CIMA versus Mike Goddard.

CIMA and an entrepreneur answer your questions

This month ... 'Our firm is thinking of listing on AIM, but I've heard it is expensive and time-consuming. What's it really like to list?'

A. CIMA

Listing on Alternative Investment Market (AIM) is neither quick, nor cheap, and I won't necessarily ensure you raise sufficient capital. It is for this reason that companies have been delisting from the AIM. Although the rate of delisting is slowing, eight companies listed in the first quarter of 2010 raised 200m, while ten in the second quarter raised just 133m.

An approximate timescale for listing on AIM is around five months.

However, an AIM listing is subject to less regulation than, say, the NASDAQ, and is relatively lower cost than listing on other bourse. Consequently, other funding methods should also be considered before a decision is reached about listing. Directors may want to think about the following benefits and risks to help them reach a decision.

Let's consider the benefits. A listing will raise your profile and reputation with the public, competitors, suppliers and customers. If successful, a listing will provide cash for innovation and development and allow the company to raise more cash in the future. It also allows you to offer tradeable shares when making acquisitions, again easing cash flow. Staff can be incentivised via share options, which can lead to improved performance.

And now for the risks. Directors often underestimate the time, effort and commitment involved, both during the IPO and afterwards, in terms of maintaining investor relations and legal compliance. The costs: both initial and ongoing costs need to be assessed against the risk of possibly not raising sufficient cash. On top of the ATM's fees, the costs of internal risk management and legal compliance can be significant. Share price fluctuation--the board cannot control adverse externalities that can impact share price, such as natural disaster and economic factors.

Any decision on whether to list will need to account for all of these factors. Your first step should be to talk to someone who has actually done it.

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A. Mike

I founded Belvoir Lettings in 1995, and today it is a franchise business with 140 offices nationwide. We wanted to float to raise money, both to expand and to allow current shareholders to exit. So, on 21 February this year, we listed on AIM. It was a time-consuming process, exciting, and at times nerve-wracking, but looking back, it was the right decision.

Preparation began in November 2010 when we started meetings with our advisors, the corporate finance firm Sunaxis. In July 2011, we appointed Seymour Pierce as our nominated advisor, or "Nomad". We auditioned six Nomads and picked Seymour Pierce because of its excellent relationship with institutional investors and the impressive personality of their corporate partner, Guy Peters.

The most intense period was January 2012, when we presented to institutional investors for the best part of four weeks in London and Edinburgh. It was also important to talk to our franchise owners to explain why we were floating.

The process is stressful. I did have my doubts, because at times it took our eye off the ball of running the company. The valuation process was particularly stressful, since my wife was exiting the business and offering her shares in the IPO to create additional liquidity. We were eventually brought down to earth with the valuation at the pre-roadshow held before Christmas, since the potential investors were quite candid with their views of the multiple of earnings and dividend yield that they were expecting.

The listing raised 7.3m and the cost, comprised of legal, Nomad, financial diligence, PR, but excluding stamp duty, was in the region of 1.1m.

The listing fulfilled our expectations. I am confident that Belvoir will now embark on its next phase of expansion as a plc with even more enthusiasm and energy.

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Mike Goddard is the founder and chairman of Belvoir Lettings