How to Prepare Your Business for an Initial Public Offering Know when an IPO makes sense and how to get ready for your first.

By Samuel Edwards

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Shutterstock/mashup by Entrepreneur

For many entrepreneurs, going public represents the proverbial mountaintop experience. It's the point where you can officially say, "I've made it." While this is a bit of an exaggeration, holding an initial public offering (IPO) is certainly a tremendous accomplishment that speaks volumes about your ability to build a business from the ground up. However, the actual process of taking a business public is painstaking and time consuming.

Related: 10 Companies That Are Probably Going Public in the Next Year

When does an IPO makes sense?

Businesses go public for a variety of different reasons. Every company is different and has unique needs that can be satisfied with an IPO. Generally speaking, though, an IPO might make sense for your company for one of the following reasons:

1. Liquidity: For startup investors and employees, the promise of future liquidity is often what encourages them to get on board. Facebook is the perfect example of this. In the company's prospectus, founder Mark Zuckerberg proclaimed he was bringing Facebook public for the employees and investors. "We made a commitment to them when we gave them equity that we'd work hard to make it worth a lot and make it liquid, and this IPO is fulfilling our commitment," he wrote.

In Facebook's situation, many employees made more from their stock options than they did from their salaries leading up to the IPO. In fact, more than 1,000 of Facebook's original employees are millionaires as a result of going public.

2. Corporate credibility: Being a publicly-traded company comes with a lot of clout. It often helps companies land bigger clients and tells others that you have a certain amount of stability. This also helps when it comes to attracting top-level talent to your organization.

3. Cash: Perhaps the number-one reason to go public involves cold hard cash. It's not uncommon for businesses to raise hundreds of millions of dollars when they go public. In fact, companies like Zynga, Facebook and Alibaba have raised billions. This cash can then be used to further strengthen the business and reward supporters.

Related: Great Achievements: An Intriguing IPO Filing and an Exciting Incentive

Prep your business for an IPO.

But the big question is, how do you prepare your business for an IPO? There's so much to be done that it can be overwhelming and stressful, even if you have all of the resources you need. Here are some basic tips to get you pointed in the right direction:

1. Get started early: The biggest piece of advice is to get started way in advance. Going public isn't a process that can be completed in a matter of weeks. Most companies require at least a year before they're ready.

You must be willing to contribute a substantial amount of your businesses resources to the IPO effort, too. The prep work is going to require hundreds of hours from you and your executive team. It's important that you're able to train employees to handle other responsibilities during this time, because going public will be your full-time job.

2. Financials must be squared away: At the heart of any successful IPO is organized financial recordkeeping. The business will be heavily audited, and you can't afford to have anything missing or out of line. Financial reporting can and will be a major stumbling block without adequate preparation.

If all of your numbers are in Excel spreadsheets or manual accounting ledgers, you'll need to upgrade to an automated financial reporting technology solution. These scalable systems streamline your efforts and can be easily integrated with other things like resource planning, customer relationship management and budgeting and forecasting.

3. Think about money: Taking a company public is not something you can do without deep pockets. It's important that you prepare for the cost of the process by setting aside cash from wherever you can. "When you take all of the legal fees, investment banker expenses, internal preparations and audits into account, you could easily spend more than $100,000," says Andrew Stickel, owner of ELOA.org. This shouldn't be an issue, as most companies going public are in fine shape -- but do keep this in mind.

4. Attract investment bankers: You'll hear some refer to this aspect of the IPO process as the beauty contest. In layman's terms, this is the stage of choosing the investment banking partners who will work with your business to successfully execute the IPO. You should interview a handful of bankers, listen to each of their presentations and make an educated decision based on how they see your company and what direction you want to go.

5. Focus on the future: While your average employee may not notice much of a difference in his day-to-day activities after the company goes public, you will. There are new rules and regulations that must be followed. You constantly have to improve your presentation skills to impress investors and keep them satisfied. You'll need to build strong media connections. A lot will change, so begin shifting your attention towards the future.

Take one step at a time.

Ultimately, taking a company public is a great thing. In the midst of the preparation, you may begin to wonder what you're doing, but it will all be worth it in the end. You'll reach what you thought was the mountaintop. Then, take a deep breath -- and then search for the next summit.

Related: 6 Strategies to Win the New Initial Public Offering Game

Samuel Edwards

Digital Marketing Strategist

In his four years as a digital marketing strategist, Edwards has worked with many local businesses as well as enterprise Fortune 500 companies and organizations including NASDAQ OMX, eBay, Duncan Hines, Drew Barrymore, Washington, DC based law firm Price Benowitz LLP and human rights organization Amnesty International. He is also a recurring speaker at the Search Marketing Expo conference series. Today he continue to work with and establish SEO, PPC and SEM campaigns across all verticals.

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