Going public refers to the process of a private company issuing shares of stock to the public in an initial public offering (IPO). This allows the company to raise capital by selling ownership stakes to a wider group of investors, but also subjects the company to increased regulations and public scrutiny. Small businesses may consider going public as a way to raise capital and increase their visibility, but it can also be a complex and expensive process that may not be right for every company. It’s best to consult with a financial advisor and a securities attorney before making a decision about whether to go public or not.
As of 2021, small businesses in America were facing a challenging environment due to the ongoing COVID-19 pandemic. According to data from the National Bureau of Economic Research, over 100,000 small businesses permanently closed in the United States between March and December 2020. The pandemic has also led to significant job losses and reductions in revenue for many small businesses.
However, despite these challenges, many small businesses have also found ways to adapt and remain viable. Some have shifted to online sales and delivery, while others have pivoted to new products or services.
In terms of the future of small businesses in America, it is difficult to predict with certainty how the ongoing pandemic and its aftermath will continue to impact small businesses. However, many experts believe that small businesses will play a crucial role in the economic recovery. They are often considered as the backbone of the economy, and their success is key for job creation and economic growth.
The government has also implemented various stimulus and relief measures to help small businesses in America survive the pandemic. Some measures include Paycheck Protection Program (PPP) loans, tax relief and more.
It’s worth mentioning that small businesses will continue to face challenges in the future such as competition, changing consumer preferences and access to capital. However, if they are able to adapt and find new ways to meet the needs of customers, they will continue to play a vital role in the American economy.
Small Businesses Going Public
Going public is a relatively uncommon move for small businesses in the United States. The process can be complex, expensive and subject to a lot of regulations, which can be a deterrent for many small businesses. Additionally, many small businesses may not need to raise large amounts of capital, or may be able to raise it through other means such as venture capital or private equity.
Instead of going public, many small businesses in America choose to remain private and focus on growing their business organically, through reinvestment of profits or by seeking out funding from private investors.
That being said, many small and medium-sized businesses (SMEs) also choose to go public through a special type of listing called “Reg A+” which was created by JOBS act of 2012. Through Reg A+ companies can raise up to $75M from both accredited and non-accredited investors.
It is always recommended to consult with a financial advisor or a securities attorney if you’re a small business owner considering going public. They can help you evaluate the potential benefits and downsides of going public and determine whether it’s the right move for your business.
The Pros of Going Public for Small Business
There are several potential benefits for small businesses that choose to go public:
- Raising Capital: Going public allows a small business to raise large amounts of capital by selling shares of stock to the public. This can be used to fund expansion, pay off debt, or invest in new projects.
- Increased Visibility: Going public can increase a small business’s visibility and prestige, which can be beneficial for building brand awareness and attracting new customers.
- Liquidity for Shareholders: Going public allows current shareholders to sell their shares on the public market, providing them with liquidity for their investment.
- Increased Credibility: A public listing can increase a small business’s credibility and reputation, making it more attractive to customers, suppliers, and potential partners.
- Access to a Wider Range of Investors: Going public allows a small business to attract a wider range of investors, including institutional investors, who may not have been interested in investing in a private company.
- The ability to use stock as currency: Public companies can use their stock as currency for mergers and acquisitions.
The Cons of Going Public for Small Business
Going public can be a complex and expensive process, and there are several potential downsides for small businesses that choose to do so:
- Increased Regulations and Scrutiny: Public companies are subject to stricter regulations and more intense public scrutiny than private companies. This can be burdensome and costly for small businesses to comply with.
- Reduced Flexibility: Once a small business goes public, it must disclose significant financial and operational information to the public. This can limit the company’s ability to make strategic decisions without first considering the impact on its public shareholders.
- Short-term focus: Public companies are often pressured to deliver consistent and predictable financial results which can lead to a short-term focus instead of long-term growth.
- Increased Costs: Going public requires significant legal and accounting fees, as well as ongoing costs for compliance and reporting.
- Loss of Privacy: Going public can also mean that a small business’s private financial information is available for public consumption.
- Dilution of Ownership: When a small business goes public, existing shareholders may see their ownership stakes diluted as new shares are issued to raise capital.
- Risk of Share price volatility: Public companies are subject to the volatility of the stock market, which could lead to share price fluctuation.
It’s important for small businesses to carefully consider the potential downsides of going public and weigh them against the potential benefits before making a decision.
