Determine if your business is ready to go public
Going public can bring many benefits to your company, but how do you know if your business is ready? This guide will help you decide if you are ready to join the 127 American businesses that held IPOs this year.
Will the benefits of going public outweigh the costs?
Going public [3] can entail substantial costs, and selling equity is a permanent forfeiture of some of the returns associated with corporate growth. However, proper management of the IPO process can substantially reduce these costs, as can the presence of the company on the public market.
Does your company have a good track record?
Companies with inconsistent or marginal growth are less likely to attract prospective investors that those that outpace the industry average in growth. Companies who are seen by prospective investors as having interesting or unique products or services are also more highly valued because they have significant growth potential.
Are your products or services of interest to the investing public?
Historical sales data can answer this question for established companies, but early-stage companies can instead rely on demonstrated product superiority and market research projections.
Is management ready?
The quality of a company's management team is a key factor in any public offering. Organizations that function well as a team and have experienced leadership [4] have more credibility with the investing public. The management must be able and willing to conduct analysts' meetings, meet deadlines and provide financial reports to have a successful IPO.
Is the market ready?
Demand for IPOs varies dramatically according to factors like the public perception of IPOs, market prospects, overall market strength, industry economic conditions and more. Before you decide to go public, consider each of these factors carefully to determine if the timing is right.
Are your company's prospects for maintaing strong earnings growth good?
Investors want to see that there is market support for your service or product and that it can sustain an increasing annual growth rate in the future.
Are you considering going public? How did you know your company was ready? Share your best advice with our readers in the comments below!