Top 7 Pre-IPO Mistakes Companies Make Before Going Public

As a Connecticut IR firm, we’ve seen a few companies fail. By simply reading the news, you can see them for yourself. While these companies often experience quick growth, companies plagued by poor preparation and questionable business models can be deadly. Often times, these mistakes are the following:

  1. Not developing a plan for “use of proceeds” raised in the IPO: One of the worst things you can do is ask your investors for money without a solid reason for it. This kills investor confidence. Ensure that every line item on your use of proceeds is well documented and you can point to a strong reason that you need it.
  2. Overpromising on milestones to get the IPO done: The best motto we’ve heard is “under-promise, over-deliver”. You’d rather investors be pleasantly surprised than annoyingly disappointed.
  3. Trying to go public without being ready: Going public before your business is ready will kill most companies. The ones that manage to survive an ill-placed IPO are simply lucky. Ensure your business meets key metrics outlined by the security exchange you plan to list on.
  4. Failing to make a good first impression: First impressions can either make or break your IPO. Ensure your presentations go well, your meetings end with a follow-up, and investors are always itching for more.
  5. Not Building a Strong Management Team: Capital can make anything happen, including going public. But if you do not have a strong team in place before your IPO, it won’t make it any easier once you are public. Building a strong management team before you IPO is critical to your company’s success.
  6. Not having a strong marketing game plan: You you market to everyone, you market to no one. A good marketing plan has benefits including but not limited to identifying your target market, identifying competitors, defining your unique selling position, supporting your Return-On-Investment on Marketing Spend and Sets out a strategy to target ideal investors/customers. Having an IPO where a company receives capital or liquidity needs to be marketed correctly in order to keep retail investors attention (on the market side) and stay in front of potential customers (on the business side).
  7. Not having the right investor relations team in place: Not having strong investor relations communications is like opening a large retail store and not having a customer service desk. You will gain (hopefully) a large number of new shareholders/investors and you will need to be in constant communication with them via press releases, news updates, tv appearances, interviews, quarterly shareholder calls, annual shareholder meetings and more. The lack of any of these activities lowers the return on investment sought when going public.

Of course, there are many other factors to consider when taking your company public. Do you have the right legal counsel? Do your auditors and accounting team work well together? Should you go public? Is there a way to finance your business privately? Will the public stock market value my company at the price I want?

Due diligence is only one of the ways we have helped clients in the space. Thinking about going public? Cervitude IR can help. Contact us today.

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