We all know that some people and their companies have gained enormous amounts of money on the net, and some of them have gone so far that they have reached the desired IPO stage and now they are big multinational public companies.

Now the good part for the rest of us is that when companies go public, they are required to fill some forms with the United States Securities and Exchange Commission to disclose information about their operations and performance. And we too can see how they are doing through this forms, and learn one or two things.

A form that can be particularly interesting for newbie internet entrepreneurs is the Form 10-K. It’s filled at the end of each fiscal year by public companies, and shows company’s business conditions and audited financial statements. Now, if you let me recommend some sections on this document that you should definitely check to learn how those companies run their businesses, those are Risk Factors, where companies said which are the most hard threats they are facing (i.e. opportunities for the rest of us), and Financial Statements and Supplementary Data (its name says it all).

For example, in the Risk Factors section from the last Form 10-K filled by Microsoft Corporation you can see how they recognize Open Source/Free Software alternatives as a real threat to their business:

In recent years certain “open source” software business models have evolved into a growing challenge to our license-based software model. Open source commonly refers to software whose source code is subject to a license allowing it to be modified, combined with other software and redistributed, subject to restrictions set forth in the license. A number of commercial firms compete with us using an open source business model by modifying and then distributing open source software to end users at nominal cost and earning revenue on complementary services and products. These firms do not have to bear the full costs of research and development for the software. A prominent example of open source software is the Linux operating system.

They also recognized that web applications (or Software-As-A.Service as some people like to call them) is an interesting new twist on their business model, but they are not sure if it will prosper or not:

Another development is the software-as-a-service business model, by which companies provide applications, data, and related services over the Internet. Providers use primarily advertising or subscription-based revenue models. Recent advances in computing and communications technologies have made this model viable and enabled the rapid growth of some of our competitors. We are devoting significant resources toward developing our own software-as-a-service strategies. It is uncertain whether these strategies will prove successful.

Now I recommend you to search by yourself for the 10-K Forms from companies you admire or want to know how they do what they do. Another interesting document that you can look for is the 10-Q Form filled with the same type of information (although not audited) at the end of each quarter.

What? Don’t you know where start? Well Google, Yahoo, Amazon and eBay are very good first searches ;).

If you liked this post please consider subscribing to Roberto Alamos dot Com by email or RSS. You will remember this decision when having your own public company ;).

This entry was posted on Monday, April 30th, 2007 at 5:29 pm and is filed under Entrepreneurship, Finance, Online business. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.