It is a common misconception in the tiny enterprise neighborhood that one’s company has to be a specific size and have a specific amount of revenues prior to a single can go public.
I have been taking Tiny Businesses and Start-Up companies public as a consultant for over 10 years now. And for 10 years I have been repeatedly asked in numerous ways “Can I genuinely go public? We only have a million dollars in income. Are not we also tiny?”
The answer has been and nonetheless is “Yes, you can go public. And no, you are not also tiny.”
A business doing a million dollars a year in revenues would be comparatively easy to take public. Even a organization carrying out a couple hundred thousand in revenues would be relatively easy. And although four or five years ago we could take a firm public with just a organization program and no organization operations, that situation has become, admittedly, quite tough to do, though still not impossible.
It has become harder and tougher to take a firm public with no income and no enterprise operations since the SEC and NASD are rightfully attempting to remove micro cap fraud, but yes it can nonetheless be done. If you have no revenues, however, you will have to have patience, some income in the bank to guarantee you can survive for a couple of years, and you will have to be creating genuine progress on your organization plan to show the powers that be that you are a “actual” company and not just a “sham” set up for micro-cap fraud.
The positive aspects to going public in the early stages, rather than waiting, can be substantial.
1) Leverage a bigger retention of ownership
two) Develop your organization faster and make it far more strong by attracting top personnel with out necessarily massive money outlays
three) Grow your firm more quickly and make it much more strong by attracting top notch team members to your board of directors.
4) Raise funds more quickly and less expensive by escalating the “liquidity” aspect for your investors.
five) Grow your company faster and make it much more effective by increasing your ability to attract “mergers”, “acquisitions” and “strategic partners.
6) Develop your organization faster and make it much more powerful by rising its capacity to compete for massive corporate contracts.
7) Grow your organization more quickly and make it much more powerful by rising your status in the eyes of all these you do business with.
eight) Leverage your personal return on investment as an owner by decreasing the quantity of time it will take you to make money on your investment, as properly as growing the valuation of your business, as effectively as, altering the liquidity of your asset to a significantly a lot more liquid form than that of a private business.
If you are a small enterprise and you never strategy to be mom-and-pop forever, then “Going Public” is anything you ought to appear into in the quite early stages. “Public” income is normally a lot less costly than “private” income.
I have seen private firms give up 50% of their organization for a $ one hundred,000 investment. By the time they have raised twenty million dollars privately, they usually only own 5% or 6% of their firm. If that individual had gone public as a commence up they could have normally raised the very same twenty million dollars and nonetheless have retained 60-65% of their firm.
Of course there are downsides to going public early as well, but most of those have to do with becoming preyed upon by non-pros, fraudsters, and other individuals who really don’t know what they are doing. If you check out your advisors and get guidance and structuring and referrals from pros who know what they are undertaking, you can eradicate most of the downside of going public early.
And if you are potentially the next Microsoft (or even just a shadow of that giant), the selection to go public early on could make you millions if not billions of dollars in the added equity that you retain and never give up to venture capitalists.
(c)2006 Charlene Kalk