Before you say I do, before you make the investment, before you hang the sign, before you set up the company, there is something that you should know. Small businesses are similar to a marriage – no one goes into the venture thinking that it won’t work out. Yet a significant portion of small businesses fail admin
. According to the Small Business Administration, as many as 30 percent of small business startups fail within the first two years of the honeymoon – and up to 50 percent within the next three years. Do the math and you’ll come up with a staggering 80 percent failure rate among small businesses within the first five years. The odds are stacked against you, but our business model is based entirely on helping small business owners maximize growth. To avoid the pitfalls that cause other businesses to fail, you’ve got to understand what business failure is, the reasons why small businesses fail and what it will take to be part of the remaining 20 percent that achieves success.
Just like someone whose marriage has ended in divorce, failed small business owners often blame anyone but themselves. They look for factors outside their control as scapegoats for the downfall of their business endeavors. They blame the economy, the government, their partners or their employees, just to name a few. If you dig a little deeper, the real root of the problem can often be revealed in a lack of business acumen, inadequate resources or insufficient capital. Without exception, these issues are ultimately the responsibility of the small business owner.
Making the transition from an employee to a small business owner can be extremely difficult. The disciplines that you have developed as an employee are totally different than what you will need when you step into the owner’s shoes and start running the show. The reality is that many owners’ expertise lies in accounting, law, medicine or some other discipline unrelated to day-to-day operational concerns. Don’t assume that you can just open a business and find clients or patients lining up outside your door. It takes skill and experience to drive business your way. Identify the areas where you lack expertise and look for consultants, partners, professional services or employees to fill in the gaps.
It’s an interesting question, but not one that can be answered in any meaningful way without drilling down into the specifics of the business because in the real world, the valuation of a business has many variables including industry types, differing market sectors and individual levels of profit and risk that make any ‘prophecy’ of business asset valuation as reliable in outcome as taking a trifecta bet at a race track.
Apart from their annual Tax Return, privately owned businesses in Australia, are not obliged, to lodge financial reports with any statutory body or publish any details of their activities in the public domain.
With publicly listed entities (companies listed on a stock market) there is more data for a business valuation company to analyse in the form of share prices, price to earnings ratios, historical performance and annual reports. Comparisons can be made between these indicators to determine a range of valuation metrics.