Leap of Faith

Companies that go public reach a milestone few other businesses do, but that's only the beginning of a difficult journey. When Internet search engine Google announced its initial public stock offering was right around the corner, some heralded it as the second coming of the tech IPO market. But as has been widely reported, Google founders Larry Page and Sergey Brin weren't exactly eager to take the public plunge, worried it would transform the company's business culture and stifle its flexibility.

Legitimate concerns, to be sure. As any public entity can attest, making the leap from privately owned business to publicly held company can test an organization on many different levels. While an IPO offers undeniable benefits, including access to capital, liquidity and personal wealth for the owners, it also creates additional responsibilities for the company. To begin with, producing the requisite financial statements is expensive and time-consuming, especially in recent years with passage of the Sarbanes-Oxley Act. The new standards, aimed at placing more stringent controls on corporate accounting practices, are particularly burdensome for small public companies. What's more, the pressure for short-term performance results is immense.