One of the first questions business owners ask someone in public relations services is if their business truly qualifies for an initial public offering (IPO) and will it be profitable to go public. Generally speaking, identifying whether a business can go public successfully is a simpler question to answer than if the venture will prove profitable.

Yes, both questions have a relationship to public relations services, for even a great company can have difficulty with an IPO if that area is not addressed. To begin with, a company must be able to answer some difficult questions before consideration of an IPO. For instance:

1. Will it stand up under the financial audit requirements?
2. Is there any way to show that the company can maintain a high growth consistently?
3. Is the company in the public eye for the services or products it produces?
4. Is the company in a hot market or industry?
5. Can the company outperform the competition?

If a company does not have any name recognition, a public offering will not be in its best interests. Of course, that can change if preparations are made long enough before the IPO by going through public relations services.

Qualifications for the Initial Public Offering

A company must begin with audited financials, and most underwriters are only interested in a company if it has sales of at least $10 million annually and shows a 10% profit. If this is satisfactory, the next concern is the product itself. Underwriters want "leading edge" products that show staying power.

The third factor needed for a successful IPO is a projected growth rate of 25% for at least 5 years; this requires a plan indicating the steps to be taken to achieve this growth. For a company to receive a NASDAQ listing, it must have tangible assets of $4 million or more.

Underwriters take a good look at the management team and if it shows experience and skill, that makes all the difference. That team should make the right decisions for outsourced support including accountants, consultants, attorneys, and public relations services. Even the selection of underwriters to approach is important for obtaining a successful IPO.

A structured plan for the sale, conveyed completely to all the team members, wraps up the preliminary preparations and places a business in a good position for its IPO. Of course, the initial offering is only the beginning. The hard part comes in appropriating capital and making the right decisions to deliver on the prospectus and keep the new owners happy.