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Believe It Or Not, Small Businesses And Start-Ups Can Go Public Too

Aug 17, 2007
It is a common misconception in the small business community that one's company has to be a certain size and have a certain amount of revenues before one can go public.

I have been taking Small Businesses and Start-Up companies public as a consultant for over 10 years now. And for 10 years I have been repeatedly asked in various ways "Can I really go public? We only have a million dollars in revenue. Aren't we too small?"

The answer has been and still is "Yes, you can go public. And no, you are not too small."

A company doing a million dollars a year in revenues would be relatively easy to take public. Even a company doing a couple hundred thousand in revenues would be relatively easy. And though four or five years ago we could take a company public with just a business plan and no business operations, that scenario has become, admittedly, very hard to do, though still not impossible.

It has become harder and harder to take a company public with no revenue and no business operations because the SEC and NASD are rightfully trying to eliminate micro cap fraud, but yes it can still be done. If you have no revenues, however, you will have to have patience, some money in the bank to guarantee you can survive for a couple of years, and you will have to be making genuine progress on your business plan to show the powers that be that you are a "real" company and not just a "sham" set up for micro-cap fraud.

The advantages to going public in the early stages, rather than waiting, can be substantial.

1) Leverage a larger retention of ownership

2) Grow your company faster and make it more powerful by attracting top personnel without necessarily huge cash outlays

3) Grow your company faster and make it more powerful by attracting top notch team members to your board of directors.

4) Raise money faster and cheaper by increasing the "liquidity" factor for your investors.

5) Grow your company faster and make it more powerful by increasing your ability to attract "mergers", "acquisitions" and "strategic partners.

6) Grow your company faster and make it more powerful by increasing its ability to compete for large corporate contracts.

7) Grow your business faster and make it more powerful by increasing your status in the eyes of all those you do business with.

8) Leverage your personal return on investment as an owner by decreasing the amount of time it will take you to make money on your investment, as well as increasing the valuation of your company, as well as, changing the liquidity of your asset to a much more liquid form than that of a private company.

If you are a small business and you don't plan to be mom-and-pop forever, then "Going Public" is something you should look into in the very early stages. "Public" money is usually a lot cheaper than "private" money.

I have seen private companies give up 50% of their business for a $100,000 investment. By the time they have raised twenty million dollars privately, they typically only own 5% or 6% of their company. If that individual had gone public as a start up they could have typically raised the same twenty million dollars and still have retained 60-65% of their company.

Of course there are downsides to going public early too, but most of those have to do with being preyed upon by non-professionals, fraudsters, and others who really don't know what they are doing. If you check out your advisors and get advice and structuring and referrals from professionals who know what they are doing, you can eliminate most of the downside of going public early.

And if you are potentially the next Microsoft (or even just a shadow of that giant), the decision to go public early on could make you millions if not billions of dollars in the extra equity that you retain and don't give up to venture capitalists.

(c)2006 Charlene Kalk
About the Author
Charlene Kalk is a consultant that has been assisting companies "going public" for over 10 years. She provides full services for companies, large and small, that want to go public. Charlene provides additional information at http://www.artfieldinvestments.com.
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