# An IPO (Initial Preparatory Outline) for an IPO! Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2022-02-04 Category: BUSINESS Category URL: https://financedigest.com/category/business Meta Title: Key Takeaways from 'The IPO Playbook' Meta Description: Discover key insights on preparing for an IPO, hiring the right team, and overhauling company culture for success. Written by finance expert Steve Cakebread. URL: https://financedigest.com/an-ipo-initial-preparatory-outline-for-an-ipohtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/istock-1321450974-1736816260085-compressed.jpg) As part of my ongoing pursuit of developing a deeper understanding of challenges faced by a start-up CFO, I recently read an excellent book named _‘The IPO Playbook: An Insider’s Perspective on Taking Your Company Public and How to Do It Right’_ by Steve Cakebread. Steve is an accomplished finance professional and has helped take three prominent names public – Salesforce, Pandora and Yext – in addition to guiding numerous others on various aspects of their growth journey. The IPO Playbook provides good guidance for a new CFO on what to keep in mind when planning to take a company public. The book was written with U.S. markets and regulations in mind, but the [key takeaways are equally applicable for any other market](https://www.financedigest.com/rowing-boats-market-key-players-industry-overview-applications-and-analysis-2029.html "Rowing Boats Market Key Players, Industry Overview, Applications and Analysis 2029"). I have listed my own six key takeaways from the book from amongst many more: **1.In terms of decision to go IPO**, the pros and cons are fairly straightforward. Besides cash, an IPO brings in significant amount of publicity and greatly adds to firm’s credibility which in-turn helps in getting new customers, securing new suppliers, and most importantly retaining & [hiring quality talent](https://www.financedigest.com/5-steps-hiring-top-talent-youre-just-start.html "5 steps to hiring top talent when you’re just a start-up "). The cons include cost (both one-time and ongoing), higher controls that can potentially slow down the growth, and diversion of significant [senior management’s](https://www.financedigest.com/senior-managers-regime-what-does-it-mean-for-the-industry.html "SENIOR MANAGERS REGIME – WHAT DOES IT MEAN FOR THE INDUSTRY?") bandwidth to things like earnings calls, investor relations, and media management. **2.It is best to start planning 18 to 24 [months ahead](https://www.financedigest.com/dutch-governor-knot-signals-ecb-will-keep-raising-rates-in-months-ahead-ft.html "Dutch governor Knot signals ECB will keep raising rates in months ahead- FT") of the IPO**. The idea is to prepare not only for the IPO (for which you would hire professional advisors, consultants as well as bankers) but to get your systems, processes, and teams ready to deal with post-listing requirements. For example, mandatory quarterly filings would require closure of [books within five to seven working days of quarter-end to ensure enough time](https://www.financedigest.com/best-selling-books-of-all-time.html "Best selling books of all time") for limited audit review and preparation of financials. Achieving this requires significant [system and process upgrade](https://www.financedigest.com/sweden-to-upgrade-berzelius-supercomputer-with-nvidia-ai-systems.html "Sweden to upgrade Berzelius supercomputer with Nvidia AI systems") in addition to change in culture for example, making employees file claims or invoices on time. In addition, requirements related to audit, corporate governance, systems (like Sarbanes Oxley in US), and disclosure requires massive preparation ahead of IPO. **3.Hire, Hire, and Hire.** The CFO need to [hire the right set of people which include specialists](https://www.financedigest.com/nine-tips-for-hiring-quickbooks-specialists-in-2022.html "Nine Tips for Hiring QuickBooks Specialists in 2022") like SEC (in case of US) reporting expert, dedicated payroll person, book closing professional, and a legal person with experience in exchange and listing requirements amongst others. Even departments like sales, marketing, and product development which are not apparently affected by IPO need to hire fresh talent due to the changed job [requirements and skill](https://www.financedigest.com/lack-of-collaboration-and-skills-shortage-is-limiting-organisations-ability-to-meet-ifrs-9-requirements.html "Lack of collaboration and skills shortage is limiting organisations’ ability to meet IFRS 9 requirements") sets. **4.Culture needs to be overhauled**. A public [company requires a very different employee mindset and culture as compared to a potentially](https://www.financedigest.com/factbox-companies-potentially-affected-by-italys-election.html "Factbox: Companies potentially affected by Italy’s election") individualistic and ‘take-no-prisoner’ approach of start-ups. A public company needs a more inclusive and consensus-based approach, even at the cost of growth, with systems and controls that even [senior management](https://www.financedigest.com/the-senior-management-regime-takes-shape.html "The Senior Management Regime takes shape") cannot override. To prepare for listing, the company [needs people who are experienced in building new controls and systems that would satisfy regulatory and stock exchange listing requirements in addition](https://www.financedigest.com/need-additional-funding-but-not-sure-how-to-go-about-it.html "Need additional funding but not sure how to go about it?") to keeping investors and research analysts satisfied. They are expensive and are hard to find. On the other hand, post-listing you would require people who can maintain and run existing [systems can be found in most listed companies](https://www.financedigest.com/setsquared-companys-maths-system-adds-up-to-pitch-perfect-palace-success.html "SETsquared company’s maths system adds up to pitch-perfect palace success") at comparatively lower cost. **5.The IT systems and processes need to be upgraded.**  Systems like General Ledger, Billing Systems and HRMS ( [Human Resource Management](https://www.financedigest.com/the-importance-of-strategic-human-resource-management.html "The Importance of Strategic Human Resource Management") Systems) are almost mandatory for a listed company in addition to optional CRMS (Customer Relationship Management Systems like Salesforce), Cash Banking, and Inventory Management Systems. It may be better for companies to go for a cloud-based suite or [ERP systems](https://www.financedigest.com/is-your-erp-system-industry-4-0-compatible.html "Is your ERP system Industry 4.0 compatible?") like Oracle, SAP, or Microsoft. The upside is a well-integrated [system](https://www.financedigest.com/innovation-at-periodic-intervals-to-upscale-the-functional-brain-imaging-systems-market.html "Innovation at periodic intervals to upscale the Functional Brain Imaging Systems Market") where everything is seamlessly connected and requires minimal manual intervention. The downside is that you may miss out on best of the breed systems and settle for average for some of the systems. Overall, the [key is to get a system](https://www.financedigest.com/vehicle-speed-monitoring-system-market-key-players-swot-analysis-key-indicators-and-forecast-to-2026.html "Vehicle Speed Monitoring System Market Key Players, SWOT Analysis, Key Indicators and Forecast to 2026") that can: - Sustain the projected growth (in terms of volume, product suite, channels, and geographies) for at least 5 [years post listing](https://www.financedigest.com/start-up-etioca-eyes-nasdaq-listing-next-year-as-it-unveils-electric-taxi.html "Start-up Etioca eyes Nasdaq listing next year as it unveils electric taxi"). - Capture and report operational and financial [data that can be easily and securely converted into quarterly and annual Stock](https://www.financedigest.com/stocks-sag-as-hawkish-fed-cools-china-rally-awaits-us-jobs-data.html "Stocks sag as hawkish Fed cools China rally; awaits US jobs data") Exchange filings - Pass access and data controls requirements of auditors, regulators (like Sarbanes Oxley in case of US), research analysts, and [Stock Exchange](https://www.financedigest.com/london-stock-exchange-pours-cold-water-on-merging-listing-segments.html "London Stock Exchange pours cold water on merging listing segments"). **6.Focus on getting long-term investors**. A successful IPO require [investors to bid](https://www.financedigest.com/glencore-courts-120-teck-investors-for-bid-backing-as-spinoff-vote-looms-source.html "Glencore courts 120 Teck investors for bid backing as spinoff vote looms -source") for purchasing almost all stocks on offer (generally referred to as book building) by a set of investors. If the company’s story is good, communicated well during the pre-IPO road shows, and [stock