The planning process can start on the day your company is incorporated or as late as 90 days before a public offering. We recommend that an orderly plan be accomplished over a one- to two-year period. This window gives your company time to think, act, and perform as a public company.
Develop a deep management team
As a company prepares for its IPO, it must expand its management capabilities. The investment community wants to be sure that management running your company is not a “one-man band.” This may require adding individuals with public company experience in marketing, operations, development, and ﬁnance. Venture capital ﬁrms also desire to put a CFO in place that has been through the IPO process. The team needs to be cohesive, and share a long-term vision for the company, in order to obtain maximum ﬁnancial returns and valuation.
Develop budgets and measure performance
Throughout the IPO process, underwriters and analysts will ask mature companies for projections, and will compare your historical performance to past budgets. Accordingly, you should get in the habit of preparing aggressive, but attainable, budgets and be able to articulate why variances have occurred. For the early-stagecompany, projections and market share are the most important measures of performance.
After you have gone public, budgets and projections will become an important tool for research analysts and market makers in your stock. Furthermore,
this information and your ability to meet your own and “the street’s” earnings estimates can have a signiﬁcant impact on your stock’s performance.
Appoint independent members to your board of directors
One of the best sources of objective advice can come from an independent or outside director. All of the major stock exchanges and markets require a registrant to have at least two independent directors, and post-Sarbanes-Oxley, one director must have previous ﬁnancial experience/expertise, either a CPA or prior CFO. You should not wait until the last minute to begin your search for qualiﬁed outside board members. A potential board member who is unfamiliar with a company may be reluctant to join the board immediately prior to an IPO since
a director has personal liability for information contained in or omitted from the registration statement. Providing directors’ and ofﬁcers’ insurance (D&O) can help overcome this reluctance, although the premiums can be expensive.
Create an audit committee
Audit committees have an essential role in ensuring the integrity and transparency of corporate reporting. Investors now expect that published information has been subject to objective, board-level review. Sarbanes-Oxley speciﬁcally deﬁnes
the role and composition of public company audit committees. Some of the key requirements are that audit committees:
—be composed entirely of independent directors (In order to be considered independent, the individual may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee, accept any consulting, advisory, or other compensating fee from the company or any subsidiary of the company.);