When is the best time to float your business?
To float or not to float? That may be the question, but in
reality, when to float might be the more important aspect. And as
with all the big questions, there is no black and white answer
largely because much of it is out of your control. It's down to
markets, economic cycles, and often, pure luck.
- Timing
- Board games
- Looking to the future
- I've been there
Timing
While every company wants to come to the market when it can
maximise its valuation, market sentiment can swing quite widely
from one day to the next. The equity markets may be having a boom
(a 'bull' market) when you first begin planning but may be on a
downward spiral (a 'bear' market) by the time your plans are coming
to fruition. Sectors that are everyone's favourite one day, may be
viewed as the dog's dinner the next. Timing is crucial for the best
valuation but even professional advisers cannot always accurately
predict what the market is going to do next.
Board games
One major aspect of going public is having the right board in
place from the outset. Without a strong board, without high calibre
people managing the finances and acting as non-executives, a public
listing will be unlikely. Investors will want to see a strong team
in place, one that can be trusted to deliver on the promises it is
making and one that can deliver the returns potential investors
expect. Following on from this, it is important that the company
has full and up-to-date management accounts, proving the track
record and overall business competence. Might sound obvious, but it
is.
Looking to the future
Any company floating on the stockmarket will expect to have
about their person, or thereabouts, a comprehensive business plan
that outlines a clear message about how you will grow a public
company. Not a scrap of A4 paper, not a few pages stapled together,
but a solid, well-researched business plan that shows the City and
potential investors that you are someone who knows what he or she
is doing, that you intend to grow the business, that this is the
way you plan to do it and that you can do it. The bottom line for
investors is the bottom line. If they invest in you, will they make
money? And if they do, how quickly?
I've been there
"The time to raise money is when you don't need it," says
Duncan Soukup, executive chairman of Thalassa Energy, an oil
services company that floated on AIM on July 29 2008 having raised
£3.1m. "Trying to raise money when you need it is like trying to
catch a cab when it's raining; it's nearly impossible. Just ask the
banks with exposure to sub-prime."