Page 146 - Initial Public Offering - An Introduction to IPO on Wall Street
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7.3.1 Sign 1: Ability to Accurately Forecast Financial Performance
               Accurate financial sales and expense estimates are a key part of a business plan and play a key
               role  in  the  performance  of  a  business,  especially  as  a  public  company  with  institutional
               investors. Missed forecasts can have a huge effect on the value and capacity of a business to
               again generate debt or raise equity capital.

               The  creation  of  reliable  forecasts  and  budgeting  processes  while  your  business  operates
               privately  is  therefore  an  important  step  in  demonstrating  the  quality  and  integrity  of  your
               financial reporting to gain investor trust.

               During the IPO process, you will be expected to share past financial reports and projections. A
               specific number of years for which you should have audited documentation may be suggested
               by the underwriters of your business.

                7.3.2 Sign 2: Having the Right Executive Team in Place
               The team that has guided your business through its rapid development until this point may need
               to evolve to lead the business once it is public. Do you have experience with public corporations
               in your C-Suite? Are they the team that will push productivity to the next level?

               When  it  comes  to  expanding  and  adding  new  staff  to  the  company,  organizing  the
               organizational structure before going public will help add continuity and effectiveness. It is
               necessary to think about the structures of your team, duties, and responsibilities, and reporting
               lines before conducting your IPO.

               For  instance,  you’ll  probably  want  to  concentrate  on  growing  the  accounting  and  finance
               personnel and perhaps establish a stronger focus on external communications. Your investor
               relations (IR) team is one specific area that you would not have had to think about as a private
               corporation.

               However, as a public company, you would want to have in place an accomplished investor
               relations officer or maybe an IR consultant, along with a strong IR infrastructure that allows
               your business to connect with the market effectively.
               7.3.3 Sign 3: Audit-Ready Business That Regularly Closes Its Books on Time
               You want to be able to close your quarterly financial reports reliably on time before going
               public.  Even  private  equity  and  venture  capital-funded  businesses  that  communicate
               periodically to their board and sponsors will find the additional attention to detail needed to
               prepare full financial reports daunting at the start.

               Going through this activity in advance helps you prepare for public reporting responsibilities
               and may reveal requirements for additional staff for disclosure, internal controls, or other areas
               relevant to financial planning and review.

               You'll  be  subject  to  routine  accounting  reviews  as  a  regulated  public  corporation.  To  be
               prepared, it is a good idea to perform several internal audits before the IPO. By reviewing the
               financial  reports  and  internal  controls,  the  auditor  can  find  any  potential  problems  and
               recommend suitable solutions.

               7.3.4 Sign 4: Having Realistic Valuation Expectations
               Your value will be affected by the price/earnings of some of your publicly traded peers as your
               business  enters  the  public  stock  market.  To  help  you  set  reasonable  goals,  your  financial
               backers and underwriters will assess the valuation landscape.





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