Know what an IPO is? An initial public offering (IPO) is basically a company's first sale of stock to the public, which is why it's also called "going public." Usually - but not always, an IPO involves the stock from a young and not-too-well-known company. The most compelling reason to go public is to raise cash for operating capital. But there are strings attached

After the demise of the dotcoms, the scandals of Enron, WorldCom, Tyco, and Global Crossing, the landscape for IPOs has changed. Taking a company public is no longer an automatic decision - even for those companies who are good candidates. Oh, there are lots of reasons to go public - access to capital, increased liquidity, employee compensation, publicity, and prestige. But before you jump on the "public" bandwagon, make sure you've considered the following points.

Have a golden parachute handy?

Anytime you take on a money partner, you risk losing control of your company, and maybe even the company. Jim Clark, before his huge success with Netscape, was essentially forced out of his first venture, Silicon Graphics, by the venture capitalists he initially partnered with to get started.

Some entrepreneurs chafe at the constraints of being a public company. Richard Branson of Virgin is a good example. After taking his company public, Branson discovered he really did not like sharing profits and working with outside directors of the company. Branson and his management team eventually executed a management buyout to take the company private again.

Research any anti-takeover measures available and build them into your IPO, if possible. Remember, though, investors won't be willing to pay top dollar for a company where the management can't ever be replaced.

Sexy enough?

Your company must have an "investor appeal." This means that your industry, services, or products are extremely popular with consumers, and therefore, very attractive to investors. If your product or service isn't "sexy," going public is not for you because brokerage firms probably won't even talk to you and a privately sponsored IPO -which is an option - is really not for the weak at heart.

Do you know your "why"?

A business needs a reason to go public, for investment in future growth. If it currently is cash rich and has no intention of explosive growth that requires more capital, there is very little benefit either for the owners, or future shareholders. Also, unlike in the heady days of dot-com-ville, you have to justify the infusion of cash; don't expect anyone to look favorably on corporate fitness centers and fancy desks!

Are you comfortable with "sharing" - profits and information? In exchange for the infusion of cash which is generated from an IPO, you agree to give up a portion of your profits which are returned to the investors. Essentially, you're sharing the rewards with your partners, as they come in and assume some of the risks for you.

Some companies resist going public because of the loss of confidentiality for company operations, policies, and profitability. This is especially important for companies who depend on proprietary technology to create its goods or services.

Do you have a good business plan?

Part of the IPO process is completing the disclosure document, which is very important in convincing investors of the viability of your IPO. Without a well-defined business plan in place, you may find it difficult to fully answer the disclosure document questions, and investors may find your offering less attractive. The business plan you'll need can run from 25 to hundreds of pages, and can cost $5,000 - $20,000 to produce.

How much more reporting are you willing to do?

Public companies are often put under a microscope by investors, customers, competitors, regulators, etc. There's also a tremendous push these days for greater transparency with financials. The public market is demanding not just the numbers, but how those numbers are derived. As the head of a public company, you will be required to file reports with the SEC, any exchange you list on, and comply with any applicable state securities law. All these reports cost money to produce and also provide information to your competitors.

Are you a lone wolf?

If you are successful with your IPO offering, someone else will own a share of your business - and they may want a say in how things are run. You will be subject to their ideas, opinions and demands on how you should run your company. If you are not willing to share control with your new partners, or if you don't trust their decisions, this loss of control is the deal breaker for you. And if your business relies heavily on the ability of one or more key personnel, realize that going public can put huge restrictions on these people.

Got an extra million lying around?

An IPO costs money! A typical firm may easily spend $750k on direct expenses related to an IPO. And that doesn't even consider the indirect costs of management time being spent on IPO, disruption of business while preparing the IPO, etc. You'll also need a good outside team - IPO consultants, accountants, attorneys, underwriters and PR specialists - none of whom work for free, of course!

What if you don't have free time to begin with?

Most people are surprised at the amount of time it takes - outside your normal business operations - to prepare your offering. During this time-intensive process, your role of actually managing the company may suffer. You'll be meeting with, and giving presentations to, potential investors. And the toll on your personal life can be significant - preparing to go public will eat into your time for family and friends. Yes, it's only short-term, but it may be as long as one year, and you do need to be prepared for long, sometimes grueling, 13 to 15-hour days.

Is your management style conducive to shepherding employees through the changes?

Many business owners report that the process of going public changes the internal dynamics of a company. It's important to maintain open lines of communications among your staff during this time. Once you've gone public, don't let the staff feel they need to worry about day-to-day fluctuations in stock price, distracting them from their jobs. And sometimes, employee benefits programs are modified after an IPO, which can also make employees nervous.

If your current management style is very close-to-the-vest and you usually only share information on a strict "need-to-know" basis, the productivity of your employees post-IPO may suffer severely. A more open management style is more conducive to successful post-IPO operations.

[A special thanks to these experts who helped me compile this list: Willie Crawford, Andy Beard, Dien Rice, Ankesh Kothari, Richard Dennis, Stephan Iscoe, Jeff Burnham, Members of The Seeds of Wisdom Business Forum, and The Willie Crawford Forum. M.M.]