1 April 2021
Five Reasons to Take Your Small-to-Mid Sized Company Public
At this point, many owners of small and mid sized companies wonder if going public is something they should consider. As a successful entrepreneur and a seasoned C-Suite executive, I am often asked, “why should I take my small-to mid-sized company public?” An initial public offering (IPO) is a bold step that can help firms elevate company awareness, raise capital and increase liquidity. As you consider the next steps in your company’s lifecycle, let’s look at the top reasons to go public.
- Raising Capital— Creating more capital-raising opportunities and financing options is one of the primary reasons companies decide to go public. An IPO can typically provide firms with a higher valuation and a lower cost of capital, offering companies the potential to grow their business more significantly than with other sources of capital, such as bank loans or venture capitalists.
- Establishing a Value — The comprehensive IPO evaluation process uses analysis and modeling to determine a company’s fair and reasonable valuation. But ultimately, investors will determine what a company is worth in the public market.
- Increasing Liquidity — Offering shares through an IPO creates a liquidity event for founders and original investors, generating an opportunity to more easily cash out some or all of their shares as well as an exit strategy for angel investors, venture capitalists and institutional investors. An IPO also increases liquidity for future investors.
- Establishing Public Awareness — Presence on an exchange typically translates into increased visibility, which may, in turn, generate greater interest and awareness of the company to a new group of potential customers. The name recognition of a listing can also help secure better terms with potential lenders, provide an opportunity to display company culture and highlight a firm’s unique qualities, and potentially help a company’s sales and profits.
- Creating a Second Currency —The common stock of your firm can be used as equity instead of cash for acquisitions, attracting and compensating management, employees, directors and strategic partners. These funds can broaden a firm’s potential for development and expansion, such as research and development, new equipment or to pay off costly debt.