Some businesses that launched initial public offerings (IPOs) shortly before passage of the Sarbanes-Oxley Act wished that they could turn back the clock after the dust had settled on their offering due to the new costs and complexities related to public ownership. Many small public companies scrambled to go private rather than live with the heightened reporting standards. But the past several years have seen a boom in IPOs that may prove to equal the onslaught of deals back in 2000. And while the stocks of most companies that went public during the past three years have continued to perform well in the robust economy, a prolonged economic downturn could leave some businesses regretting the day they went public.

What questions should private companies flirting with an IPO be asking themselves before they take the plunge, and what can they do to ensure a smooth process from start to finish once they've determined they're viable IPO candidates? "Before a company is ready for an IPO, it must satisfy two criteria," says Ed Wes, an attorney with Perkins Coie LLP in Menlo, Cal. "First, it must have a business that will attract investment from the financial community; and second, in today's regulatory environment, it must have internal systems and controls in place such that it can meet or achieve minimum regulatory requirements."

"To go public, a company has to attain a certain level of maturity," says Irwin A. Kisner, head of the corporate law department at New York City-based Herrick Feinstein. "This can take several forms, including cash flow, profits, and, sometimes most important, the ability to prove that its business plan makes sense. Conceptually, the market has to accept the company's business plan and give the company a relatively high level of probability of success as an ongoing concern."

In fact, company longevity on the IPO road has increased. The average time to IPO has doubled since the IPO boom in the late 1990s. "In Q2 2007, the average time from initial venture funding to IPO was 6.1 years," says Jim Savage, partner at Longworth Venture Partners. "The fact is that it takes time for a company to achieve the scale, financial strength, and predictable growth that public market investors are looking for. For the first several years, a company typically is creating product, hiring a team, securing initial customer commitments, building operational infrastructure, refining its business model -- the essential foundation work for a successful public company."

Knowing when the business is sufficiently mature to attract investors is almost intuitive. Companies that find the prestige of public ownership may not be worth the cost and efforts are more likely to lack a firm grasp on what is entailed in meeting regulatory requirements. "While the Securities and Exchange Commission [SEC] has recently published new rules to help clarify compliance with Section 404, and the Public Company Accounting Oversight Board [PCAOB] has recently adopted new Auditing Standard No. 5, which will streamline auditing standards, these rules and standards just clarify a company's obligations and don't eliminate the need to implement very stringent governance and reporting standards as part of the process of issuing stock to the public," says Wes.

Another critical governance issue is the challenge of attracting highly qualified, independent directors. "The company must have an up-to-date charter, bylaws, and indemnification agreements protecting officers and directors against liability," says Jim Alterbaum of New York City-based Moses & Singer.

After determining that it has the right stuff to make itself IPO-worthy, a company should be prepared to part with a hefty amount of the "green stuff." Says Wes: "Costs will vary based on the complexity of the company. For example, the cost of the process will be greater if the company has recently completed any mergers or other transactions that create complicated accounting or disclosure issues. My estimate is that the cost of an IPO for a Silicon Valley company would vary between $1.5 million and $3 million."

The best way to control costs is good preparation prior to beginning the process. "The primary reason for delay in the IPO process is the failure of the financial statements to comply with SEC accounting rules and SEC interpretations of GAAP," says Fred Lipman, a partner with Blank Rome LLP. "The single most important step for a private company to use to minimize the time to complete the IPO process is to engage a nationally recognized auditing firm that will be acceptable to any underwriter and to insist that the national SEC partner of that auditing firm review the financial statements well in advance of the commencement of the IPO process. Some of the local partners of Big Four accounting firms do not have sufficient expertise to anticipate the financial statement issues that will likely be raised by the SEC." This review by a national SEC partner would give the company sufficient time to correct any problems without delaying the IPO process.