Gone are the days of the Internet IPOs of the 1990s. During this IPO heyday, most any business could make IPO filings and see their company shares soar. The initial public offerings industry is now about realistic valuations and the underlying business model of the company. In making the most of initial public offerings, you must have detailed planning documentation for the business and know when the best time to file an IPO is in relation to the stock market.

Besides timing and planning, IPO listings also require proper marketing of your company. Prior to an IPO listing, you must complete a successful IPO road show. This is where you visit with stock market industry leaders from coast to coast with a sales pitch for your IPO. If these road shows are a hit, then chances are the IPO will do well. Therefore, before you begin the initial public offering process there are a few items to consider, such as:

1. Contact a dedicated IPO consultant.

2. Compile a strategy to complete all aspects of the business initial public offering.

3. Organize your company's IPO road show and the overall marketing.

Action Steps
The best contacts and resources to help you get it done

Hire an IPO specialist

There are many accountants and lawyers that can help you navigate the financial and legal aspects of initial public offering listings. However, they only take care of one aspect of the IPO. What you need is an IPO consultant to help you manage all aspects of the offering. A consultant can help you integrate all aspects of the IPO into one fluid business model.

I recommend: Contact Magtin to compile a coherent and all encompassing IPO strategy. Submit an information request form to PublicShell.Net for IPO assistance. It can help you take your company public at a fixed price to help making the most of initial public offerings more reasonably priced.

Formulate a complete IPO strategy

Before you employ the services of a consultant, it's important that you know how to structure an IPO campaign. If not, then you won't know the specific questions to ask the IPO consultant. Knowledge is power and this power can help make your initial public offering a success.

I recommend: Download The Initial Public Offering: A Guidebook for Executives and Boards of Directors from Bowne for a complete instructional manual on taking your company public. Use the IPO case study from Business Economics posted on BNET to learn from past IPOs.

Define the IPO listing in your own terms

In the business of IPOs and IPO data, perception is reality. There must be an energetic and effective marketing campaign to sell your IPO to potential buyers, especially during your road show campaign. If there are any negatives in the IPO filing plan, it can be a problem. The negatives whether they're pricing, the business model or marketing can begin to grow and depress the enthusiasm for your IPO.

I recommend: Use the post-IPO review at Ernst & Young to examine all aspects of your company after going public. Review the initial public offering information marketing lessons at JBV.com to help you make the most of going public.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Make certain your company has a separate website that will house your IPO prospectus and all other relevant information. Too many times companies will incorporate the IPO into their existing website and it gets lost in translation. New initial public offerings need an Internet presence all their own.

When your small company needs to raise capital, SBA loans and angel investors aren't the only options. A growing number of small businesses are raising capital by issuing equity shares through an initial public offering (IPO). Going public means your shares will be traded on the stock market — for smaller firms, shares will most likely be traded on the Nasdaq SmallCap market or the Nasdaq National Market System. Going public isn't a decision to be made lightly, and there are a number of benefits and disadvantages.

Benefits of an IPO include:

1. Raising capital for your business.
2. Opening additional financial doors.
3. Granting prestige to your firm.
4. Making it possible to attract top talent by offering employee stock option plans.
5. Increasing the value of your business.

Disadvantages of an IPO include:

1. The process is extremely expensive, time-consuming and challenging.
2. You're saddled with obligations to keep shareholders informed.
3. You and your company can be held liable for any non-compliance.
4. You lose some control of your company when shareholders must approve your actions.

Action Steps
The best contacts and resources to help you get it done

Determine your capital needs

IPOs are best for firms that want to raise at least $5 million. Most smaller firms look to raise between $5 and $15 million.

I recommend: Use the business calculators at Dinkytown.com to help you assess how much capital you need to raise.

Establish growth potential

To be considered a good candidate for an IPO, start-ups and existing smaller businesses must demonstrate significant future growth potential — usually a minimum of 20 percent in earnings growth per year. Companies should be on target to reach a valuation of at least $100 million for a successful IPO.

I recommend: ForecastPro is a software program that can help you chart your growth potential.

Understand the costs

An IPO is one of the most costly and challenging methods of financing your operation. Expect to give up approximately 25 percent of your firm's equity and be prepared for fees and expenses to mount as high as 25 percent of the capital raised.

I recommend: IPOVitalSigns.com offers tips on how to evaluate and control the costs of going public.

Strengthen your management team

One of the main things underwriters look for is an experienced management team. Shore up your management team by hiring top-notch executives with a strong reputation in the industry.

I recommend: Post jobs at TheLadders.com, which specializes in helping companies find top talent.

Find an investment banker

Look for small investment banking firms that have experience managing IPOs of smaller businesses. Any firm you consider should be handling at least four IPOs per year.

I recommend: Check out IPOMonitor.com or IPO Central at Hoovers.com to find underwriters who are handling the IPOs of smaller companies.

Hire an accountant or attorney

Many investment banks won't even look at your business plan unless they have a personal relationship with your business or with someone representing your business, such as an accountant or attorney. Hire an accounting firm or an attorney with recent experience handling IPOs. This may help you get a referral.

I recommend: Search for accountants who specialize in SEC/securities at AccountantsWorld.com and search for securities attorneys at FindLaw.com.

Consider hiring a consulting firm

Navigating the complex issues surrounding an IPO can be difficult and time-consuming for busy business owners. Several consulting firms have emerged to help businesses develop and implement an IPO plan.

I recommend: Shop for IPO consulting firms, such as Nagle & Ferri, which provides complete pre- and post-IPO programs.

File a registration statement

You must file a registration statement with the SEC in order to make a public offering. There are two main parts to a registration statement: Part I must include descriptions of the business operations, financial condition and management; Part II is additional information. This vital form should read like a sales brochure.

