"Relying on key lieutenants is extremely important," says Atchison, "because the IPO process can be so long." It took Hoover's approximately six months to complete their IPO. Not to mention the fact that while on the road show, Atchison and Hoover's CEO, Patrick J. Spain, did "50 presentations in 25 cities in two and a half weeks."
7. Business Model:
The road show is the company's big shot to strut their stuff. If your business model is not solid, says Atchison, it's going to be a tough ride.
When meeting portfolio managers and investors, for example, you have to be able to justify reasons for them to invest in your company. This is done by noting the current market conditions (which hopefully will be better than they are now), showing how and where your company's product or service fits into a particular industry in the market, and describing past, present and future anticipated successes.
One of the best ways to do this is is by presenting your company's business model. "Tell them what you have in place to generate revenue," says Atchison. For example, Hoover's uses a "three-tiered" business model, whereby it generates revenue through online advertisements, charging subscriptions, and licensing agreements with companies such as Bloomberg or Reuters. Atchison says that when her company went public, its situation was "unique."
She says, "We were an Internet company that charged for information… that was going against conventional wisdom at the time. It was a challenge in the marketplace because people thought we were flawed. But we stuck to our guns and did not succumb to the pressure. You can be successful if you have a strong business model that you believe in."
8. The Power of a Name:
"Visibility is a double-edged sword," warns Atchison.
On one hand, name recognition can help with recruiting more qualified employees as well as help your company to raise a lot of money in the public market, which can of course influence growth. But then again, it can also make a company more vulnerable to public scrutiny in the case of a missed forecast or stock decrease.
Once again, when you go public, you can be assured that the public and the market will not bite their tongue. How you handle the publicity is quite significant.
Companies can prepare for any kind of feed-back, positive or negative, by posing mock situations at management meetings, playing devil's advocate among the key executives, and devising methods of approach if they, for one reason or another, get reproached by the public or the market. Atchison adds, "If you're a private company and you just want to experiment, you can; if the quarter isn't successful, you can just report it to the board and life goes on. However, there is just not as much room for public companies to make those mistakes." The market, and the SEC, won't allow it.
9. Costs:
You can bet your bottom dollar that costs will skyrocket once you go public, says Atchison. Questions to ponder: "Do you have the ability to absorb added administrative costs or legal fees, for example? If you don't, then perhaps you are not ready."
In addition, take a good look at the market and where your company fits into the industry within it. (For example, now is probably not the best time to take a company public.) Also, "if your revenues are showing no signs of growth," says Atchison, "you might want to think twice about your decision."
10. Reality of Going Public:
The IPO is just a transaction, says Atchison. "A huge transaction — but just that." Companies need to think about and plan ahead of time for all the factors involved in going public and then the issues or situations that can arise after. "Don't just think about going public," warns Atchison. "The real life begins after the IPO."
Reader Comments» Post a comment