market](https://www.financedigest.com/online-trading-and-stock-markets.html "Online Trading and Stock Markets") is conducive then it is likely that the book would get oversubscribed. This means that the company (and the bankers) would have some leeway in choosing the [price as well as future investors](https://www.financedigest.com/analysis-oil-prices-turn-more-volatile-as-investors-exit-the-market.html "Analysis-Oil prices turn more volatile as investors exit the market"). The bank would try to allocate more shares to their preferred set of investors, but it is key for company to push for [higher allocation to its set](https://www.financedigest.com/oil-set-to-end-turbulent-2022-modestly-higher.html "Oil set to end turbulent 2022 modestly higher") of preferred investors. It is critical that the company does its own research prior to IPO and identify a [set of investors](https://www.financedigest.com/uks-most-liveable-city-manchester-sets-its-sights-on-the-world-from-tourists-to-property-investors.html "UK’s most liveable city, Manchester sets its sights on the world, from tourists to property investors") that are: - Typically, long-term like pension fund, insurance companies, and mutual funds that are unlikely to dump the stock in [market on the IPO](https://www.financedigest.com/porsches-blockbuster-ipo-is-no-gamechanger-for-europes-battered-markets.html "Porsche’s blockbuster IPO is no ‘gamechanger’ for Europe’s battered markets") day itself creating downward pressure on price. - Have [invested in peers and hence have better understanding of the industry and existing business models](https://www.financedigest.com/nissan-renault-to-invest-600-million-to-make-6-new-models-in-india.html "Nissan, Renault to invest 0 million to make 6 new models in India"). A good investor can advocate company’s story to the broader investor community and would be easier to [deal with during earnings](https://www.financedigest.com/french-uber-drivers-to-earn-more-than-8-per-ride-after-union-deal.html "French Uber drivers to earn more than per ride after union deal") call.  Also, reducing hedge funds and day-trader allocation helps in alleviating downward [pressure on stock price](https://www.financedigest.com/heavy-norwegian-gas-maintenance-adds-to-energy-price-pressure.html "Heavy Norwegian gas maintenance adds to energy price pressure") in the initial days of the IPO. In addition to above list, few other things that are worth noting include [keeping the company](https://www.financedigest.com/in-listening-mode-new-bayer-ceo-keeps-open-mind-on-company-split.html "In listening mode, new Bayer CEO keeps ‘open mind’ on company split") cashed-up to meet cash requirement for say 24 months when starting to plan for an IPO, ensuring that the IPO price leaves some money on the table for incoming investors, and hiring the bankers for their sell-side research analysts. Overall, the book provides a good [list of items](https://www.financedigest.com/myhermes-boosts-smes-by-revising-cover-model-and-excluded-items-list.html "MyHermes Boosts SMEs By Revising Cover Model And Excluded Items List") to be kept in mind when aiming to go for an IPO. It doesn’t aim to be a comprehensive to-do list or a legal manual but more of a broad guidance around what the [company need](https://www.financedigest.com/italys-windfall-tax-on-energy-companies-needs-to-be-rewritten-pm.html "Italy’s windfall tax on energy companies needs to be rewritten – PM") to start thinking before going for an IPO. This book is highly recommended for senior management of any company aspiring to go for an IPO. **_![](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/tanay-450x489-1736816260034-compressed.jpg)_** **_Author profile_** **_:_** _Tanay is a seasoned M&A professional with more than 14 [years of experience](https://www.financedigest.com/2021-the-year-of-buyer-experience.html "2021: The year of buyer experience") in advising Financial Institutions Groups around their M&A needs at reputed firms like Deloitte, Standard Chartered Bank and Ambit Corporate Finance. He has advised over 50 deals with value of USD 10 bn in South East Asia and South Asia with special focus on insurance, bank, non-bank funding companies, [asset management](https://www.financedigest.com/asset-managers-on-alert-after-whatsapp-crackdown-on-banks.html "Asset managers on alert after ‘WhatsApp’ crackdown on banks"), and brokerage clients._ --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---