Are You READY for the Naked Truth? Lessons From an IPO Offering…
The decision to go public with an IPO is pivotal to the growth of a company, for a number of important reasons.
It’s when you tear down the walls and invite outsiders inside your company. It’s when you agree to allow everything you do to be examined, scrutinized, and challenged. So, if you’re not ready to be naked in front of others — think twice.
A few years ago a client with whom I was on a multi-year retainer decided to go for an IPO. The client was a well-known, name-brand designer — and the organization, while only in business for a just over a decade, was now seeing profits heading north towards seven figures. With the aspiration and likely potential of huge growth — and a timely positioning to be one of the top three design houses in the world — the leadership team and board made the fateful decisions: It was time to go public.
And that’s when the work began.
It’s one thing to be able to stand in front of a crowd of employees who know what you do inside and out and talk about what’s next for the brand. It’s another thing entirely to create the documentation, the presentations, the road shows and the rationale to convince people who don’t know you why they should invest in you.
From Dreams to Reality
First, we needed to move from natural insider enthusiasm for a new brand extension to putting things down on paper for a financial team to examine. That team of financial truth-seekers was there to pull apart and challenge all our data before the investors had a chance to do so.
For weeks, I worked with my client’s CEO. We talked and talked over the matter, working to flesh out her vision and unfold her aspirations for the company’s future growth.
What we discovered: As a CEO, you know that what is and what will be seem closely connected when you talk about strategy — but tend to get further away when you need to actually execute it. So, there’s a real need to balance the dream with the reality and be true to what can make the vision live for others who choose to invest. Since this was a design company, everything had to be articulated perfectly and then scrutinized by the CFO, who would go on to build the financial story behind the dream.
Dressing Up for the Road Show
It’s not enough to simply lay out and substantiate the vision. After that, you need to go on the road and talk about it, explain it, demonstrate it, and sell it. You need to convince people that your dream is worthy of their investment dollars.
Actually, some say that 70 percent of investors look at an organization’s management as the deciding factor for IPOs. “Can I trust the leadership team to pull it off?” they may ask. “Are they a cohesive team? Can they execute the vision — really? Will they execute it well?” Answering these questions convincingly is no small feat, especially since you may be giving three to five presentations a day once you’re on the road (going city to city, working the crowds and, of course, doing it perfectly each time).
It’s a rough experience. My client half-joked that you either need to be high on belief to carry you through it day after day — or you need to take to the bottle. Fortunately, she was able to succeed by getting high on the experience (and then collapsing from fatigue at night between cities).
Also fortunately, being in the fashion industry, a part of her presentation was a “demonstration” of the new and exciting things to come when people invested in the brand. “Seeing is believing,” after all, and as a design professional, she definitely had an advantage that not all companies will share. Not all IPOs can tell their story so graphically and visually. And that’s all the more reason why rigorously researched data is so critical to success.
Not all IPOs involve stock options for employees. However, if and when they do, it’s a powerful experience for employees to go through with the management team.
I was the one to go to bat for giving everyone a piece of the action. It made so much sense, because my platform is about creating work environments where people feel like owners and act like owners. So, giving employees a share of the business — even a small share — is a crucial way of signifying appreciation for their hard work and giving them the motivation to stay the course. And that’s all necessary to help ensure that the company’s vision becomes reality.
Reality Sets In
In the case of this company’s IPO, the stock price was incredibly high. People were drunk on success over the first 24 hours, and when the smoke and mirrors of the initial IPO finally settled, the stock slipped back from $27 per share to $21.
Then reality set in … and the management team and employees began to realize that “when someone else owns you,” you need to really work hard.
The mirrors are always there, of course, and sometimes they’re foggy; you need to make sure they get cleaned. Being on the other side of the IPO, there was a rigor and a discipline expected by everyone. You could no longer simply say, “We can do this.” Now you needed to say, “We can do this, and this is how we’re going to do it.” The link between aspiration and execution is more closely watched, and people had to deliver when they said they would.
And everyone became mindful that performance sometimes didn’t have a practice stage — it was the reality.
Going for an IPO isn’t easy, and it requires the difficult and honest answering of a lot of tough questions. But nothing worthwhile is easy, right? So don’t be discouraged by this story; instead, let it motivate you to power your way through the process. Preparation is key: If you believe in your team and have the right numbers — and understand the tough reality you’re about to face — you’re already halfway there.
Judith E. Glaser is a change agent and executive coach, and refers to herself as an organizational anthropologist. She’s been a speaker for Vistage and TEC for more than six years, and is the author of three best-selling books: Creating We, The DNA of Leadership and 42 Rules for Creating WE. You can e-mail Glaser at firstname.lastname@example.org.