Assuming an entrepreneur began a business with a few close friends as shareholders, they all bear the profits and losses. As the company comes of age and exhibits a significant growth potential, any business owner desires the business to become even more prominent. To achieve this calls for a substantial capital investment which the banks may not be willing to offer. This is where going public through an Initial Public Offer (IPO) comes in. It means the company will now be traded publicly. Further expansion is among the significant reasons why businesses go public. But it comes with other benefits as well.
This is the most cited benefit of going public. It is not always easy to obtain money from investors or venture capitalists. Sometimes investors are available but are unwilling to offer the adequate capital needed for the venture to move ahead. In such a scenario, the entrepreneur may seek equity investment from the public through an IPO. The funds raised help companies to hire top talent, reduce existing debt, build new structures, adopt modern technology, and expand existing units.
Better Public Image
Going public raises the business’s image to insane levels. The business emerges from obscurity and gets much-needed recognition. The employees, customers, and banks now see it differently and acknowledge the business as a significant player in the industry and a force to reckon with. Banks no longer deny the business access to finance. This increased prestige offers the business free marketing and enhanced brand awareness.
Hire top talent
One major challenge with small businesses is recruiting top talent. Once a company goes public, that no longer becomes an issue. Making your company public brings in more interested people who want to be associated with the business. It also attracts more potential employees. With the raised capital, a business can afford to offer high salaries and other perks to top talent in the industry. The company can also go the extra mile and provide stock shares to employees to increase its retention capacity.
Raises future capital
When a business goes public, it provides an opportunity for raising future financing. Due to the increased company’s value, it becomes easy to get private funding if needed. Even better, the company can consider raising additional capital in the future by issuing a secondary offering. Assurance of future funding means the business can continue exploring expansion opportunities when the time is right.