We are living in the golden age of entrepreneurship! From a college dropout with a brilliant business idea to an excellent home baker starting an online bakery, entrepreneurs in the new millennium are changing the tides of traditional businesses. But with 50% of start-ups shutting their doors even before they hit the five-year mark, the one thing that seems to deter some budding entrepreneurs is taking stock of the numbers that matter because numbers are the building blocks of a successful business.
The art of reading numbers and understanding what they are trying to tell you is at the core of a successful business. If you can’t make the numbers work for you, no matter how great the idea, you will not hit its maximum potential. You will need to evaluate some numbers to create a robust, viable, and successful business.
- Seed Capital.
As you sow, so shall you reap. You need to carefully consider the capital you need to invest in your business because this will initiate the chain reaction for everything that follows. Weigh your marketing plan, competitors’ positioning, potential risks, and profitability factors to understand how much money you can safely invest. A great way to gauge the market while raising capital is to test crowdfunding on one of the many crowdfunding platforms, such as Kickstarter.
- Projection.
This translates into the yearly budget and estimated profit. The crucial factors to be considered while calculating this are the raw materials or capital costs, labor charges, buffer, taxes, rent, maintenance, other unaccounted expenses, and input and outflow of workforce and finances.
Many of these factors will change based on the nature of your business. Remember that although you may estimate that the business will generate a specific rate of revenue growth going forward or that certain expenses will be fixed or can be controlled, these are only estimates and are not set in stone. They will act as guiding lights as you try to navigate your way forward and grow your business.
- Debt.
Maintaining a steady cash flow requires a substantial amount of reliance on debt, at least for a majority of new businesses. The debt you owe the bank, investors, or any other institution will be the loans taken by your business that must be repaid, usually with interest, over a period of time.
However, you may have taken a loan from an alternate source, including accountants, credit unions, or others. Calculating a tentative inflow or outflow of money from these sources is important. It is usually advised to split your loan amount between two or more sources so that no single lender can overpower your business.
- Assurance.
You have set up a successful and profitable business but imagine one day there is a spark in the motor room of your factory. The spark that started in a corner burned down a considerable part of your factory before someone could put that fire out. As hypothetical as this example is, many smaller damages to your business can occur. However, if your business is insured correctly, it will never result in more than a minor setback. Hence, as a growing business, it’s essential to know precisely how much your business is worth to arrive at the right insurance amount, monitor your valuation over time, and update your insurance accordingly.
With our help, you can learn exactly how much your business is worth and even monitor it over time. This means you know precisely what kind of insurance coverage your business needs.
- Let’s sum up the numbers, shall we?
None of these numbers can be analyzed without the exact number of your business. This is the value or worth of your enterprise. Business valuation is the basis of any future transaction or estimation. It is used to set the fair market value of a business’s shares, estimate and follow up on the budget and profits, taxation, insurance, loans, and almost any other function of the company, be it qualitative or quantitative. Now, this is THE number, and you cannot go wrong with it because it will have a domino effect on the rest of your business. We recognized this need to continuously monitor and optimize a business’s worth and put real-time Business Valuation within reach of all business owners. Our process aims to help business owners make more informed decisions by having access to real-time valuation numbers and trends.
So while you get all your pieces in place and formulate a strategy, don’t forget that your product/services, the marketing plan, financers, insurers, etc., are the army, but what you are eventually trying to protect, business value, is the King.
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