For any growing technology company looking to go public, success is directly dependent upon effectively managing and growing the business within a turbulent marketplace. In the past year, a number of Australian businesses have witnessed IPO successes, for example Genworth Australia and Healthscope. Also attracting a lot of attention pre- IPO, is Atlassian, the local tech start-up that's inevetibaly headed for a billion-dollar IPO.
In today’s highly competitive business landscape, seemingly minor details become major factors in differentiating businesses that reach their goal and others that remain in mediocrity.
Within Australia’s thriving start-up scene, research suggests that the biggest danger facing start-ups is “premature scaling”, where a business tries to grow faster than demand for the product allows.
A key difference between high-growth companies that reach that IPO goal and others that never hit the open market? The former can rapidly adjust to unexpected organisational and market changes. They have internal processes that give leaders a consistently updated and holistic view into their own business’ performance, from fast and accurate financial analysis to detailed growth plans leading up to and after an IPO. The following are five tips to creating an equally effective internal strategy to best lead your business to that initial public offering.
Data: The Lifeblood of a Successful IPO
Leading a successful IPO requires a disciplined focus on measuring the most impactful key performance indicators (KPIs), even within a sea of daily business data. Then you can create systems through which employees across departments can easily view and understand their performance related to those KPIs. The more people understand about their contribution to business success, the more focused they will be on the most revenue-generating projects.
The CFO: Your Modern Day, IPO Driver
Using modern technology built to handle today’s business challenges, today’s CFOs should be driving business decisions based on financial performance insight. A CFO who is truly the designer of that corporate machine is one who can make tough calls, like knowing when to say no to department executives.
Talent: The DNA of Your Company
Simply put, talented and ambitious people create industry-leading companies. They are key components in any growth plan. Simply adding more people doesn’t always lead to more productivity. You need to make smart hires, particularly when eyeing an IPO. How many of your employees today can also lead your company tomorrow?
Hire for current needs while looking for people who can grow into leadership roles in the future. Employee retention and advancement is the most effective way to create a workforce full of emotionally invested people who will go the extra mile to ensure the company’s long-term success.
Making such hires requires an understanding of where your business is today, a forecast of where you want your business to go, and a plan to get there. Take the time to thoroughly analyze your financial performance – which is the best indicator of future needs – and then determine which employees are skilled and motivated enough to lead the business into tomorrow.
Game Day Ready: Establish the “IPO Mindset”
Going public brings about a new set of obligations that weren’t present during your privately-held era, so be ready to embrace a different context of accountability. That means having the flexibility to take quick action in the face of industry changes, and being prepared to answer to a greater ownership group, i.e. public shareholders. Make sure the entire leadership team understands and accepts the difference in ownership between private and public companies before crossing that chasm.
It’s A Risky Business: Knowing when to IPO
There are two financial performance signs that your company is ready for an IPO:
1. Your business has attained a critical mass, or;
2. Your business is positioned to get there very quickly.
Listing on ASX can be completed in two ways: via an IPO where capital is raised at the time of listing, or via a Compliance listing, where capital is not raised at the time of listing. To be eligible to list on ASX, a company must satisfy minimum admission criteria, including structure, size and number of shareholders.
According to the ASX listing pre-requisites, if you’re leading a company that’s considering going public today, the company should have at least 300 shareholders with holdings valued at a minimum of $2000 each, and at least 50 per cent of the company’s shares must be held by parties unrelated to the company and its directors.
If you insist on going public before meeting the criteria, you need to have a clear line of sight to get there in a short period of time. This is where sound financial planning comes into play – being able to accurately and consistently forecast financial performance to demonstrate that clear roadmap to being ASX ready.
IPO success requires the right mindset, high recurring revenue, and a strong leadership structure. Financial plans and forecasts must include hiring, spending, and capital expenditures, and the organisation needs a disciplined focus on both a long-term vision and a forecast for the quarter ahead. This is the most prudent way to manage the outcome in order to meet or beat any investor guidance you issue.
Rob Hull is the founder and chairman of Adaptive Insights