If a private limited company wants to earn more profits it may decide that it has to get bigger and sell more products in more areas than it does at the moment. Flotation could be used to raise the money needed to expand as a plc can sell shares to anybody rather than just friends and family.
The company will produce a prospectus that attempts to persuade investors to buy shares in the company. The prospectus will contain information about past accounts, the company’s business activities and aims and objectives for the future. In order to float on the stock exchange the company must issue at least ¬£50,000 worth of shares. Most companies who become plcs sell shares with a value far greater than the minimum ¬£50,000. This is because the process of becoming a plc is very expensive and complex and smaller businesses could not afford the costs involved.