Taking your business public, pros and cons

Taking your business public is a big decision. It is an expensive endeavor to take your business public, even for the big companies. Taking your business public is also a time consuming process both before and after the company has gone public. You will lose some control of the company since you now have to keep your investors involved with some of the decisions. There are pros and cons involved with taking your business public, here are a few things to consider:

Once you go from being a private company to a public company, you will sell securities to the public. This means that your close friends and family members will not have control over the operational status. Taking your business public will help to raise your company's capital, which is always enticing.

When you increase your company's capital, you are creating a market value to your companies stock. If your company directors use this stock wisely, they will be able to use it as currency for mergers and new acquisitions. This will also increase your company's ability to have capital inflow and it will improve your debt-to-equity ratio.

Another consideration with taking your business public is your current operating status. If you have positive growth and you have a healthy bottom line each quarter, your business should be able to go public without any problems. You will easily attract investors if you already have positive numbers and a steady revenue stream. It will be easier to obtain loans if you are a public company because of your company image and your investors.

Once a company goes public, they start to make a name for themselves in the investment world. You can start to attract customers with brand recognition. Private companies do not always get this recognition, making it hard for them to have a good public relations image.

One of the cons with taking your business public is the cost. You will need to pay yearly fees for accounting and legal services. In addition to this you will also need to need to report to the SEC or the Securities and Exchange Commission each quarter and each year. This can be a time-consuming process for companies that are traded on the NASDAQ.

For smaller companies, the easiest way to go public is to be listed on the pink sheets. The pink sheets do not have any revenue or earnings requirements and there is not a minimum asset requirement, making it much easier for the smaller companies to go public. The price to go public normally costs around $100,000.

Another con of taking your company public is the new responsibilities you now have to your shareholders. You need to keep them in the loop about the companies business, management decisions, and financial information. Another con of taking your company public is that your shareholders may need to approve your actions, causing you to lose some flexibility in the way you have run your company. Here is a simple list of the pros and cons of taking your business public:

Pros

• Increased capital


• More investors


• Ability to obtain financing is easier


• Brand recognition and increased awareness about your company


• Ability to hire highly qualified personnel because you can offer stock options and other incentives

Cons

• Cost, usually around $100,000


• It takes a lot of time to get all the necessary documentation completed in order to take your company public


• Legal fees and quarterly reporting


• Loss of flexibility because you need to rely on your shareholders approval


• You must keep your shareholders constantly updated about the business operations, financial obligations, management, and other legal obligations