3 Reasons Going Public Creates a Favored Customer Perception


Share on LinkedIn

Going public is a big step in your business, and if you’re not quite sure you want to do it, you might be happy to learn that going public can help you earn more trust from customers and leads.

It’s well known that customers trust public companies over private ones, and going public is a good move when your goal is to become more profitable by earning loyalty and trust from your customers. If you don’t want to go the traditional route,special purpose acquisition companies (SPAC) are still an option. A SPAC is where you create a shell company to raise capital for a future merger or acquisition. Once the merger is complete, the shell company is dissolved and the new company is dropped into the public market nearly instantly.

Customer trust and loyalty are a requirement for running a successful business. No matter how you do it, here are all the best reasons to go public for the sake of creating a favorable customer perception of your business.

  1. Public companies are strictly regulated

The Securities and Exchange Commission (SEC) strictly regulates all public companies and painstakingly scrutinizes every detail of their finances.

The SEC will enforce strict accounting and auditing standards (according to federal securities laws) concerning all the financial statements you are required to provide publicly. Their goal is to protect investors and promote fairness in the securities market.

For you, as a business owner, this can create a perceived barrier to entry if you aren’t able to put in the time and effort to get your finances straight on paper. However, it’s worth overcoming resistance to this hurdle because the value on the other end is worthwhile.

When you offer stock to the public, your customers know that the SEC has rigorously audited your finances, and they will feel more comfortable doing business with you, whether or not they buy stock in your company.

  1. The SEC requires serious transparency

Another reason going public can help you build trust with your customers is because the SEC requires some intense transparency from you. For example, you have to disclose a lot of information about senior management, including their financial compensation. Most of the time, this information is kept secret, and depending on your industry, this can create a rift between you and your more justice-oriented customers.

  1. Brand recognition

Although brand recognition doesn’t directly establish trust from customers, over time, people tend to feel more comfortable doing business with familiar brands. This is usually something that happens over time. For example, some people may have never purchased a single product from Johnson & Johnson, but almost everyone knows they’ve been around for decades and would probably choose J&J over an unknown brand when faced with a choice.

When your company is publicly traded, it will put your brand name out there for everyone to see. Over time, people will become more familiar with your company, even if they aren’t directly doing business with you.

3 Precautions to take when going public

While offering stock to the public can be an excellent way to raise capital for projects that will expand your business, there are some precautions you need to take.

  1. Make sure your finances are in good order first

It’s easy to make your finances look great on paper, but make sure there’s substance behind the numbers. Don’t rush it and fudge the numbers just to go public as fast as possible. It will come to light and it will bite you.

  1. Know that shareholders lawsuits happen

You really need to be on top of your game to avoid getting sued by shareholders for accusations of insider trading or self-trading. Although, it’s impossible to avoid completely.

  1. Be ready to hire experts

In order to go public, you’ll need to hire attorneys, accountants, and investment bankers in addition to many other outside consulting experts.

Should you go public?

Going public is risky, time-consuming, and hard work. The entire process can take more than a year in some cases. You won’t get rich overnight and you may not see mega success right away. However, if you follow a proven strategy for taking your company public, you have a better chance at successfully earning the customer trust your business needs to achieve greater success.

Larry Alton
Larry Alton is an independent business consultant specializing in social media trends, business, and entrepreneurship. Follow him on Twitter and LinkedIn.


Please use comments to add value to the discussion. Maximum one link to an educational blog post or article. We will NOT PUBLISH brief comments like "good post," comments that mainly promote links, or comments with links to companies, products, or services.

Please enter your comment!
Please enter your name here