Critical Questions Before Going Public
- August 24th, 2015
- Russell Weigel
- Comments Off on Critical Questions Before Going Public
There are a number of issues and facets that need to be considered while planning to take a company to an IPO (going public).
You need to keep an eye on a number of elements such as financial reporting, economic considerations, managing a timeline for the process and thinking over all possibly easier and quicker alternative routes you can take to enter the public arena legally and ethically.
Starting and completing an initial public offering (IPO) is tough, expensive and complex. The process can be highly perplex and requires diligent efforts because it involves the disciplines of accounting, financial reporting and security law, and the average entrepreneur usually does not have expertise in these areas.
Here we discuss a few important queries that need to be satisfied and factors to be assessed before going public.
What is my company’s value proposition and investor’s appeal?
Your company’s investor’s appeal is directly proportional to the demand of your products and services by individual as well as business consumers. This shows the company’s potential for outstanding growth which means a handsome return to the investors and hence determines company’s value proposition. Staying ahead with smart long-term strategies and offering products and services that your competitors don’t, are the tools to guarantee your growth prospect to the investors and ensure that your company promises to produce big numbers.
Do I have the right team?
The dire need of the hour is to strengthen your management team. The demands of your company’s projections with Initial Public Offering (IPO) are going to change dramatically. You need to keep the most prolific, agile and utilitarian forerunners and key persons to run the show. Experts highly recommend to start the process of reviving your organizational chart, by identifying the requirements and pointing the loopholes and recruiting new board members at least a year before filing for an IPO.
Does my company have a reliable revenue stream?
Investors are only interested in investing in a company that is expected to make money. The queries, of how quickly you can grow and how much bigger numbers you can produce and how much reliable is the company’s ability to make money, are determined by the two main economic indicators- rate of growth and net profit margins. As a pre-IPO step you need to do every effort to show a good return on your sales by using different techniques such as cutting costs, improving your turnover, boosting revenue by either launching new products or services or by improving the existing ones.
Is my investment banker ideal?
You need to do a lot of homework before hiring an investment banker and completely relying on him to take your company public. In Initial Public Offering (IPO) process there are a lot of elements for which you are fully dependent upon your investment banker including drafting of prospectus, assisting with the filing, soliciting interest from the investors, determining the price of the shares to be sold and selling your offerings to the public. Therefore, to attract a good investment banker you must stimulate interest by displaying your company’s potential and reducing perceived risks possibilities to lowest levels by underlining how a good investment can boost your company’s revenue and strengthen its position. Also check investment bankers’ deal structures they offer and their working history with the firms they have previously taken public before getting it all set to work.