Business Valuation 1: 5 Ways to Value your Business to Investors

Working out the value of your business is important when selling your business, as it can help you decide on the selling price. Here are some suggested steps to help you through the process. They measure on both the intrinsic and implicit value.

1. Prepare your business information

You’ll need a range of business information to value your business properly. If you need help with preparing your documents and can’t afford a professional, consider asking friends or family with bookkeeping or business experience.

Buyers/Investors may ask if they can value your business independently, so it’s a good idea to have your business documents organised and up to date (it makes a good impression too!).

Below is a guide to the type of information you’ll need.

Finances and assets

Your financial statements (for the last 5 years if possible) – such as cash flow statements, debts, annual turnover, and profit and loss statements

Details of physical assets – such as machinery, buildings, equipment, and stock

Details of other assets – such as goodwill towards the business and intellectual property (any designs or ideas that you have protected through copyright)

Legal information

Legal documents – such as leases and insurance policies

Registration papers – such as business name certificates, registration papers, licenses, permits, and any other papers that demonstrate you comply with government requirements

Business profile, procedures and plans

Market conditions – such as details of competitors, and how your business compares to them.

Sales information – such as reports and forecasts

Business history – such as start date, ownership changes, and location changes

Business procedure documentation – such as marketing, staff roster and customer service procedures

Business plans – such as marketing, emergency management and growth plans

Other details – such as opening hours and whether the business premises are owned or leased

Staff, supplier and customer information

Employee details – such as job descriptions, skills and experience, work history, performance reviews, and pay rates

Supplier details – such as supply agreements and supply prices

Customer details – such as customer numbers, customer profiles and direct marketing activities

2. Decide whether to get professional advice

If you can afford to, consider getting professional advice on how to value your business through your accountant, a business advisor or a business broker.

These professionals can help you analyse your business finances, find trends within your industry's market, and help you work out a value for your business. They can also help you calculate the goodwill value of your business and estimate your business' future profit.

An advantage of using a professional is that they may have clients who would be interested in buying your business, saving you the cost and hassle of advertising.

3. Choose a valuation method

Below are some common methods of working out the value of a business - this list is not exhaustive. If you engage a professional, they can help you decide which method is best for your business and explain any industry specific methods relevant to your business.

Keep in mind that there is no one set method, and a combination of methods can be used to arrive at your desired sale value. You may also need to negotiate the method of valuation with the buyer or the financier.

A. Look at current marketplace value and your industry

How you value your business can depend heavily on the industry you're in, and the current marketplace value of similar businesses within that industry.

Industries usually come up with their own rules and formulas to value a business, so it's a good idea to conduct research to gain a good understanding of your industry before you sell your business.

B. Use the return on investment method to calculate value

The return on investment (ROI) method uses your business' net profit to work out the value of your business.

To get your ROI, divide the net profit (before owner's salary) by the selling price:

ROI = (net annual profit/ selling price) x 100

For example, you have a selling price of $200 000 in mind, but want to test your ROI based on that price. You calculate that your business' net profit was $50 000 for the past year.

To work out the ROI, you use the formula:

ROI = (50 000/200 000) x 100

In this case, your ROI is 25%.

If you have an ROI in mind, you can use it to calculate the price for your business:

Selling price = (net annual profit / ROI) x 100

For example, if you were looking for a ROI of at least 50% for the sale of your business, and your business' net profit for the past year was $100 000, you can work out the minimum selling price you should set.

Selling price = (100 000/50) x 100

In this case, to achieve a ROI of at least 50%, you'll need to sell your business for at least $200 000.

C. Use your business' assets to calculate value

When calculating your business' asset value, it's important to include both tangible and intangible assets of your business. Tangible assets are physical things you can touch such as tools, equipment, and property. Intangible assets are things that can't be touched but are still valuable such as intellectual property, brands and business goodwill.

After you've calculated the total asset value of your business, you can then use this value as an indication for how much you would like to sell your business for.

As assessing your business' assets value can be a complicated process, it's a good idea to talk to your business advisor or accountant for help.

What is business goodwill?

Business goodwill is an asset that is much harder to value, as it does not have a determined market price. Goodwill can include:

• customer loyalty and relations
• brand recognition
• staff performance
• customer lists
• reputation & approach of your business
• Business operation procedures
• Access to markets
• Strategy

Calculating goodwill can be a complicated process, and different methods will give different results. Using different methods of calculation can give you an indication of the price range you would like to set for your business goodwill, and ultimately the value is what the marketplace or buyer is willing to pay.

Because it's difficult to calculate goodwill, it's a good idea consult a professional such as your accountant.

Take depreciation into account

If you use your business assets to calculate value, remember to take depreciation into account. Depreciation is the loss of value for your assets over time. For example, you may have purchased a computer for your business three years ago for $1000. When calculating your business' asset value, the value of the computer will no longer be $1000 as it was when you purchased it.

Talk to your accountant if you're unsure about how to work out depreciation of your business assets.

