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

Your securities attorney will charge you anywhere from $75,000 to over one million dollars. Quotations for legal services below $75,000 are usually offers to review and edit your filing. Costs rise when your attorney must sign your SEC filing. The usual attorney retainer is $25,000.

Your Certified Public Accountant will charge anywhere from $15,000 to over $250,000 for their audit. They will want at least a $5,000 retainer.

Your underwriter will charge a 3% nonaccountable expense, a 5% accountable expense and expect up to a 10% discount on IPO share price. The NASD limits IPO commissions to 18%. The "apparent" commission is around 15%-16%. Unless IPO can easily be oversubscribed, brokers double their commission by requiring principals to supply 50% or more of IPO buyers. They receive discount, accountable and nonaccountable expense on IPO buyers supplied by company. This effectively doubles their commission on an IPO.

The underwriter's retainer is half nonaccountable expense. On a ten-million dollar IPO, this is a retainer of $150,000.

Your Investor Relations firm will want anywhere from $25,000 to $800,000. Until recently, they demanded a large bloc of stock along with their cash fee. The SEC is moving aggressively against payment of stock for services, especially stock promotion services.

Studies show that 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.

Here are two secrets to containing IPO costs. 1. Seek flat fee agreements with professionals. If you agree to an hourly rate, you are giving professional a blank check. I've seen failed IPO efforts that have cost company as much as $15 million. The reason for obscene cost was professionals billing at $1,000 per hour. 2. Don't pay entire bill as initial retainer. I try for a formula of one-third retainer against costs. One-third payment when professional supplies company service expected by agreement. The last third when you get positive result that you expect from professional's service.

1. What do you have? Is your company making money? If you are a startup company, you will find it hard to raise money. The industry in which your company operates is important. If you are in a fad industry, your odds of finding money are better. Where are you selling your product or service? The larger your market, better your odds of finding money.

2. How is company structured? You must be incorporated somewhere. I think that a company with an international market for its products or services should incorporate in a tax haven. Your management team must have a relevant education and work experience to make your company succeed.

3. What do you want? You want money. How much money? Do you need all money now or can investment be spread over time. You are more likely to find money if investment can be spread over time. The reason is investors have opportunity to see their initial investment produce positive results before they risk more money on your company.

4. If you had what you wanted, what would you do? Expanding company's market is your best answer. Poor answers are R&D, raise managements' salaries, or paying down debt. If your company isn't growing, why should anyone invest?

5. What are you willing to pay for help? Concisely answer what you are offering an investor to risk their money on your company. Do you intend to rely on professional help in raising money? Then, concisely answer what you are willing to pay professionals for their help. If you are unwilling to pay current cost of investment, you won't find an investor. If you aren't willing to pay for professional help, you won't find professional help.

The trick is to summarize your answers into a 300-350 word email message. I'm willing to read your summary without charge. Most people in finance business will review a clear, concise, and short email and reply with a "yes" or "no." Please don't send me your investment package unless I indicate an interest in your company. -----