Growing a business demands considerable effort, time and money. As the business grows, so will its demand for inputs. Whether you want to expand your range of products or services or desire to move in on an emerging market, there comes a time when business demands more resource than you can give. A logical move to raise the necessary funds is listing your business on a stock exchange. This is often an effective way of raising capital for growth but getting it done is easier said.
There are many things to consider before taking your business public key among them is the pros and cons. These include the following.
- It improves the public profile of your business which can help attract high caliber board members
- A market valuation of your business encourages employee commitment, improves investor, supplier and consumer confidence and creates the opportunity to raise capital for operations, growth and paying back your investment
- Listing your business provides you alternative acquisition currency in the form of shares
- If there is low demand for shares of your business, you run the risk of getting a low share price which can undermine your fundraising and acquisition activities. Stock message boards like Investors Hangout could give you an insight into how the stock market is fairing to help you determine the right time to announce your IPO.
- Taking your company public literally makes it public property in effect opening it up to more scrutiny. You will now be expected to comply with the market rules and expect hostile takeovers
- The entire process of listing is labor-intensive, time-consuming and quite costly
Should you stay private or go public
After analyzing the pros and cons, you should then ask yourself a few questions answers to which should help you vet your preparedness.
Do you have a plan?
Listing your business on the stock market is a means to an end. Before going forward with it, you must have a solid strategy to present to investors who can be ruthless. Before sinking their money into your business, they need a detailed plan of what you intend to do with the capital. You must clearly and honestly outline your growth drivers and manage expectations upfront.
Is your team on board?
Successful businesses service a need in society. Making money is always a secondary goal. This is why loyalists who took part in building the business from the ground consider public listings “selling out.” These sentiments are justifiable since going public fundamentally changes the business culture. Internal systems from legal to HR will be affected by the listing, so it is imperative to find out if your team is onboard before listing your company on the stock market.
Can you afford it?
Although the financial benefits of listing your business will most likely outweigh the costs of operating a public company, the cost is still significant. The costs you will incur include: Documentation fees, listing fees, annual fees, recurring fees and the cost of upgrading your systems to meet requirements.