life of your business quite as exciting as the day you decide to launch an initial public offering. If you’re facing this decision it means you’ve done an awful lot of things right, and your baby is poised to take its next step. With an IPO the company will begin trading stock on the market, taking on shareholders and possibly a board of directors for the first time. The decision making will no longer be yours alone, but the potential scope and financial success of the company will take a huge leap forward. It’s an incredibly exciting prospect, but it isn’t the right move in every situation. If you don’t go about this the proper way you could lose all of that forward momentum and actually doom your company. It’s time to ask the tough questions, and determine if your business is truly prepared for an IPO.
First off, ask yourself if you really understand the pros and cons of going through an IPO. The positive side is probably obvious to you. You’ll be open to some incredible new partnerships, and an entirely new level of relationships with your current associates. You’ll also enjoy a much higher visibility with the general public, through stepping up to ‘the big time’. However, have you really thought through all of the control over your company you are losing? It isn’t just hiring and firing you’re talking about, but the company’s financials as well. Not everyone will be comfortable with that change.
Next, have you done all the necessary research to figure out the regulations that will come into play? The Securities and Exchange Commission, or SEC will weigh in on every IPO. Most of the activity will fall under national regulations, but there may be additional constraints you haven’t considered. Make sure you’ve looked over all of the state and federal regulations that could come into play, to make sure that everything you are doing is within the confines of the law. You cannot plead ignorance if you misfile paperwork, and will be held accountable for everything you need to know.
Do you have the right systems and staff in place to insure success? You’re probably going to need reinforcements to successfully navigate an IPO, especially if this is your first time going through the process. Most companies in this position hire on a Chief Financial Officer who has managed an IPO in the past. There are just too many regulations to juggle, and you’ll need to step up the financial reporting methods across the entire company. Without the right minds behind it, something is likely to go wrong.
Finally, is your prospectus in order? The one thing to remember about an IPO is that it is just that, an ‘offering’. There is no guarantee that just because you put stock out in the market anyone is going to buy it. Investors can go in thousands of different directions, and you have to show them why their money will be best spent with you. It’s basic stock investing for beginners that a company’s prospectus should be reviewed in full before choosing to invest in that company. Therefore it is crucial that your IPO prospectus puts your company in the best possible light, while maintaining total authenticity. You’ve got to have long term projections, as well as a detailed strategy for how your product development and marketing efforts will make that happen. You can launch an IPO without a great prospectus, but the results will fall far short of your expectations.