Business Development Entrepreneurship

5 Essential Steps to Prepare for a Successful IPO

prepare for a successful IPO
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The lead up to your company IPO is an exciting time – but it’s also a busy one. There’s a lot to be considered when taking your company public, and your preparations should begin well in advance. Planning is key, and adjustments will need to be made across your entire organization to ensure that you’re ready for your public offering. While every company has different needs and requirements, there are some top tips that apply to everybody. These five essential steps should be deployed by any business about to hit the public market.

Upgrade Your Technology

As your business grows, you can expect your accounting to become both more complex and subject to greater scrutiny. It’s important that you set in place systems that are able to keep up with your growth, even before you feel like you really need them. While Excel spreadsheets may work well for a small business, you’ll find it difficult to scale them to suit a medium to large corporation, and it will be much harder to shift everything over once your company has already grown. By upgrading your technology in advance, you’ll save yourself a lot of hassle down the line, and you’ll also be better prepared to present a professional and efficient face to any potential investors.

Now that others are also invested in the future of your company, it’s more important than ever to keep on top of your metrics. Make sure your information is consistently up to date and accurate, and identify your key metrics for analysis and forecasting. As well as benefitting you and your investors, you will be under greater legal obligation to ensure that the information you present is properly reported.

For convenience, peace of mind and security for your investors, you may want to look into advanced financial reporting technology and find a system that best suits your business. Remember to take into account customer management, budgeting and forecasting, and make sure all relevant team members are properly prepped and trained on your new systems. While this may seem like a lot of hassle in the short-term, it could be crucial to your business’ success in the future.

Audit Your Own Taxes

Tax considerations have always been a major concern for private companies looking to go public, but in today’s climate with much mistrust surrounding company taxes, it’s more important than ever to make sure you address it properly. If you or your CFO don’t specialize in corporate tax, consider bringing on a consultant with IPO experience to ensure that all the necessary steps are taken.

It’s important to understand how your IPO will affect your business’ taxes – particularly if you’ve been operating on income tax basis accounting up until this point. The earlier you can address tax considerations the better; many experts recommend strategizing at least 12 months in advance of your IPO. Make sure exactly what is required of you in order to ensure that your company is compliant with current regulation, and set into place the relevant controls to protect your company going forward.

It’s also worth preparing for future tax regulations, such as filing financial statements for the quarterly close. This may mean expanding your team or investing in high performance software, or you may find that outsourcing works better for your company. Either way, it’s important to consider the new demands that your IPO will place on your tax department and set up a workable system in plenty of time. Remember that you will be required to disclose your effective tax rate reconciliations once your company is made public, so you may find it beneficial to introduce new systems in advance so that they’re more stable by the time they’re made public.

Have Your Strongest Team in Place

If you’ve reached the stage of going public, the chances are that you run a successful business and have already handed off a number of day-to-day responsibilities to other members of your team. Going forward, further success means that delegation will only increase, so it’s vital that you have a team in place that are properly prepared and who you trust to manage large aspects of your business in your absence. This applies to not only senior members of staff but also to employees at all levels, as everyone will have a role to play in ensuring a successful IPO.

Becoming a public business means that your accounts will be much more complex, so you need a team with broad knowledge and experience and who you feel confident trusting with financial reporting, monitoring and analysis. I’ve already discussed the importance of bringing on board qualified and experienced tax consultants, but you should also look at other key roles in your team such as underwriters and bankers. With all roles, it’s beneficial to have employees who have previous experience in taking a company public – both because of the expertise they can bring to the business and because they’ll have some experience of what to expect during this busy but exciting period for the company.

Consider your existing team’s skills and try to find new team members who can balance and complement these. Identify any gaps in specialism or experience which additional employees may be able to fill, and consider which teams may need extra manpower in light of the growth of your company.

Brief Your Staff on Insider Trading

For the team already employed at your company, the shift from private to public can seem like a substantial one. The business – and by extension, its employees – will be subject to a number of new regulations and so the nature of the company can often suddenly seem more formal. It’s important that as the leader you make your team aware of what to expect and coach them on new laws and policies that they need to be aware of.

This is especially true if you’re offering staff stock options or shares in the company as part of your incentive package. Consider that many of them may not have dealt with shares before or may not have experienced an IPO as part of a company, so ensure that all essential information is properly and clearly communicated. Put into place a comprehensive insider trading policy, and make sure that this is shared with staff and investors, and that the proper training is offered and undertaken by anyone who might need it.

In preparation for your IPO, identify information that needs to be kept confidential and share policies and potential risks with all your employees. Again, this may represent a surprising culture shift for those who have been with your company from its beginnings, so it’s important that the message is clear and understood by all. You should also highlight other need-to-know information that may affect your employees and shareholders, such as blackout periods.

Prepare Your IPO Prospectus

Once you’re confident that your company is well prepared to go public, it’s time to convince everyone else. Your prospectus should be a comprehensive document that displays your offerings to potential investors. It’s also important to remember that this is a legal document, and you will be responsible for any inaccurate or misleading information contained within the prospectus, so it’s essential that this is prepared by a qualified and experienced team and that all figures and forecasts have been properly reviewed.

Your team should comprise underwriters to ensure proper legal coverage, as well as members of your senior management team who can help create the direction of the document. While your information needs to be accurate, it also needs to entice directors and paint a clear picture of your company and your (informed) predictions for its future.

If you’re based in the United States, your prospectus will need to be filed with the Securities and Exchange Commission (SEC) and will undergo rigorous review. Expect this to be a lengthy process and prepare in advance for any flags that can be anticipated.

Your initial IPO prospectus will also be taken by your client-facing team on your IPO roadshow ahead of the launch – although a more comprehensive final version should be created once your roadshow is complete. Here it will serve as a form of company look book for your potential investors, so it’s important to consider who you’re pitching to and what their primary concerns are likely to be.

Have you ever taken a company public? Do you think there are any vital tips that I missed? Let me know what your experiences were and share your most important advice in the comment section below.

Related: 5 Tips to Successfully Market Your Crowdfunding Campaign

Aniket Warty
Adventure Capitalist. The creation of wealth is merely an extension of my innate freedom to produce.
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