Growth is assuredly the mark of a successful business, and the owners may need to consider the potential for offering shares to the public in an effort to raise operating capital. Cash flow is a serious issue for all businesses. However, making the move to going public can also bring uncertainty and a potential loss of control because stockholders will have a say in how business is conducted to some degree. This includes selling shares quickly when they have made a reasonable profit. There are both advantages and disadvantages to taking a company public, so here are a few things to consider before making a final decision.
The primary advantage that any business has when offering stock to the public is that it will be receiving money that it will not be required to repay. This result can seriously increase the amount of operational capital the company has to facilitate more growth. Additionally, the new assets can justify paying management officials more salary, which in turn could attract more qualified management personnel. Of course, the move also brings more attention and increased status of the company, largely because publicly held companies tend to have a higher share value.
The primary disadvantage of going public is a potential loss of control in establishing a long-term strategy for growth. While some stockholders will be focused on the long run, others may be looking to make a quick profit. If the short-term investors are the largest percentage of stock purchasers, then a short-term profit could become more important when decisions are being made. For the sake of business formation and planning, this could become a problem when others decide to follow suit in copycat fashion, which is common in the market.
Going public is a very serious decision for all business managers and owners. Before going through with it, business owners need to weigh the pros and cons.