It costs money to raise money. Here are the primary costs in doing an Initial Public Offering (IPO).

The cost of a securities attorney
The cost for quotations for legal services
Certified Public Accountant fees
The cost for an investor relations firm

Studies show that the average cost of doing an IPO is about $750,000. The odds of raising money with an IPO are about even. Going public is a high risk game. If you win, you can create a multinational powerhouse. If you lose, it can destroy your company so, it’s important be careful when determining your equity strategy.

Secrets to containing IPO costs:

1. Seek flat fee agreements with professionals. If you agree to an hourly rate, you are giving the professional a blank check. I've seen failed IPO efforts that have cost the company as much as $15 million. The reason for the obscene cost was the professionals billing at $1,000 per hour. Effective decision making with regard to finances is essential.

2. Don't pay the entire bill as the initial retainer. I try for a formula of one-third retainer against costs. One-third payment when the professional supplies the company the service expected by the agreement. The last third when you get the positive result that you expect from the professional's service.

Alternatives

It's the cost and risks of doing an IPO that makes alternative methods of going public attractive. The disadvantage to any alternative to doing an IPO is the need to find a source of funding. Unless you find a way to offer investors liquidity, your odds of finding money are less than 1%.