Preparation and planning are essential for creating confidence for both potential and current business owners. These two elements are a springboard for future success. A miscalculation many small and medium-sized enterprises (SMEs) make is not planning properly, doing the right research or knowing where to go for the critical information before making major financial and time commitments.
According to Industry Canada data, of the 130,000 new small businesses starting up each year in Canada, 93% don’t make it past their first year. That staggeringly high failure rate is very intimidating to potential entrepreneurs. However, there are ways to improve the chances for success.
The first step is a solidly detailed business plan. Asking a professional to flesh out the business plan and provide feedback can be very valuable.
A poorly thought-out business plan can be detrimental to the business’ direction and weaken the chances of securing investor support.
Another tool available to new businesses, once a solid business plan is developed, is exploring the value of a customized market valuation and business analysis. These reports allow new-business owners and investors to review the potential stability and profitability of their business.
Essentially it is an appraisal on the worth or potential worth of the business and an analysis of how the performance of the business’ industry and the wider economy might affect the business’ performance and success in the future.
A question that many small-business owners may wonder about is, why bother spending extra money on a valuation report when I am just starting out?
Entrepreneurs are alive with amazing ideas, but they may not have a background in financing or understand the market they are entering.
If an SME wants to raise additional money, either as debt or equity, it will need to know how much the company could be potentially worth in the market before it can approach a bank or an investor. I strongly believe having industry specific information through a business valuation can solidify plans and allow SMEs to be better equipped to make informed decisions and improve the value of their business.
Products should be designed for different stages of business development that can help a company raise startup capital, partners sell out of a partnership, business owners who are planning to retire or investors looking to enter a new industry.
We recently had a client who was looking at purchasing a cheque-cashing franchise and wanted to understand what he was investing in. The client remarked that the market valuation was affordable insurance that allowed him to enter the industry with confidence.
Reflecting on the decision to have a report prepared, the client commented that it was an excellent return on investment. The report solidified that this was a profitable industry to venture into. Our client received a concise report written in plain language that he could understand and use to make decisions immediately.
As an entrepreneur, I understand that a small-business owner has to wear many hats when first starting out and throughout the growth of his or her business. A lot of stress can be involved when investing time, money and energy into an idea. Developing a solid plan and having as much knowledge as possible through business valuation tools can mean the difference between success and failure. •
