Going public – it’s the dream of many entrepreneurs, and the thought of seeing their business shares traded in a public market can be a thrilling experience. But the process of achieving that dream requires that you have an understanding of the work and commitment that’s required for a business to become publicly traded. Taking your business public isn’t an easy process, and it’s important to understand what’s involved before you make this big decision. In this article, we’ll go over the 10 most important things you need to know before taking your business public.
What Does It Mean To Take A Business Public?
Before we jump right into the things you need to know before taking your business public, it’s important to understand what it actually means to do so. Essentially, when a business goes public, it’s offering its securities on the open market in order to raise capital. This typically involves a stock exchange, like the New York Stock Exchange or NASDAQ, and investors can buy shares of the company, thus becoming a partial owner.
Why Do Businesses Take The Plunge?
Now that we understand what it means to take a business public, it’s time to ask: why would a business want to do it? There are a few reasons why businesses typically go public. First, it offers a way for businesses to raise capital that can be used to pay off debts, invest in new expansions, and grow the business. Second, it offers liquidity for existing investors who can now cash out their investments. Finally, it allows businesses to receive public exposure, which can be great for their reputation.
What Are The Risks Of Going Public?
As with everything, there are risks associated with going public. The most significant risk is that a company may not be able to raise the capital it needs when it’s offering its securities. This can lead to a liquidity crunch, where there are more sellers than buyers, thus impacting the value of the company’s stock. Additionally, companies that go public are subject to stricter regulations, which can be costly and time-consuming to comply with. Finally, there is the potential risk of shareholder lawsuits and other legal issues that can arise.
What Are The Benefits Of Going Public?
Even though there are risks involved, there are several benefits of going public, as well. For starters, taking your business public can increase its overall visibility and bring in more investors. This can lead to greater demand for the company’s stock, thus increasing its overall value. Additionally, increased visibility can attract more customers, which can help with the company’s bottom line. Finally, going public can create press opportunities, allowing the company to generate more interest from prospective customers and the media.
Things To Consider Before Going Public
- Have You Done A Thorough Cost-Benefit Analysis?
Before you even start thinking about going public, it’s important to consider the potential costs associated with taking your business public. In addition to the legal and filing fees, you also need to consider the potential detrimental effect that being publicly traded could have on the company’s operations. As such, it’s important to do a thorough cost-benefit analysis beforehand.
- Are Your Financials In Order?
Having your financials in order is critical when it comes to going public. You will need to disclose your financials to prospective investors, and any inaccuracies or inconsistencies could be problematic. It’s also important to make sure that your financials are up to date and compliant with the accounting regulations of the country you’re in.
- Do You Understand The Regulatory Requirements?
Another important thing to consider is the regulatory requirements associated with taking a business public. Depending on the country you’re in, there may be specific rules and regulations that must be complied with when it comes to issuing securities, filing paperwork, and other such activities. Be sure to familiarize yourself with the relevant regulations before moving forward.
4.Have You Picked The Right Exchange?
Your decision on which exchange to list your securities on can be a make-or-break decision for your business. Every exchange has its own benefits and drawbacks, so it’s important to understand the differences between them before making your choice. Some exchanges may offer more liquidity, while others may be more cost-effective. Therefore, take the time to do your research and pick the one that best suits your needs.
- Have You Chosen The Right Advisors?
Making the decision to take your business public is a major one, and it’s important to have knowledgeable advisors by your side to ensure everything goes smoothly. Depending on what country you’re in, you may need to work with different advisors such as lawyers, investment bankers, accountants, and corporate governance consultants. Be sure to do your due diligence and select the right ones to help you with the process.
- Are You Ready To Be Transparent?
One of the requirements of going public is providing full transparency to the public when it comes to the company’s financials, operations, management decisions, etc. Therefore, it’s important to be sure that you are ready to take on this responsibility before moving forward.
- Have You Developed A Comprehensive Communication Strategy?
Once you go public, the media will be more interested in your company, thus making it all the more important that you have a communication strategy in place. This strategy should include goals, objectives, and tactics for addressing any media inquiries, investor communications, and other such matters.
- How Will You Handle The Impact Of Dilution?
When it comes to going public, there is always the risk of dilution, which occurs when the company issues more shares and dilutes the value of existing shareholders’ stakes. To combat this, it’s important to have a plan in place for how you will handle the dilution impact and how you will ensure that existing shareholders still get the value they deserve.
- Are You Prepared For The Time Commitment?
While the decision to go public can be an exciting one, it’s important to note that it’s a process that involves a lot of time and dedication. There are legal documents to review, filing fees to calculate, financial statements to submit, and many other time-consuming activities. It’s best to be fully prepared for the time commitment when taking your business public.
- Are You Ready To Navigate The Aftermath?
The work doesn’t end after the process of going public is complete – you also need to know how you’re going to handle the aftermath. This includes understanding the new regulations you must follow, how you’ll answer investor queries, and how you’ll manage a possible decrease in stock value. It’s important to be prepared for these things before you move forward with going public.
When it comes to taking your business public, there are many things to consider. You need to do a cost-benefit analysis, ensure that your financials are in order, understand the relevant regulations, choose the right exchange, pick competent advisors, be prepared to be transparent, have a comprehensive communication strategy, be ready to handle dilution, know the time commitment involved, and prepare for the aftermath. All of these things are essential to consider before taking the plunge and going public.