The 5 Elements of Success With an IPO and Beyond
For any growing, pre-IPO tech company looking to go public, success is directly dependent upon effectively managing and growing the business within a turbulent marketplace. In today’s highly competitive business landscape, seemingly minor details become major factors in differentiating businesses that reach their goal and others that remain in mediocrity.
A key difference between high-growth companies that reach that IPO goal and others that never hit the open market is they can rapidly adjust to unexpected organizational and market changes. They have internal processes to consistently update leaders with a holistic view of their own business’ performance from fast-and-accurate financial analysis to a detailed growth plan leading up to, and after, an IPO.
Related: The ABCs of IPOs
Here are five tips for creating an equally effective internal strategy to successfully lead your business to that initial public offering.
1. Data: The Lifeblood of a Successful IPO
We all swim in a sea of daily business data. Leading a successful IPO requires a disciplined focus on the most impactful key performance indicators (KPIs). Then you can create systems through which employees across departments can easily view and understand their performance related to those KPIs. The better people understand their contribution to business success, the more focused they will be on the most revenue-generating projects.
2. The CFO: Your Modern Day, IPO Driver
Today’s CFOs should be driving business decisions based on financial performance insight using modern technology built to handle today’s business challenges. A CFO who is truly the designer of that corporate machine is one who can make tough calls, like knowing when to say "no'' to department executives.
3. Talent: The DNA of Your Company
Simply put, talented and ambitious people create industry-leading companies. They’re key components in any growth plan. Just adding more people doesn’t always lead to more productivity. You need to make smart hires, particularly when eyeing an IPO. How many of your employees today could lead your company tomorrow?
Hire for current needs while looking for people who can grow into leadership roles in the future. Employee retention and advancement is the most effective way to create a workforce full of emotionally invested people who will go the extra mile to ensure the company’s long-term success.
Making such hires requires an understanding of where your business is today, a forecast of where you want your business to go and a plan to get there. Take the time to thoroughly analyze your financial performance, which is the best indicator of future needs, then determine which employees are skilled and motivated enough to lead the business into tomorrow.
4. Game Day Ready: Establish the “IPO Mindset”
Be ready to embrace a different context of accountability because going public brings about a new set of obligations that weren’t present during your privately-held era. That means having the flexibility to take quick action in the face industry changes, and being prepared to answer to a greater ownership group, i.e. public shareholders. Make sure the entire leadership team understands and accepts the difference in ownership between private and public companies before crossing that chasm.
5. It’s a Risky Business: Knowing when to IPO
There are two financial performance signs that your company is ready for an IPO. Either your business has attained a critical mass, or your business is positioned to get there very quickly.
There was a time when a technology company could IPO at under $100 million in revenue. But annual audit compliance costs, reporting obligations and requirements for internal control for a system of SEC-listed companies have all increased the cost of going public. If you’re leading a technology company that’s considering going public today, you should be at or close to $100 million in annual revenue.
If you insist on going public before hitting the $100 million mark, you need to have a clear line of sight to get there in a short period of time. This is where sound financial planning comes into play, so you are able to accurately and consistently forecast financial performance to demonstrate that clear roadmap to $100 million.
IPO success requires the right mindset, high recurring revenue and a strong leadership structure. Financial plans and forecasts must include hiring, spending and capital expenditures. The organization needs a disciplined focus on both a long-term vision and a forecast for the quarter ahead. This is the most prudent way to manage the outcome in order to meet or beat any investor guidance you issue.