As seen on Forbes
By Kathleen Lucente
All companies want to attract attention, whether it be for an innovative product or an essential service. But how can a business make sure it’s catching the right eyes, specifically those of potential investors? An IPO or acquisition doesn’t just happen. Making your company a sought-after asset takes insight into what buyers and investors want to see.
First, they want to see growth. Not just top-line growth. Investors also want to see a company’s rate of revenue growth and valuation potential. They want to know the financials are solid. Wrapped up in this growth, investors or buyers are looking at things like potential for new customers and the cost of acquiring them, as well as opportunities to sell new products and services to existing clients. Finally, how employees engage with the company’s culture and mission are key measures for future success.
Investors want to get the big picture and the details, too. They’re interested in companies with a large market opportunity and a proven record of growing at scale. They want to know what the competition looks like. And it might seem obvious, but having a solid product line with a proven record of capitalizing on the customer base is important.
How do you showcase both the tangible and intangible parts of your company’s story? By having the right people helming the ship. Potential investors or buyers want to work with people they feel they know and trust, and that starts with the CEO and CFO. Having a top executive who has been through a successful IPO makes a company even more attractive.
While those executives are communicating regularly with investors, sharing the story of the company’s success, the sales and marketing team needs to be pushing the story of the future. Investors want to see a growing sales/customer acquisition strategy in action. That sets expectations and allows for more accurate forecasting.
Product launches need to be meticulously planned, and messaging must be crystal clear to everyone, including investors. They need to feel confident speaking about the company. IPOs have rules, so make sure everyone knows how to play by them. Establish FAQs on what all players can and can’t say during the process.
Being a public company has rules as well, and following them before the big day will help a lot down the road, especially in financial operations. Setting up the right procedures and systems and hiring the right financial team well in advance isn’t just practice; it shows investors and the public that you’re capable of putting together all of the audited financial results quarterly, like clockwork. It’s a lot of heavy lifting, and many companies fail to plan for it. Don’t underestimate all the work that will be required to make this happen.
Taking a company through a public offering means tightening up in all areas. Create formal HR policies, a code of conduct, a public company-ready employee handbook and a strong, consistent internal communications policy. In addition, a solid social media policy is a must. Use legal counsel to align all the procedures and policies and make sure all of them are made available to employees as part of the onboarding process. Having everyone on the same page helps avoid litigation and HR nightmares that can pop up with fast-growing companies.
Do your due diligence. Public investors are going to want to know the good, bad and ugly. Expect them to ask for background checks on senior leadership, changes in management, product failures or any change that would affect the company’s financial picture. The run-up to an IPO brings heavy scrutiny from investors and underwriters, lawyers and the SEC. This isn’t the time to have an avoidable crisis crop up. People considering investing in your company don’t like surprises, but they absolutely will want to know your game plan for handling a crisis should one occur.
Also, take the time to vet potential advisors or board members. Be aware of not only a person’s skills but also of the group’s diversity. This is especially true if the company’s customer base is diverse and the business is mission-focused. Search for the right people for the job, and do so with purpose.
While juggling the preparation for going public, remember that stability and predictability are important to investors. They want to see a consistent pattern of behavior and performance. Big variations can stop the IPO cold and put a CEO out of a job.
Finally, get employees excited about the future of the company. Poll them at least twice a year to see if you have gaps in your internal communications. Employees can get excited about the idea of going public for a variety of reasons — besides providing liquidity for employees and investors. It also gives companies the M&A currency to help them acquire other companies and stability for the future.
Send a clear message to everyone on the team, so they understand the upside of going public.