D. Find out the cost of creating your business from scratch

The cost of creating your business from scratch can be used as a benchmark for valuing your business. This is the estimated cost to build a similar business in your industry from scratch within the current market. To calculate the cost, you'll need to include all costs related to starting from scratch, including the costs of:

• buying stock
• buying equipment and tools
• getting licenses and permits
• recruiting, training and employing staff
• developing products
• marketing and promotion
• buying or leasing premises
• Setting up an online presence etc.

E. Estimate the future profit of your business

For a buyer, the biggest value of your business will come from future profits generated. As a seller, you're more likely to sell at a higher price if you can show through your financial statements that your business is likely to be profitable in the future.

This helps give a prospective buyer an idea of the returns they may expect from your business in the future.

You can estimate the future profit of your business by looking at any trends in your business finances from past years. You can also investigate the trends of similar businesses in your industry to see how your business compares and how the market is going. This information may be useful when negotiating the final selling price of your business.

What to do...

Talk to your business advisor, solicitor, accountant or business broker for personalised assistance and advice on valuing your business.

Check out our advice & support page for links to business advice, support and counselling services.

Learn more about financial reporting in our business finances topic.

Interested in more business valuation advice? Follow us on Twitter @gbshconsult

GBSH Consult is all about making your Deals Successful

Join our experienced acquirers in mergers and acquisitions - analysis and trends in recent M&A middle market transactions, deals and private equity investment.

Strategies for Job Creation and Inclusive Growth in Africa

This piece originally appeared on The CEO Zimbabwe: Back to Work Exclusive with H.E.Dr. Ambassador Edgars 

Africa economies are on the move and the continent has the second fastest growing economy in the world in the past decade. The acceleration in Africa’s growth over the past ten years reflects fundamental improvements in in the overall macroeconomic landscape, country political stability, and the business environment. Africa is beginning to harness its natural wealth and sectors growing rapidly include local services such as retail, banking, transport and communications, manufacturing and agriculture.

Poverty is on the decline with around 90 million African households having joined the consuming classes by 2011. Income inequality however remains unacceptably high and although it is falling in only about half of African countries. Africa has a workforce of 382 million with 42 % of the workforce being employed outside agriculture and 28% earning a wage versus a 24% margin in the year 2000.

Africa’s growth needs to be inclusive if it is to improve human welfare and ensure increasing social and political stability. In most countries economic growth reaches most people through employment income, so the challenge is to ensure that the economic growth translates into stable wage-paying jobs. Most countries in Africa have the potential to create stable employment to absorb the growing potential labour force

Depending on the source, Zimbabwe’s unemployment rate has been estimated as low as 4% and as high as 95%. The real level of unemployment is almost impossible to gauge as countless Zimbabweans are making a living in the informal sector and outside the country. This shows that the government needs to step up processes and policies that can create more jobs and more so create a labour force that can contribute to the country’s GDP.

WHAT ARE THE BARRIERS TO JOB CREATION?

For most businesses the barriers to job creation revolve around macroeconomic or political instability conditions. Notwithstanding the improved and faster economic growth within the region, businesses still show concern about ;insufficient demand, potential threat of inflation, access to finance, shortcomings in infrastructure like electricity, transportation and internet.

There is no simple solution to boosting job growth in Africa. I believe with targeted reform programmes, governments can eliminate these barriers and unleash private sector growth.

A robust GDP is a necessary condition for accelerating the creation of jobs. National leaders on the continent need to ensure that the improved macroeconomic and political stability of the past decade is maintained. They should also pursue macroeconomic reforms that create a more attractive business environment. However focusing on GDP growth alone, will not be able to transform Africa’s employment landscape or ensure inclusive growth and wider opportunities for Africa’s people.

To harness growth for job creation, Africa’s leaders should focus on reforms to the business environment in the labour-intensive sectors that have the potential to create a large number of jobs.

A jobs strategy is very far from the broad based industrial policies that have more than often proved ineffective in countries around the world. Africa’s development needs are vast and national economic plans can often be hundreds of pages long. Many well-meant reform programmes enact numerous policy changes but have limited practical success. I believe that a more pragmatic approach is to remove all obstacles to growth end-to-end in specific industry value chains and then build more broadly on this narrow head start theorem.

Examples that have successful done this include;

Morocco which consolidated its growth in 2013 with GDP rising 4.7% compared to 2.7% in 2012. Sound macroeconomic and fiscal management has continued while a cautious monetary policy held inflation at 1.9% and the current account deficit at 7.2% of GDP, compared to 10% in 2012, while foreign exchange reserves reached 4.5 months of imports of goods and services. The new aeronautical and automobile industries represent an important source of economic growth and innovation for Morocco.

In India there has been a huge growth of IT companies which have in the first instance taken advantage of the growing Indian market and also exported there products to overseas markets. Foreign owned companies were also allowed 100% ownership to provide funding for the booming industries in the country and these companies were critical part in providing capital and know-how in the earlier days of India’s economic growth.

Mali’s integrated investment in road, rail and other transportation to facilitate mango exports and Morocco’s two free trade zones for automotive companies are examples of targeted infrastructure tailored to specific industry opportunities.

