Page 145 - Initial Public Offering - An Introduction to IPO on Wall Street

but to go public and risk a less desirable outcome. However, you would not be pressured to go
public at an uncertain time if you organize your market plan in such a way that going public is
not urgent.

7.2.2 Prepare Early
Preparation is critical as well. When a business is ready for an IPO, when the IPO window
starts to open, it has the opportunity to leap into the market. To be ready for an IPO, a business
should have appropriate financial reporting processes, well-trained staff, and corporate
governance policies in place. If these plans are in place, when the window opens, your business
is likely to be ready.

7.2.3 Communicate Expectations
Clear communication between the executives of the company and your board of directors
should also be part of your planning. Executives and boards are advised to agree on key targets
that must be met before a business goes public. The following milestones are identified for this
purpose:

 Several growth quarters above a certain level
 Trust in growth prospects for a certain number of quarters
 High levels of cash-flow above a specific level
 Several compliance requirements fulfilled

Your organization may choose different targets, but setting consistent milestones will allow
your board and the management to be on the same page about what your business means by
"prepared".

7.2.4 Do Not Miss an Opportunity
The fourth and final advice on timing your IPO is not letting any good opportunity to launch
an IPO pass. There is no need for you to wait any further if the market is stable and your
business is fully prepared for an IPO.

If (1) your business has the figures to be public, (2) your business is ready and prepped to be
public, and (3) the IPO market is stable and the window is clearly open but you still want to
wait to go public, then you are accepting the potential timing risk—which is a big risk to take.

Market timing should be a significant consideration for businesses preparing to go public.
While it is difficult to anticipate when a market window opens or closes, an understanding of
the variables that signal the opening of the IPO market window—such as the VIX index,
performance of output, and competitive environment—can help businesses avoid the pitfalls
of poor IPO timing.

Your organization should prepare early, and when the window seems to be open, proceed
without delay. By acting on this advice, your business will increase its chances of finding an
‘open’ market window and as a consequence, raise more capital at a higher valuation.

7.3 Signs You’re Ready To Go Public
It is difficult to identify the right time to go public, especially in current times where we have
seen market volatility rises suddenly and sometimes without warning. Although the right time
for each business is different, there are a few common characteristics that IPO-ready businesses
share. The following are the 6 signs your company is ready to go public.

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