With every set of advantages, an equal and opposite set of disadvantages exist as well. DPOs are a lot of hard work, getting a document through state regulators or the SEC is no easy task, and the successful sale of your stock can hardly be presumed. So far, most DPOs have been unsuccessful in achieving all their objectives, and this should be a caution to you. Don't let this fact stop you from fully considering a DPO as your best funding method, but don't write off more conventional methods as well. You may find that a DPO is only one part of a variety of financing techniques that properly fit your own growth cycle at different times.

Millions of dollars have been raised in some DPOs with the investment of just a few thousand dollars. Other entrepreneurs have put in hundreds of thousands and come up with nothing. On the surface this looks like a pure gamble, but it doesn't have to be. Enough experience exists to lay out a template for your success, given that you have a company that really warrants investment.

First, you want to have a company and a stock you're really proud of Does it pass the mother test? Would you want your own mother to buy stock in the company? Now? At this price?

Second, you're asking people who may be friends and neighbors to risk their capital with you. Are you far enough along so they aren't taking unnecessary product development risks that you really should be taking instead?

Third, everything costs money and takes time, usually more than you expected. Are you ready to commit capital and effort to an extensive and complex process that involves a lot of different skills? A DPO runs from soup to nuts, a highly involved document that requires accounting, legal, and business planning skills all the way to marketing and selling stock.

Fourth, can you identify or develop an affinity group who can naturally understand your business and place capital with you? If you haven't figured out just how to sell the issue, you probably won't get it sold.

If you can answer "yes" to all the above, then you're ready to take the first steps to a DPO. These moves should involve more than just yourself. Bring your accountant and your attorney together and lay out what you plan and get their input. They will be intimately involved with your success, and you want them on your side all the way. Next, talk it over with your employees, suppliers and distributors as well. Chances are that you'll get some very good ideas that didn't occur to you before. Contact some investment bankers and ask if they'd be interested in selling your issue. Friends in the media and elsewhere should be informed of your plans since a helpful word dropped by them can prove valuable. Call your state securities commission and ask if they have any suggestions. They may also provide you with a list of some of the companies that have made filings and you could try contacting them to learn of their experience.

The most common form of filing statement for a DPO is known as the "Form U-7" or a "Form 1-A." This consists of a 50 question form that lays out data that eventually becomes an offering statement, a prospectus. The theory had been that a businessman should be able to answer 50 questions and provide enough information for a person to make an intelligent estimate of the stock's attractiveness. Many of the questions will prove "not applicable" but others will take an enormous amount of work and thought. You should not underestimate just how much effort will really go into this. In addition, you'll have filing fees to pay, and eventually a printing bill for the prospectus. Not all the states use the U-7, but all have some variation of the form or an alternative for filing. Experience can be vastly different, from state to state.

The Four Direct Public Offering Mistakes

• Trying to speak a language one doesn't understand. Remember, you are involved in accounting, legal, regulatory and business conventions that may be unfamiliar to you. If you don't learn what's necessary or have adequate help, chances are good that you'll be bogged down and ultimately unsuccessful.

• Attempting a public offering before the company is ready. Your need for capital may unduly influence your judgment concerning your firm's viability. Is your company really ready to grow? Have the problems been ironed out? - Can you be sure that new shareholders have an excellent chance to profit, and don't have to take unreasonable gambles? Are there steps you need to take before risking the money of the investing public?

• Misunderstanding the costs involved. Think seriously of the myriad of tasks and inevitable costs ahead of you. Everything is expensive, often two or three times more than what you may have estimated. You have costs for a business plan, usually an audit, legal review for filing, filing fees, printing and postage, marketing costs, and literally dozens of other purchases you will make. Don't forget your own time (this can often outweigh all other factors).

• Starting the money raising project at the wrong end. If you feel that each step in the process is discrete and naturally falls after the other, you've already made a major mistake. Consideration of just who may choose to purchase your shares needs to be a continuing question for you to answer. Don't go through the costly process of registration unless you're pretty sure that your securities are marketable. You may wish to discuss this issue with a broker/dealer or a professional marketing company. This caveat operates for all specialties that you may employ. Don't distance your accountants from your attorneys or either group from your marketing people.