How to Prepare for an Initial Public Offering (Step-by-Step)

  • By: Adam Wire
  • March 25, 2024
Reading Time: 4 minutes

Raising money through an initial public offering (IPO) is a common way for startup companies to take their business to the next level. Any executives interested in enacting such a plan for their organization must remember two truths. One is that the IPO process requires a lot of time, money, and effort to see all the way through. The other is that IPOs are not a foolproof plan for success. 

Regardless of the level of expertise in your boardroom or the level of confidence in your business, you can never fully predict the results of an IPO. That makes it more important to control as many of the procedural tasks as you can. Read on to learn how to prepare for an IPO.

What is an Initial Public Offering?

An Initial Public Offering (IPO) is the process by which startups offer shares to the public for the first time, thereby becoming a publicly traded company. In an IPO, companies raise capital by selling newly issued shares to investors, allowing them to buy ownership shares in the company. 

The main advantages of an IPO are:

  • Lower cost of capital than other forms of financing
  • Access to a wider pool of financing opportunities (equity, convertible debt, cheaper bank loans, etc.)
  • Publicity, which can help attract customers, employees, and partners
  • Ability for existing shareholders to diversify their investments or make a profit selling their stake
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How to Prepare for an Initial Public Offering

Follow these steps to prepare a successful IPO.

1. Assessment and Readiness Evaluation

Start by evaluating the company’s financial health, market position, growth prospects, and overall readiness for going public. During this phase, consider engaging with financial advisors, legal counsel, and accounting firms to better understand the organization’s overall readiness.

Once an IPO project team of internal senior executives, lawyers, and accountants is established, hold a meeting to discuss the company’s IPO strategy. This gives leadership a greater sense of your organization’s prospects and the opportunity to re-examine certain elements of your operation to lower the chance of costly mistakes or missed details later on in the process.

2. Financial Preparations

The next step is for your financial team or financial planning experts to assemble financial data in order to create a realistic budget with updated projections. This helps public investors gain a deeper understanding of the company’s performance over time and can have a strong influence on share prices. All information should be recorded in accordance with modern accounting standards such as IFRS or Generally Accepted Accounting Principles (GAAP)

Begin identifying potential investment banks and engaging with the main candidates. Consider industry expertise, previous experience with IPOs, the ability to collaborate with underwriters, and the bank’s reputation. Senior management should also identify the stock exchange they intend to list the company on and work to meet its listing standards.

3. Legal and Regulatory Compliance

Conducting extensive due diligence is a massive part of IPO preparation. Businesses must inspect several aspects of their operation, such as:

  • Internal controls
  • Audited financial statements
  • Material agreements
  • Legal standing and reputation
  • Business model sustainability
  • Capitalization records
  • Executive credentials 

Companies can also work with external partners to ease any compliance concerns. A financial printer can assist private organizations in properly filing registration documents with the U.S. Securities and Exchange Commission (SEC). In addition to SEC requirements, businesses also need to comply with the Sarbanes-Oxley (SOX) Act. 

Other methods of ensuring compliance include working with a transfer agent, directors and officers (D&O) insurance broker, and a registrar bank note company.

4. Corporate Governance and Structure

Establish a board of directors and develop (and implement) policies and procedures to ensure transparency, accountability, and ethical conduct within the organization. A board management solution is a simple piece of software that enables board leaders to conduct efficient and effective meetings, and organize mission-critical board documents. 

Overall, the board should have a healthy mix of different personalities with industry experience, passion for the organization, and the ability to strategize on a short-term and long-term timeline. The board  should craft a corporate governance framework with well-written policies to keep the company running smoothly.

5. Marketing and Investor Relations

To convince public investors to provide additional funding to your business, you have to sell them on the idea that your company has a bright future. Develop a comprehensive marketing and investor relations strategy to generate interest and attract investors to the IPO.

Creating an outline to standardize public communications before and during the IPO can be useful in this regard, as is building relationships with investment analysts. You should also ensure that the company’s official website is updated with accurate information. 

With all those aspects in order, you can then orchestrate an investor roadshow, a series of meetings with investors to discuss the IPO and the merits of your organization. 

OnBoard Powers Scaling Startups

Taking an IPO from concept to reality requires a combination of collaborative planning and smart documentation. OnBoard’s broad list of features is designed to help companies improve the efficiency of their meetings with minutes builders, analytic tools, a limitless system of record, and more. 

Finding the right board management solution for your organization should be easy. To help you make the right decision for your unique startup or scaleup, we’ve organized a free guide: Board Management Software Buyer’s Guide. Inside, we give you all the tools and resources needed to find the very best board portal. 


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About The Author

Adam Wire
Adam Wire
Adam Wire is a Content Marketing Manager at OnBoard who joined the company in 2021. A Ball State University graduate, Adam worked in various content marketing roles at Angi, USA Football, and Adult & Child Health following a 12-year career in newspapers. His favorite part of the job is problem-solving and helping teammates achieve their goals. He lives in Indianapolis with his wife and two dogs. He’s an avid sports fan and foodie who also enjoys lawn and yard work and running.