Floating on a stock market: your options
Is your business suitable for flotation?
Stock market flotations are unlikely to be suitable for smaller businesses. Before you even consider a flotation, you need to determine whether your business is a suitable candidate.
Investors will only be interested in buying shares in your business if it has secure earning streams and strong growth prospects. They will look for a good rate of return on any investment but will require a higher rate of return from an unproven, smaller business than from a large established company to compensate for the greater risks involved.
It is harder to guarantee a successful investment in companies new to the market. Smaller companies are more likely to suffer should market or financial conditions change - making investment in them risky.
You have to assess whether your business can deliver that rate of return. Ask yourself whether:
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the business has a strong record of delivering profits and growth
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your sector is attractive to investors
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your business plan sets out how you will deliver strong growth in earnings in the future
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your management team is up to the task of delivering the performance required
If you feel your business can't deliver the necessary growth and that it's in a relatively unattractive sector for investors, a trade sale - where the business is sold to another outside party - might be a more viable option.
For more information on trade sales, see our guide consider your exit strategy when starting up.
Subjects covered in this guide
- Introduction
- Is your business suitable for flotation?
- What is a flotation and why consider it?
- Advantages and disadvantages of flotation
- Choose the right market
- Appoint your advisers
- Prepare for a flotation
- Price your business' flotation
- The flotation process
- Here's how we prepared our business for flotation
