When Is The Best Time TO Take Your Company Public?
When is the best time to take your company public? The answer to that question largely depends on the type of business you have, but it can also be a difficult decision. Let's cut through the confusion and examine what makes up a good time frame for making an IPO in this article.
It is not easy to please investors and end users alike but we are here with some sound advice. Unlike taking a private company public, when it comes to going public through an initial public offering (IPO), take your time and follow these guidelines. You will likely find there is no perfect timing at all, unless you are trying your luck with last minute trading decision-making. Your decision to go public will affect many stakeholders in your company besides you and your shareholders. You might just want to be sure that it is the best time and that it will be worthwhile for all parties involved.
The main reason why the timing of going public matters is because it impacts the common stock's accounting statements. Everything, including financial statements (revenue, profits, assets and liabilities) are going to change with the new financial report that comes out every year or so. The earlier you take your company public the sooner all those changes are happening. But, this is not the only reason why timing matters.
There are many key factors that will determine when and if you should take your company public. Some of which include access to capital markets, liquidity, profitability and total number of employees in the company. Let's look at these factors individually to find out why each one matters when it comes to the best time frame for taking your company public.
Going Public: Access To Capital Markets
If you are not going to be a public entity, you will most likely have to rely on private investors for funding for your start up or early stage business operations. However, when it comes to public companies, you will be able to raise capital from sources like the stock market, bond markets and other methods.
If you are going to conduct your business with a lot of money in the first few years, it is much more likely that someone will invest in your private company than if you are going to stay private. However, when going public it is not only easier but also effective for raising funds because there are many doors open for it. You will have more investors interested in buying your company's shares while on the stock market as opposed to in the early stages of growth or even later on in life when everything should be smooth sailing.
By going public, you not only get investors but you also get access to a lot of information about your company from the board of directors to the shareholders and even the public. If you have been concerned about what your operations look like from the outside, you will find out right away when you go on the market.
Going Public: Liquidity
There is a level of liquidity that is associated with any business. What this means is that it is easier to quickly buy and sell your shares in a company before they even go public as opposed to after they make an IPO. So, if you are mainly concerned with liquidity, it might be a good idea for your company to go public sooner rather than later.
However, it is not entirely true that there is no liquidity for private companies. There are venture capital firms, angel investors and even family members who will buy some of your shares for a relatively low price early on. But, this can be hard to find as you start out. Going public will eliminate all private investors from buying into your company so you do not have to worry about those issues later on.
Going Public: Profitability
There are two sides to profitability when it comes to IPOs and the timing of going public. First, if you are profitable, it is a good idea to take your company public because you will be able to achieve higher returns on invested capital.
In addition, profitability also plays a role in the public perception of your company among shareholders, the investing community and other stakeholders. It is not a requirement of starting out as a public company but you will want to show strong growth at some point in time.
It does not matter if you are profitable or not when it comes to taking your company public but it does matter for investors who want to buy into your business. If you try and raise funds from private investors before going public, most of them are going to ask for proof that the business model works (profitability). They need to see that your company is going to cut it in the real world and not be a flop.
Going Public: Number Of Employees
One of the biggest differences between an IPO and a company that remains private is how many people are employed by the business. Private companies tend to have a small number of employees who are considered part of the core team. These employees work for equity (ownership) instead of getting paid based on a salary or hourly. This type of compensation works well for building value in the company, especially when combined with the right amount of risk-taking, but it can be challenging when it comes to adding more talent to the team.
On the other hand, you will need employees for your public company operations. This is a necessity because you will have to provide more goods and services to your shareholders. Taking your company public means that there are going to be a lot of people interested in buying your stocks and finding out all there is about what you do. You will need people answering those questions or else there is no way the business would run smoothly.
Conclusion: Best Time To Go Public?
The best time to go public can be difficult to determine. There are many factors that you should consider when trying to decide on when it makes sense for your business. It is true that there are some advantages to taking your company public, but it also has its disadvantages. It is not a matter of right or wrong; it all comes down to when is the best time for you.
There are many factors that could determine if it is too soon or too late to take your business public. While there are many advantages to taking your company public, you should look into them before going ahead with your plans. Not only will profitability be a factor but also liquidity, number of employees and other issues related to having a larger business.
The first thing you should think about when deciding on the best timing for launching an IPO is whether or not you actually want to go public in the first place. If you decide to go public but you lose faith in your business and venture capitalists, it can be a huge setback for your company. One thing that is certain is that most companies who go public will go through an initial period of financial uncertainty. This will be hard to handle if you are not prepared for it at all levels of your business. In other words, an investor may say "why should I invest in this company if there is no assurance that it will be successful?". So, this could cause this investor to pull out from the IPO.
In addition, when taking your business public there are many issues that arise as well. For example, a company's stock price could drop when they are going public for the first time.
Conclusion: Why You Should Take Your Company Public
So, why should you take your company public? It is not a requirement to have to go public but it may be an option that you should seriously consider. It can be a good way for investors to get involved and it can also help you grow your business if done right. For many private companies, the only way they can grow is by having the capital that an IPO brings.
The process of going public is very complex but the benefits are significant once you do finally get there and do have the money invested in your company. You can raise a lot of money from private investors but going public will make this process much easier.