The Importance of Pre-IPO Financial Goal Setting


If you’re working at a pre-IPO company, tremendous financial opportunities may be on your horizon. You may have big dreams about what you can do with your anticipated windfall, but without clear financial goals and proper structures in place to reach them, those dreams may be difficult to realize. Clarifying your financial goals before your company’s IPO allows you to make choices along the way that put you on the path to the future you envision.

Basics of Financial Goal Setting

Financial goals can be short, medium, or long term. For example, establishing a budget, paying down debt, and establishing an emergency savings fund are short-term goals that should be addressed to create a firm foundation for longer-term coals. Medium-term goals might include saving to start a family or fund your children’s education, obtaining or improving life insurance coverage, or purchasing or upgrading a home. Over the long term, you will want to think about your retirement and estate planning goals.


Sometimes, when we think about goal setting, our thinking can be a little vague or dreamy. We might think of having a bigger house in a better neighborhood or enough money that we don’t have to worry about paying the bills each month. To create a clear path to a goal, however, the goal has to be clear. That’s why many business and financial leaders use the SMART framework for goal setting. SMART goals are

  • Specific
  • Measurable
  • Attainable
  • Relevant
  • Time bound

When you sit down to make a list of financial goals, consider these elements. For example, let’s consider you want that bigger house in a better neighborhood. Make that more specific by thinking about the number of bedrooms, the square footage, nearby amenities, local schools, and any other details that would make a home ideal for your family. From there, you can get an idea of how much such a home would cost and compare it to your current means, making the goal measurable and allowing you to determine its attainability. Of course, you’ll want to make sure that the home you choose is relevant to your larger goals, such as providing a comfortable, safe, and stable environment for your family. Making your goal time bound is also important in this respect, since your family’s needs will shift, and the house that’s ideal when your kids are young may be different from what you need when they strike out on their own.

Pre-IPO Financial Planning

After you’ve identified your goals, then you can work with a professional to put structures in place that will make the most of your financial windfall. Having these set up before your company’s IPO is critical for getting the most out of the liquidity event.

Why is pre-IPO financial planning important?

What you do before your company reaches IPO has profound effects on your ability to gain from it. Working with a trusted financial professional with deep experience in the IPO process from the beginning will position you to reap the greatest rewards. They will be able to educate you about the tax consequences of the various types of securities you may own, how to manage your tax burden, and how to structure a sales strategy that respects both your risk appetite and financial goals while steering clear of any appearance of insider trading.

What does pre-IPO financial planning involve?

Tax Planning

Pre-IPO financial planning begins with a review of what kinds of options or stocks you currently own as well as the terms of your company’s stock plan. This is important because different types of company stock receive different tax treatment and, therefore, require different tax mitigation strategies. If you own stock options, you will need to decide when and how to exercise those options. You may be able to exercise stock options early, before your company even reaches IPO.

After getting the whole picture of your share ownership, you can work with your chosen IPO planning professional to develop a tax mitigation strategy. If you exercise stock options early or receive a restricted stock award, this may include filing an 83(b) election to make the market value of your shares reportable to the IRS as of the day you exercised the options or received the stock instead of on the date it vests (when the value could be much higher). Tax management also includes strategies like mitigating the impact of the alternative minimum tax (AMT), active tax loss harvesting, and accelerated gifting.

Sales Strategy

Another important step in financial planning to meet your goals is developing a strategy for selling your company shares. After your company’s IPO, you will most likely be subject to a lockup period as well as blackout periods, during which investors who have material, nonpublic information about a company are prohibited from trading its shares. A knowledgeable IPO planning professional can help you structure a 10b5-1 plan, which allows you to avoid blackout periods and the appearance of insider trading by prearranging trades, in a way that supports your specific goals.

The experts at WRP have a deep understanding of the IPO process, the tax consequences that pre-IPO employees face, and how to custom design financial strategies that enable our clients to meet their individual goals. For more information about how to successfully navigate your company’s IPO, browse our blog or our free resource library.