Taking a company public can significantly increase a business’ opportunities and provide for quick expansion. At the same time, a poorly timed initial public offering (IPO) can result in failure. Unfortunately, an IPO largely places the fate of the company out of the hands of the owner, therefore making it imperative that the company conduct due diligence about the decision to go public. Research about timing should focus on competitors, their likely timetable for staging an IPO, and the company’s own financial stability.
In general, companies should have a solid base in vulnerability assessment, growth potential, and predictability. These three factors have proven to be the best indicators of long-term success following an IPO. Other important and sometimes overlooked elements of an IPO include customers, suppliers, and technology. Will an IPO benefit customers and suppliers most now or in the future? Will the company’s current technology withstand the process or does it need an upgrade?
Entrepreneurs should have complete faith in going public before they begin the IPO process. The stakes involved in an IPO are high, and companies need to prepare for a full range of scenarios. Early experimentation with small steps toward going public can provide the feedback needed to decide whether the time is right.