Have you been asking yourself if you should take your small business public? The process of going public with your small business can be complex and is not something you should rush into. There are a number of advantages to making the transition, and below we look at some of the reasons why you might want to go public with your small business.
Why Should a Business Go Public?
1. Raise more capital: If capital is the limiting factor in business expansion, many investors consider going public to raise the much needed capital.
2. Brand awareness: The business is widely recognized and the credibility of the business is enhanced. It is easier to market products and services of a public company in comparison to a small business. Clients will often associate a public company with stability and quality.
3. Cross border expansion: Going public helps a business to reach out to a wider market in foreign countries with ease. This opens doors for foreign direct investments.
4. To attract a better workforce: Public companies are able to offer enhanced salary packages, staff training and capacity building. Therefore, they are often able to recruit and retain highly qualified staff in comparison to small businesses.
5. To spread out the risks: Partnership and sole proprietorship businesses may have a limited life span. In fact, many of them disintegrate upon demise of one of the owners. It is therefore necessary to consider going public to ensure that the business life extends beyond the life of the owners.
6. Listing at the stock exchange: A small business might go public in an effort to have their stocks recognized, listed and traded publicly. They are thus able to benefit from international trade gains.
7. Expansion: A small business has limited opportunities for expansion; however going public will give it an opportunity to increase its product range or diversify into totally new products or services. Some small businesses may have reached their threshold and can only go public to reach the next level. A common example are farmers savings cooperatives that grow into full fledged banks.
8. To meet threshold requirements for national and international tenders: Some tenders are only given to public companies and thus small businesses will strive to go public to net such opportunities.
How To Make a Small Business Go Public
Before going public, the management must ensure that the business is making handsome profits. A public offer will only be successful if the public have confidence in the business. Therefore before considering going public, a small business should be making handsome profits and have projections of remaining profitable in the future.