Before contacting underwriters and putting together the team which will lead the IPO, the company must first undergo an internal process of preparing to go public.
The Managers' Responsibility
The company's managers need to undertake the commitment required for the process and recognize that they will have to dedicate much time to it. Being intimately involved in the demanding IPO process, which could last several months, while continuing to manage the company, imposes an enormous burden on the senior management.
The company must have a well-formed business plan enabling the company to be presented to underwriters and to the representatives of various capital markets as a company ready to go public. A detailed business plan and forecasts may also facilitate a swift drafting of the prospectus.
Several issues need to be addressed before starting the actual IPO process. Among others, these issues include:
The company needs to ensure that its internal audit procedures meet the standards required of publicly held companies, including appointing an internal auditor and an audit committee. The internal system needs to be ready to prepare the annual and periodic reports required of listed companies. The company's financial statements need to be prepared according to generally accepted accounting principles (GAAP) and be audited by a CPA who is associated with a prestigious CPA firm (preferably one of the big four accounting firms).
Managing Investor Relations
The company needs to prepare to establish relationships with its investors. To this end, it needs to develop an appropriate investor-relations program and hence typically retains the services of an investor-relations firm (see the section on following the IPO for a further discussion).