FAQs for Business Owners Thinking about Going Public with ISM
I have heard having public stock is risky
On the NYSE or NASDAQ, perhaps. With the Independent Stock Market, there are no puts, no calls, no short or naked short sales – no derivatives. No monkey business! There are risks, sure. We’re just getting started!
I have heard that having public stock costs a lot
Traditional processes can take substantial upfront funds & resources. Some companies have spent $1 million or more just to get started. Our costs are a tenth of that and we help you maintain control of your growing company.
What are the benefits of going public?
There are many benefits. Owners can take out cash from their sweat equity. They can acquire competitive or complementary companies with stock instead of cash. They can sell a small percentage of stock for cash to grow their business while maintaining control of their company. They automatically remove IRS approved discounts by going public, thereby increasing the value of their business by 20% or more!
I don’t want to look like we are desperate
When your customers realize that you are offering them ownership in the company they love, they will see it as a kind offer to “share the wealth” not as a plea for help.
I’m afraid of losing control of my company
You will only offer the amount of stock that you want to release to the public. Just keep a majority share of the stock to keep control of your company.
I don’t want to deal with more investors
The majority of investor problems come because the investor is stuck in a private company. With ISM, your unhappy investors can simply sell their stock to happy ones.
The following are real questions from actual business owners answered by ISM CEO and America’s Capital Coach, Adam Brandley
The TV Show Audience: The TV show is a stroke of brilliance, but without a network to air it and lots of people watching, it’s hard to know what will happen. The whole strategy hinges on the success of the TV show to be a marketing machine – for the product and for investors – so it’s difficult to sign on when that piece of the puzzle is an open question.
Even without ABC/CBS/NBC/FOX (which we believe we will get one of them because they are very interested!), we already have AMGTV, a national syndication firm from New Jersey, signed to take us. We also have an online channel and the fans from Kevin, Forbes and all the national celebrity’s fans and the customers and friends of the initial companies. Also, social marketing linking Shark Tank and incubation chat rooms will get the viewers. We will get viewers. Social media is fast moving and the news will spread.
Being First: Being offered the opportunity to be one of the first on-air and listed with ISM is a great honor but comes with additional risk. Typically, a show will grow its audience base over time. Unless there is tremendous marketing hype set up in advance, the first few shows have the smallest audience. That, and there are kinks to work out in any new initiative. So, being the guinea pig is riskier than being in future seasons. Admittedly it has its advantages too.
You don’t have to go first. The first show gets the most promo upfront and will be taken with us or mentioned to all the TV and radio interviews prior to and after the first show. The second season will never be the first in our history. Also, expenses increase for the second season. The second season and beyond will cost $150K plus $50K to be on the show – as not everyone after the first season will be able to be on the show because there will be so many quality companies signing up. Every company that posts with ISM, whether or not they are introduced on America’s Real Deal, will receive all the powerful benefits of being listed on our public marketplace.
Valuation: This entire enterprise for us is dependent upon our valuation. Since we haven’t been preparing to go public for 18 months, my concern is that regardless of our nice trajectory, a valuator will not give us the valuation we need to make this a worthwhile endeavor. And that sinks the deal immediately, but not before I’ve spent the money assuming it will all work out. There’s a chicken-and-egg issue here: If I knew for a fact I could get valuation X, I would be more likely to proceed.
You can get the valuation now and find out. It costs $5K if you use our friend or $15-$20K elsewhere. If you want, we can put you in contact with Dale Richards so that you can get a feel for what your valuation might be. Let him know that you have been talking about going public with ISM and about your above concern. He is a great guy, straight shooter, and you will like him. Valuations are based on historic numbers, the industry, assets, management, and potential projections, etc. The following outlines valuation criteria and then there are weights assessed based on the scoring.
|Quality and depth of management|
|Importance of key personnel|
|Stability of industry|
|Diversification of product line|
|Diversification of customer base|
|Diversification and stability of suppliers|
|Stability of earnings|
Money: We’re a small business. From our perspective, this is a hugely expensive proposition. Intriguing for sure, but very expensive. Moving forward effectively puts most/all of our eggs in this basket. This basket promises to (a) bring in funds and (b) drive awareness and consumer purchase. If it works, it could be great, but if any of the things above doesn’t fall into place, I don’t just lose my money, I could lose my business because I’ve banked on this to be not only the fuel for the finances but the fuel for sales. Money is particularly challenging because there are 6-figure fees before anything ever actually happens that’s of tangible value to us. That just doesn’t sit right, especially given all the rest of the risks involved.
I agree. It is a risk. That is why we are discounting the price. We understand that the discounted price is still a big hurdle to jump over. Some of the companies are paying $10K a month, instead of all up front. The game plan is to have their offering done within 4-5 months, and within the 6th month or sooner start raising funds. Thus you will have about $60K at risk, (plus your audit and valuation), have a fully tradeable stock company and a partner to help you capitalize and grow. I can sell our concept to a few of your investors and get you the $150K you need, $100K for us, about $15K for audit and valuation and $35K for additional inventory, website work, public relations etc..
