It should come as no surprise that there are several advantages associated with taking your company public.
After all, if an IPO wasn't advantageous then why would so many companies aspire to have a ticker listing on the NYSE, NASDAQ or AMEX markets?
As a business owner or major shareholder, there are really two kinds of benefits you need to know about: Personal and business. While an IPO has the potential to make you wealthy (at least on paper), it also has the potential to create new opportunities for your company. It's important that both you and the company's shareholders understand the many ways your IPO will positively impact the business and its owners.
- Access to capital. A publicly traded company has the ability to generate capital for continued growth. The funds that are raised through an IPO can be used for a variety of purposes including capital purchases, research and development, or even debt repayment. It also provides an avenue for future capital funding.
- Public awareness. An IPO has the ability to create additional public awareness about your business and your products. It raises your profile in the public consciousness and gives you an additional layer of credibility, especially if your competitors are not publicly traded companies.
- Borrowing power. IPOs typically result in an improved debt-to-equity ratio. This improvement translates into greater borrowing power and gives the company greater leverage when it comes to the borrowing terms it secures from lenders.
- Wealth creation. When a company goes public, owners benefit from stock liquidity. This makes their exit from the company much easier and much less painful for both the individual and the business. Additionally, the increase in share value that is often identified with IPOs can create substantial amounts of wealth for owners and major shareholders.
- Prestige. Whether you admit it or not, the prestige of having your company traded on a stock exchange is clearly a benefit of going public. In fact, this prestige can ultimately translate into real dollars if you are a founder who plans to launch other companies. Venture capitalists are more likely to fund startups if you can demonstrate previous success in taking a company public.