Feasibility Studies & Business Valuations

It is a sad fact that many new businesses fail, often within a short timescale while others last longer until they run out of cash or don’t achieve the sales, they needed to be viable.

The optimism and excitement of creating a new business can turn sour quickly if the assumptions made at the start, are incorrect, badly researched or simply over-optimistic. No one wants to be a glass half full business person but sometimes a healthy dose of skepticism at the outset, would temper your expectations and promote more of a ‘what if’ analysis before you start.

That is where a feasibility study is an essential exercise as it will highlight possible issues before they become real problems. It is money well invested.

No one likes to think negatively, however with a new venture it’s essential to examine the project as deeply as possible including a review of the product or service you plan to sell.

Is there really a market out there? Which is exactly why a feasibility study will provide you an analysis of the market potential for your offering.

A feasibility study will:

• Demonstrate that you are serious about succeeding.
• Identify possible problem areas and offer solutions.
• Carry out an analysis of the market and your marketing plans.
• Look at initial staffing and after expansion.
• Examine financial projections based on experienced analysis of available data including:
  • Initial investment
  • Start-up costs
  • Anticipated operating costs
  • Market involvement
  • Contract services
  • Insurance and legal fees
  • 5 Years projections based on complex calculations based on known and projected data.

One of Push Digit’s primary services has always been impartial feasibility studies, business plans and financial forecasts which remove the emotional investment by entrepreneurs – These plans and studies are independent and completely objective.

Your feasibility study will have an Executive Summary, a high-level overview of the findings which is normally written after the report is completed.

The study will also consider:

• The organizational structure of the business.
• The key personnel.
• The chain of command.

The final section deals with findings and recommendations. This will deliver a final decision on whether the proposal should progress or be cancelled. This section may also offer changes to the proposed business model in order to improve the potential to improve it or provide evidence as to why the business is likely to fail.

A positive result for a good feasibility study is the next stage which is a detailed business plan in a format that presents the business as an attractive proposition for lenders or investors.

An effective business plan is a logical progression from a positive feasibility study.

Company Valuations & How to Determine What a Company Is Worth

The calculation of the value of a business is a way to assess its commercial worth, which can be required for a number of different reasons, which include retirement, personal health or family reasons, raising cash.

You may also require funding due to cash flow issues where banks or possible investors want to know that the company has adequate value before investing in it.

Perhaps you are adding shareholders, in which case a share value will need to be established.

No matter the reason, a professional valuation will enable you to establish and set an accurate price for the business.

Three Company Valuation Techniques

There are three common methods of calculating value:

• Asset-based
• Earning value
• Market value

These calculations are complex and require the input of experienced accountants to achieve an accurate valuation. Remember the final valuation of a business is what someone is prepared to pay for it which is something out with everyone’s control.

Have the Valuation Done Professionally

Business owners should never carry out their own business valuation; they won’t be sufficiently objective.

Push Digits have the expertise to achieve the best possible price for your business, as professionals they will ensure you achieve the best price for your company every time.

Non-Competitive Agreements

Often non-competitive caveats are added to sales especially where good will forms a major component of the valuation.

To impose the limitations placed in a non-competitive clause, they should be spelled out clearly and be ‘realistic’.

Non-competitive clauses should be appraised by both legal representatives prior to the completion of the transaction.

Conclusion

Push Digits have decades of experience in conducting feasibility studies for new ventures and are proud of their success in this area.

Feasibility studies are essential if you want your business idea to succeed. They remove the emotional involvement of the entrepreneur and take a hard, cold look at the facts and figures which ultimately tell the true story. It’s best to know the truth in advance to save issues later on.

When your feasibility study is positive you can move on to the production of a detailed Business Plan and start making your new business a reality.