We can offer the investors a 20 to 35% discount on the stock now from what it will be when you go public. That is a nice option. If you don’t have a handful of potential investors, we can hold a meeting with your fan base and you can get 50+ people there, which could get you the cash. I agree, don’t pull from cash flow if you can’t and if you have other options.
We want, more than anything, for it to sit right for you. What doesn’t sit right to me is seeing you pass up this opportunity to take your business to the next level in such a powerful way, with a partner that won’t quit working for you.
Distraction: Given the risks, I have to consider whether this is a focus or a distraction. Given the money involved, it has to be a focus. But given the risks, that focus could turn out to be a disastrous distraction.
Instead of distraction, it will be momentum. Think of all the Facebook and other social media posts and excitement that will come as a result of jumping with this. “Watch us on AMERICA’S REAL DEAL!” “Invest in our company!”
The worst case scenario: You end up with a public entity and can raise funds from non-accredited investors direct from your website, your company becomes worth 30 to 50% more than it is now, and you have new energy and power to acquire competitors and leverage your now-public stock than ever before, and your founders and new investors have liquidity for their investments.
You are completely right – it must be a focus! Energy, excitement, and confidence on a potential 10x on your business in just a few short years.
Available Equity: We didn’t really get into this yet, but I have already raised some investment money and given away a lot of equity in the process. I don’t know how I could afford to do this from an equity perspective. I do think you may have some clever ideas here, so I’m sort of reserving judgment on that but I feel like we may not be in an equity position to do this. I’m eager to get your thoughts.
You’re right, this really isn’t an issue. As long as you control the company now or can get voting rights. That is the critical piece.
Going Public: I don’t feel I have a good appreciation for what this might mean for our company. I don’t think I have a good handle on the implications, the costs, the risks, the hassles, or, the flip-side: the benefits. I know you’ve done a marvelous job laying some of this out for me at a high level, but making a commitment means I need to understand what I’m getting my company into. Once I go down this path, it’s hard to turn back. Not something to be stepped into cavalierly I guess is my point.
We will hold retreats/conventions every six months to make sure every public company understands everything. Also, you can always call or come into the office for assistance. Here is a quick review:
Benefits: Raise capital, (sell some sweat equity too); leverage stock for acquisitions, hire better staff with stock incentives; increase the value of your business – this alone offsets any costs; obtain liquidity for investors and shareholders.
Costs: $100K upfront plus a GAAP audit each year, one-time valuation, $58K a year for all filing and reporting, stock transfer fees and online posting of your stock as well as consulting etc. You can choose to pay $10,000 a month for the first year instead of the $100K upfront.
Hassles: A semi-annual report that we help with and submit. Monthly update to customers and investors which you should be doing now anyway. Annual shareholders meeting which you should be doing anyway. We will show you how to do all of these activities.
Risks: Covered above under distractions/worst case scenario. My risk: I put my faith in you and promote you and you decide to quit and do something else, or you just don’t put your whole heart into it and sales drop dramatically so stocks start dropping and I lose my profit, and I don’t have you to brag about. It could affect my whole dream as well, especially if you are part of my first 20 companies.
The Unknown: You – and potentially we – are flying into uncharted territory on many fronts. TV, investment vehicles, SEC regulation, etc. Who knows what awaits us and how much unknown mess there is in the way of our success? I am not afraid to challenge the establishment or build what hasn’t been done before, but I’m concerned that I know so little about where we’re headed that I could be stepping into something that is far riskier than what I have imagined. And I’m concerned that if I took this concept to others on my team, I would get an “are you crazy?” look.
The REG A+ is heralded as a hit by the SEC and its critics. SEC loves it because all the companies are registered with them. Combining that with our primary and secondary portals and TV show, ISM is the future of funding. I am happy to introduce this to your team. Would three SEC attorneys, Kevin Harrington, Dale Richards, and more investors put their names and reputation on the line for something “crazy”? No. Your team will congratulate you for being at the right place at the right time and for the excitement of the ride. This is a journey for those that like roller-coaster rides with their hands in the air enjoying the thrill, trusting that they are safe to enjoy the experience. It is not for those hanging on to the bar in front of them waiting for it to end. Hands up my friend!
At the end of the day, every decision we make affects our business. This is a big one, the results of your daily decisions determine if you can pay a profit to you and your investors. You have investors money. How often do they contact you? How much would they like their money back or at least an avenue to sell their stock if needed? This can often be the most powerful benefit of going public – providing an opportunity of liquidity for you and your founding investors. This is why they will jump in with you and even help put up the $100K. Even if the show fails, ISM will not. And the show will not fail.
Your goal is to build your dream, my goal is to help you take your dream to the next level and beyond. We will be partners in making that happen. I see multiple TV show appearances as we show off your success. I see national interviews and strong relationships with our hosts and my contacts that are invaluable. I am inviting you to take the “Indiana Jones” leap of faith because I can see the path and the prize on the other side.
Contact the Independent Stock Market for more information.