Over the weekend I glanced through the classified section of a Saturday newspaper and was surprised at the high prices offered for second-hand businesses:
– Franchise restaurant R4 million
– Takeaway restaurant R985,000
– Cellular sales/repairs R1,3 million
– Coffee shop R450,000
– Ladies boutique R600,000
– Beauty salon – R250,000
In this economy you’ll have to look hard at why these businesses are up for sale. The reply you get has to be watertight otherwise the rest of the seller’s story would be dodgy and downright dangerous to your personal assets.
What if a prospective buyer had a tool to evaluate the business for sale? A tool that would tell if the second-hand business is a viable proposition.
Most people will approach the business broker and the conversation will be about methods of valuation. Perhaps the broker will pull out of the three-prong valuation method. These methods would probably include the book value, book value plus value of goodwill, multiple of historic earnings, market-based valuation or even future earnings discounted to net present value (NPV).
Yet all this will ignore the fundamentals of what is the nature of the business, the growth or decline of its customer base, the stage of product life-cycle and the point of differentiation.
The same set of questions would apply to a business idea of your own that you have come up with and want to invest in or persuade others to back you.
What method or tool would you use to evaluate the potential of your new idea for a product or service that will form the foundation of your business?
You could pay a business consultant to evaluate your new idea. But the cost may perhaps be too high to justify depending on your eventual product or service. There also would be no guarantee about success because no one can accurately predict whether an idea will succeed or fail.
To help the entrepreneur and small business person I have developed “The One-Page New Business Idea Accellerator Evaluation Plan”. This tool is not psychic – but it can show you what you need to do to make your idea stand a fighting chance in the market.
Think of it as a robot system: the Red light means stop and revise your plan; Amber means there are warning signs you need to address; and Green means you should start a low-cost pilot, test or trial.
Fill in your details below and I’ll send you a copy while the tool is still available for free.
