- It is better to under-estimate and impress than it is to over-estimate and disappoint
- Owners should resist an IPO until their business is completely prepared to sustain growth
- Excessive preparation is the most reliable method for preventing IPO mistakes
Top 3 IPO Mistakes Business Owners Make
Life as an entrepreneur can be an exhilarating experience. With hard work and dedication, business owners can go on to achieve great success while establishing an influential brand. A company must be properly managed to reach the IPO stage while preventing IPO mistakes, and it is not easy, but it is possible. Corporations that are rapidly growing will likely consider an initial public offering (IPO) at some point in time. Many companies that started as an IPO went on to earn a reputation as a Fortune 500 company. It all depends on company management, finances, and investor’s opinion of your business.
Over-Promising On Deadlines
It is easy for people to get excited about something and over-estimate their ability to make it happen. In the world of investing, this can be a detrimental mistake that can cause many problems for owners and investors. To satisfy investors and maintain their support, business owners need to accurately predict company profits, expenses and meet deadlines. Failing to reach a promised goal can result in wavering support and withdrawal of investments, and eventually, a collapsed IPO. Keep in mind, it is better to under-estimate and impress than it is to over-estimate and disappoint.
Going Public Too Soon
Not every corporation that has achieved success or piqued the interest of investors should go public, some companies are better off remaining private. Owners should resist an initial public offering until their business is completely prepared to sustain growth and reach all designated milestones. Determine realistic projections and potential setbacks for company finances, based on past revenue and the company’s overall track record. Be sure to have audited financial statements to verify company revenue and expenses, which could delay an IPO if not administered in time.
Proceeding Without “Use Of Proceeds” Plan
Carefully examine what your company needs and what it does not. It is important to have a thoughtful plan to spend the funds you intend to acquire. Captivating investors with an intelligent strategy backed by accurate information will make it easier to obtain and maintain investor relationships. Potential investors need to know that their money will be used efficiently before they decide to get involved financially. Take time to organize your finances and develop a strategic plan before reaching out to investors with the desire to go public.
The bigger they are, the harder they can fall. Many companies have filed an initial public offering and achieved monumental success, while countless others have failed miserably. Even if a corporation fails to accomplish its IPO goals, it does not necessarily mean the company will not persevere. Two well-known companies that had IPO mistakes, and are widely considered failures are WeWork and Lyft. Both corporations had similar problems but experienced different outcomes. Shortly after filing its IPO, WeWork faced heavy scrutiny over its leadership and management of its finances, which eventually lead to the removal of its CEO and layoffs for thousands of employees. However, another company that failed as an IPO, Lyft, is still operating as an overall successful company even though its finances are still in the red. Lyft is considered a failed IPO because the company has not been profitable, yet the corporation continues to remain in business and receive investments due to its potential to succeed.
Investments can be an essential part of a company’s development. It is important to make a positive first impression on investors with an elaborate financial plan, attainable goals, and necessary preparations. Avoid stating promises that you may not be able to keep to prevent investors from losing interest and withdrawing their money. Creating a strategic plan to use the capital you plan to raise will bolster investor support and help sustain your company’s continued growth. In the end, excessive preparation is the most reliable method for preventing IPO mistakes and achieving success. Taking the time to confirm that your business is ready for an initial public offering will save money while preventing future problems.
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