Public Scrutiny : IPO Takes Time, Invites Review

Tantie Ruth Food Products has achieved some distribution in major supermarkets, but owner Ruth Norman wants to expand to more parts of the country. She decided to raise money by taking her company public, but she learned that it costs about $250,000 and that it’s not an easy or risk-free process. Norman was interviewed by Karen Kaplan.

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I never set out to make a living on my cooking. But a professional at a food company tried some samples of my sauces and salad dressings and told me I needed to sell them. After a lot of thought I decided to go ahead and make it a business.

I had some success selling to supermarket chains like Hughes, Vons, Albertsons and Ralphs. But I wanted to take my business to the next level. The more orders you get, the more your expenses are going to go up. Before you can make more money, you have to spend more money first. When you’re talking about going national or even global, you need to have more capital.

I examined my options very closely. As a small business, my chances of going out and borrowing $5 million were very small. And if you get the loan, you have to worry about paying it back. Many small businesses have gone under because they couldn’t afford to make their loan payments.

I read a lot of stories in the business magazines about people doing initial public offerings just to get their businesses started. I decided I wanted to do an IPO too.

An IPO is not for every type of business. If you’re running a shoe repair shop that just services Palmdale, you don’t need an IPO. But if you’re planning to expand into other states and countries, you might need an IPO.

It costs money to do an IPO. There are legal, accounting, printing and filing fees you have to pay. It can cost even more depending on the condition of your financial records and whether they have to be redone.

In my case, the fees are in the range of 5% of the total amount of money I am trying to raise.

Potential investors want to know everything about your company, and you need financial professionals to put it all together. They want to know if you have done any strategic planning. They check whether your orders have gone up or down. They want to know what new accounts you’re looking for. All of this information has to be compiled. They take your whole company apart and put it back together again. It takes at least a year of planning to get ready for that public offering. We are expecting to sell shares at the end of January.

You need to check the credentials of the people who take your company public. Find out who else they have worked with and whether they were successful.

You also have to keep your own people looking over their shoulder. You can’t just leave it all to them.

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AT A GLANCE

Owner: Ruth Norman

Nature of business: Manufactures salad dressings and sauces

Location: Lancaster

Year founded: 1991

Number of employees: 6