The cost if an IPO largely depends on the company that is about to go public. There are a lot of hidden factors that would affect the bottom line. In an IPO, a company usually undergoes a transformation, because in the process of becoming publicly traded various information is released which could lead to disaster. For example, a publicly-traded company needs a good team of officers and managers. An officer with securities laws violations, bankruptcies or any other issues in the past would negatively affect the final stock price. The company’s profile is also important. A start-up is significantly riskier than a business that has been profitable for a number of years.

With these in mind, there are some numbers that can be more accurately estimated. The legal due diligence fees, preparing the selling agreement with the underwriter and the preparation of the “water tests” document will cost around $10,000 to $15,000, with a $7,500 deposit. You then have $15,000 to $25,000 for the preparation of an offering statement and registration of the securities in one of more states. There will also be travel fees involved and other out-of-pocket expenses. You also have a $500 SEC filing fee, with the Blue Sky fee varying from state to state, but it could be approximated at $10,000 if the fee is paid in ten to fifteen states. The NASD fee will cost $500+0.01% of the offering amount. Additional expenses occur if the issuer has a separate securities counsel, and for the accounting involved.

These are of course some rough estimates in the grand scheme of things, knowing that IPOs vary so much from case to case. The initial costs of shaping up the company cannot be accurately estimated as a rule of thumb. But the costs that can be estimated are fairly clear. Starting an IPO is a costly and time consuming process, which can eventually pay off big. Of course, there is also the option of a Direct Public Offering for small businesses, in which the company itself engages in selling stocks to its investors. Many of the billing fees still apply (Blue Sky, SEC, etc.) but the main advantage of the DPO is that commission fees that go to brokers are completely avoided. The downside is that this is not a viable option for every company, with DPOs having had a success of 30% in the past year, compared to 95% of IPOs.