Many private companies think of an initial public offering (IPO) as a strategic option to grow their business. The process is not easy, carries significant risks and requires strategic thinking and careful plan to ensure long-term success.

The first step to prepare for an IPO is to formulate and articulate your equity story that explains to investors the path you are taking towards value creation and distinguishes your business from other companies. This is crucial for establishing a compelling valuation and getting the attention of investment bankers, underwriters, and analysts.

The next step is review your management team and leadership. You need to ensure that your management team is capable of managing an IPO that is a high-risk venture. For example an IPO could result in additional financial reporting requirements and tax implications, which may require the addition of a tax or finance specialist to the executive team. Additionally, you will need decide if you would like to have dual class stock, which grants the founders and other managers distinct voting rights.

A solid track record of financial accountability and control is crucial for an IPO. This is why you need a well-defined SOX program, which must be implemented and updated prior to IPO. It is also essential to review your existing system of records. This includes minutes, capitalizations files material agreements, historic option grants. This is vital for ensuring that you meet SEC requirements and bank underwriters. It is crucial to determine if there are any potential “material weaknesses” in the company’s control systems so you can fix these prior to going public.

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