When the directors of a given company wish to go in a new strategic direction to provide new services and products, they will assess if the company has the resources to put into practice and maintain the new initiative; it might include such tactics as how risk and earnings are distributed between subsidiaries and locations. The study might include satisfactory parameters for non-production items and economic scenarios. Of course, detailed cash flow predictions well into the future with contingency plans and other scenarios are a must. Although this a basic step, most small private companies and private entrepreneurs that want to go public may not be familiarized with the degree of financial oversight that public companies use on an ongoing basis.

Understandably, post-Enron market and other capital funding for public companies in the US has been extremely difficult to obtain, and public and lender confidence is only slowly returning. This lack of confidence has made it even more advantageous for private companies to go public, The importance of sound financial management and leadership - sound PandL and balance sheet review and oversight - is critical not just to that company's profits, but to thousands of families and retirees around the country, whether they are relying on company benefits, or on a sound economy that is supported by each individual company's performance.

Private companies are accustomed, in many cases, to operating independently and making financial decisions without outsider oversight or input. Many private companies utilize only limited outside input or financial commentary -- typically engaging a public accountant or CPA for quick review, to complete tax and/or payroll filings -- with limited thought to actual cash flow forecasting or realistic revenue projections and PandL analysis. It is not unusual in the private company world to see many smaller firms operating without any fixed budget, with company ownership relying solely on the revenue side of the financial equation; focusing solely on revenue projections (sometimes without true profit analysis); operating without internal audit controls, without real-time budget checks and balances based on cash flow forecasts; without real-time adjustments to future financial forecasts, to adjust to market or environmental changes such as product price increases, economic impacts to customer demand, workers compensation claims, unexpected losses, or other real-world events. Many private businesses, as public accountants can attest, operate without either the 1-year or 5-year budget and cash flow forecasts which public companies or corporations routinely utilize.

When a business seeks to go public, utilizing a typical time-to-market time frame of 4-6 months, private companies will be well-rewarded to invest focus and resources on an initial detailed audit and financial plan. This should include meticulous cash flow forecasting, historical and forward-looking PandL projections, financial contingency plans based on 2-3 initial offering / market entry scenarios ("what if" budget and scenario analysis and projections): both to satisfy federal regulatory and exchange listing requirements - if applicable, depending on the exchange listing sought - and to present as complete a financial picture as possible to prospective investors and capital funding sources. This initial exercise should also provide an honest and realistic projection for company ownership, of the impact of going public on company growth, revenues, and cash flows.

Many private company owners approach the go public process with a general expectation or awareness of the many benefits of being a publicly traded company -- which typically include enhanced visibility, increased company valuation and credibility, etc -- but with only a vague idea of market strategy, or detailed cash flow predictions. Cash flow forecasting is particularly difficult for start-up companies, as they may lack the historical expenditure perspective to accurately anticipate costs and revenues. This level of financial detail - overhead, true cost of goods, market or product differentiation, and contingency strategies - is typically the calibre of information investors or lenders will demand before funding, however.

Private company subsidiaries or product lines may be accustomed to being carried or subsidized by a parent company or other product lines, without real-time cash flow analysis, or without a true financial model of cost of goods sold. When money runs out in one product line, the company may be accustomed to borrowing from other product lines, without a full appreciation of the level or scope of subsidization. While it may be acceptable to apply this same strategy as a private company moves into the public arena, public companies will be required to more thoroughly identify, justify, and forecast such areas, to meet regulatory and investor requirements. Private owners typically have only one chance to impress potential investors, or analysts, or potential shareholders.

Federal law requires that all sales of securities be either registered with the SEC, or meet an exemption. Reg D under the Securities and Exchange Act of 1933 allows companies meeting certain categories of exemptions to be excluded from SEC financial reporting requirements, and to sell stock without this regulatory burden.

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