How to Know When Your Business Should IPO


An initial public offering (IPO) allows a company to issue stock to the public and have it traded on a stock exchange. But how do you know when is a good time to IPO? Here's how to know when your business should IPO:

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A company should consider going public when:

  • the company's financing plan shows a need for equity capital
  • private equity capital is unavailable and existing investors want an exit
  • the market places a high value on the company's equity
  • current owners are willing to accept both the drawbacks and advantages of being a public company
  • the company is qualified (in terms of size, management, use of proceeds and adequate market valuation)

Recommended reading: A Simple Guide to Raising Capital

Advantages of going public

Some of the advantages of going public include:

  • improved financial condition
  • stock can be used as a form of currency to be used for future acquisitions, or creating business alliances
  • acquisition funding opportunities access to future equity or debt capital

Disadvantages of going public

The disadvantages of going public must also be considered:

  • pressure to keep the stock price up
  • stock prices can also fall
  • potential limitations on activities
  • ongoing reporting responsibilities
  • additional risk exposure
  • costs of issuance
  • ongoing expenses
  • potential loss of control for the current owners

Knowing when to IPO is critical for success in going public. Hopefully these pointers will help you decide when and if you should IPO. 

Over to you now. Have you taken your business public? Any tips to share? Tell us in the comments below. 

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