Wanting to be a public company and actually being one are two somewhat competing ideals. The most successful initial public offerings maintain some semblance of a public company long before they actually make the fateful step into the public arena. There are surprisingly more ways to wreck a company than to help it. Hopefully what follows provides some 50,000 foot helpful insight in how to not screw things up too badly. Here are a few areas companies should begin to act public before taking that fateful step into the public markets.
A complete and compelling tale of how the business has come to the point where a public offering will create more value for shareholders. The story must include the track record of the founders as well as the predicted growth into the future. The best story will indicate how the public offering and the proceeds will be used to assist the company toward further growth into the future.
Solid Financial Results
Steady growth and preferably profits stemming from strong operating performance make for the best public companies. While public companies do not need to be profitable, a future promise of profitability should be on the horizon and in the company’s plan for the future. The more solid the financials, the easier it is to regularly hit up current and future investors for more growth cash.
Robust Accounting and Information Systems
Readily available and accurate financial information is key to a successful and well-oiled public company. Having timely financial information–both monthly and quarterly– available through reliable information systems provides both shareholders and management with the proper, reliable information from which good business and investment decisions can be made. Having this data in place prior to being public is an absolute necessity, not to mention the proper financial audits.
The right accounting and financial internal controls ensures investors and management have the most accurate financial data. Additionally, having controls in place not only imbues confidence, it also can help prepare the company for the time when immediate and certified data may be needed for direct and timely reporting.
A management team with a proven track record who’ve helped and managed the business for at least a year prior to the “go public” event is essential for gaining the confidence of current and future shareholders of the public company. The management should preferably have the expertise at performing a public offering as well as the ability to manage a public company once the business is trading on a public exchange.
A clear and transparent corporate structure along with a wholly independent and experienced board of directors is essential to maintaining a strong presence just prior to and immediately following the company’s public offering. Clear rules and guidelines for all corporate offices and board members helps to set an organized precedent for how the business operates.
Effective communications management with investors and shareholders is absolutely essential to public strategy and corporate goal awareness. Sending appropriate and timely messages to analysts and investors will be a key component for maintaining their commitment for the long haul.
Regardless of whether your public offering involves the long and traditional IPO method or some type of alternative offering with a public shell, the aforementioned tips should provide a meaningful outline for proper prior private-to-public company preparation 🙂