I recommend: Smaller businesses can use one of two simplified registration forms Form SB-1 to raise up to $10 million or Form SB-2 to raise any amount.

Do a road show

Once your registration statement has been accepted, you and your management team must do a 'road show'. Basically, your team travels nationwide presenting your company to stock brokers who will sell it to their public investors.

I recommend: Sharpen your presentation skills by participating in training classes and seminars from the Leaders Institute.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Make sure your financials are in order. If underwriters determine that aggressive accounting methods are the only reason your balance sheet is showing a profit, your deal will die.
• •  Underwriters will either underwrite the IPO on a 'firm commitment' or 'best efforts' basis. In the former, the underwriters purchase shares at a discount (generally 7 percent) then sell them to institutional and retail clients at full price. The second option only commits the underwriters to do their best to place the offering, with no guarantee to your company.
• •  Timing is everything in an IPO. Being flexible and able to take advantage of market ups and downs is another critical factor.

The initial public offerings industry is an excellent source of capital to help in business expansion. From IPO filings to IPO listings to the actual initial public offering, the process is involved and you need to understand how the industry operates. There are also strict rules and regulations that govern all IPOs. The Spitzer rule for instance, prohibits a company from hiring Wall Street stock analysts to do research prior to the IPO.

An IPO listing begins with the proper price valuation of your company. If the price of the IPO is too high, investors won't purchase the stock and you'll not get the necessary capital infusion. Conversely, price it too low and you leave capital on the table that could've helped your company. That's why it's essential to review an initial public offerings (IPO) industry overview prior to any action. Therefore, here are a few items to consider:

1. View the most recent industry IPOs.

2. Know the regulations that govern the business initial public offering industry.

3. Use an IPO industry overview to decide if this is the right route for your business.

Action Steps
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Evaluate the current initial public offering information in the industry

To properly understand the investment climate for new initial public offerings, it's vital to find out what companies are expected to go public and the pricing information for each. If possible, find a company from within the sector in which your business operates or one that's roughly the same size, to attain an adequate IPO comparison.

I recommend: Monitor the IPO information available at Hoover's. Use the Renaissance Capital website to view an IPO industry breakdown by company, industry and sector.

Examine the regulations for initial public offering listings to further understand the industry

The IPO industry has a stringent set of rules to which every company must adhere. While you can hire an IPO law firm to handle the details, it's necessary to understand the general rules of this process. Without knowing the general regulations, you're putting the fate of your company in the hands of initial public offerings firms.

I recommend: Study the IPO rules from the Securities and Exchange Commission, which is the government agency that regulates the industry. Contact the officials at the Financial Industry Regulatory Authority for any questions about the industry. Its IPO Distribution Manager is a web-based application that allows members to transmit distribution information directly to the National Association of Securities Dealers (NASD).

Know the pros and cons of the IPO industry

As with any sector or business, there are advantages and disadvantages to the IPO industry. Taking your company public can provide a cash infusion, but know you are beholden to shareholders. This brings a completely new list of responsibilities and regulations for you and your employees.

I recommend: Use the IPO industry guide from Pepperdine University to obtain an easily digestible industry overview. Employ the IPO tutorial from E-Commerce Times to investigate the IPO industry further.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Make sure your business initial public offering comes at a time of an amenable stock market climate. You don't want to take your company public during a down market because it'll be very hard to get the highest target price for your IPO.

The most common reason for an Initial Public Offering is to increase the capital available to a company for expansion. A single IPO can raise billions of dollars and fund most companies into the near future. However, they do mean losing control of a company to shareholders and can create more layers of management. To understand the process, it helps to know Initial Public Offerings key terms such as underwriters, common shares and the public offering price.

Action Steps
The best contacts and resources to help you get it done

Underwriters

Underwriters are the investment banking professionals who agree to sell a certain number of securities at a given price in return for a fee. If the underwriter fails to sell all of the shares, the underwriting syndicate agrees to take responsibility for the losses. An underwriting syndicate is simply a group of underwriters that work with the primary underwriter to promote the IPO. The syndicate is also necessary because most IPOs are simply too large for one underwriter to handle.

I recommend: Use the information at Investopedia for a basic definition of an underwriter. For a detailed review of the process, examine the article from the American City Business Journals.

Firm commitment or best efforts basis

The two types of IPO processes are the firm commitment and best efforts basis. The firm commitment is the most common and holds the underwriters solely responsible for any unsold IPO shares. On the other hand, in a best efforts basis IPO, the underwriter isn't responsible for the unsold shares.

I recommend: Review the definitions and explanations of best efforts basis available at Business Finance.

Prospectus

A prospectus is the document that provides all of the details of the IPO. Written by business lawyers, the prospectus is not an easy read but it is the main marketing tool for an IPO. It tells investors all the relevant information regarding the reason for the IPO. The prospectus must contain no false or misleading information to avoid future lawsuits.

I recommend: Study the prospectus tutorial from Hoovers to gain more insight into the document.

Free riding

Free riding is an illegal practice in which the underwriter holds part of the IPO back for sale at future date and higher price. Free riding was somewhat common during the tech bubble in the late 1990s.

I recommend: Review the definition of free riding from the Financial Dictionary.

Common or preferred shares

When issuing an IPO, one must determine whether to issue strictly common or preferred shares of stock or a combination of the two. Most IPOs have a combination. Preferred shares differ from common stock in that they usually have specific shareholder rights attached to them.

I recommend: Compare common and preferred shares in the article at the Investor Guide.

Initial public offering price

The initial public offering price is the cost of each share to the general public established by the underwriter.

I recommend: Examine the data available at Finance Maps of the World for more on the public offering price.