While more regulation may be needed for a variety of reasons, it typically produces many new headaches for law-abiding companies that have to comply with it. That is exactly the case with the Sarbanes-Oxley Act (SOX), particularly with its Section 404. At the same time, this creates new business opportunities as well for other companies that can help alleviate the pain of companies that have to comply with it.

According to a study conducted by a Chicago-based law firm Foley & Lardner, the average cost of being public for a company with annual revenue under $1 billion in the wake of corporate governance reform has increased $1.6 million (130%) from the inception of Sarbanes-Oxley Act in 2002. Fees paid to outside auditors have continued to increase by double digits year over year since then. In 2001, these companies spent just $1.3 million on costs related to their being public. In 2003, this number jumped to more than double at $2.9 million and most of the increase came from Section 404 compliance steps.

Companies with revenues of more than $1 billion spend significantly more on and that number is estimated to be approximately $7 million though the number should be even higher for very large corporations. 

If you are wondering if private companies are also impacted and if they should be on your radar screen, the findings of the study show that more than three-quarters (77%) of the private organizations responding to the study indicated that the Sarbanes-Oxley Act or other corporate governance reform requirements have impacted their organizations as well. These companies have instituted several changes in their control systems even if they did not have to comply with SOX.

If you simply count US firms with $75 million or more in sales, these firms will spend as much as $7 billion each year in Sarbanes-Oxley compliance. That is a sizeable market and will be captured mostly by existing accountants, auditors, lawyers, BPR consulting firms, and IT firms (that have since added new capabilities to enable their clients to comply with SOX). However, here are the top-four pain points of the firms that have to comply with Sarbans-Oxley and as a business leader you need to figure out how you can create value and capture new business.  (Related article:  How to find new business opportunities?)