Nigeria’s telecommunications sector is estimated to have generated up to 3 million jobs in the absence of the state telecom monopoly.

In Angola, Africa’s second largest oil producer, major investment is being made to expand access to electricity, water and transport and infrastructure development, leveraging off the oil revenues in the country. To boost business, financial sector policies are being modernised with the introduction of a new foreign exchange currency law for the oil sector and a mining law.

WHAT ELEMENTS SHOULD AN END-TO-END STRATEGY HAVE?

In order to boost grow and generate jobs, end to end strategies should have these six elements:

A) Identify one or more labour intensive sub sectors in which the country has a global competitive advantage or enjoys strong domestic demand, and can create a large number of jobs.

B) Improve access to finance for businesses in those sub sectors by providing incentives for the banking sector to increase lending, educating new borrowers and opening access to foreign investors.

C) Build suitable infrastructure to support economic activity in these subsectors and in the geographic mosaic regions needed for success.

D) Cut unnecessary bottlenecks in regulation, corruption and bureaucracy, all of which raise the cost of doing business and limit growth and investment.

E) Public-Private Partnerships: Strong collaboration through the public and private sectors, to ensure a steady pool of workers with the education and skills needed in those targeted subsectors.

F) Execution.

Another country that has successfully created an enabling environment for job creation is China which has added well over 300 million jobs predating to 1980. Several factors have assisted in this development including rapid growth in manufacturing, increased urbanisation, and improving education and skills attainment that has prepared children for non-farm work. Over the past decade, close to one quarter of China’s employment growth (33 million jobs) was in the manufacturing industry. Many of the jobs were labour intensive. China migrated into the production of higher value-added and knowledge - intensive goods and have become the biggest producer, and consumer of high value technologies. The country invested heavily in primary and secondary education, including in the rural areas, preparing its children to join the modern workforce. By 2010, 60% of the workforce had at least a secondary education.

India created 67 million non-farm jobs over the past decade, just over half the tally in China. Gross exports in India amount to 22% of the GDP, compared with 30% in China.

The lesson from China is simply that to create jobs, countries should focus on labour-intensive export sectors and from India, the lesson is to create products firstly for domestic demand and then export.

For these countries and other growing economies, the SME sector has played a major role in creating jobs. Governments that have supported the Small and Medium sectors have reaped enormous rewards in terms of innovations and job creation as well as positive contributions to the GDP.

The policies to grow the SME sector must be able to create a conducive business environment for them to thrive. These are generally reflected in; Strategic support to the SME sector, Institutions supporting business development must be visible and accessible in all areas, Support for beneficiation of SME products, Simplification of labour laws for SMEs, Promotion of government SME support programmes and Integration of SME roles into strategic thinking on trade and industrial policy.

Youth unemployment is an emergent and perennial problem in many countries in Africa and the increased internationalization of labour markets and flexibility of labour relations, with the traditional cycle of school-to-work-to-retirement giving way to more varied patterns of employment provide a new context for this problem.

WHAT ARE THE STRATEGIES TO DEAL WITH YOUTH UNEMPLOYMENT?

The best approach to dealing with this challenge is to outline youth policies and programmes that address:

A) Promotion and introduction of the self-employment option,

B)Skills training

C) Business counselling

D) Mentor support

E) Financing of youth projects

F) Access to work spaces

G) Business expansion support

H) Creating support networks and

I) Multifunctional youth enterprise agencies.

In order to generate more jobs in such sectors as agriculture, tourism, mining, manufacturing, technology and retail, Africa should have clear policies that encourage ease of investment in these sectors.

In order to make agriculture more productive, there should be expansion of large scale commercial farming on uncultivated land, shifting from low-value grain production to more labour-intensive and higher-value-added horticultural and biofuel crops. Growth in agriculture should be used to develop downstream agro-processing industries.

To grow the manufacturing sector the country needs to understand the sources of potential comparative advantage it holds in the global market, identify the specific manufacturing subsectors in which it can compete, and then begin to remove the blockages that have prevented these subsectors from reaching their potential.

The main barrier to expanding wage-paying employment in retail is the prevalence of tiny informal stores and cheap imports. Another major barrier to the expansion of modern retail stores is a lack of or expensive commercial retail space. Strategy to grow this sector include moving retail and consumer good companies upstream for owners to become anchor stores or co-invest in formal retail space. A perfect example is the South African grocery store Shoprite.

Africa needs to overcome barriers to growth in the tourism industry including inadequate and costly airfares, visa requirements, and unreliable local airlines, expensive hotels compared to the region, poor surface transportation and poor uncoordinated marketing of the country. 

Construction of hotels is very costly and even if the infrastructure is improved, the industry needs to explore how it can boost the length of stay and spending per stay to increase revenue and create more jobs.

To create more jobs, Africa needs an innovation-led, knowledge-based approach to improving the policy environment in the continent. Keeping in mind that there is no “quick-fix” there are areas in which concerted action can generate forward momentum, and overtime make a sizeable difference for growth and job creation. They are deeply couched in the following areas:

• Encouraging Foreign Direct Investment
• Accelerating privatization of loss making public entities
• Targeted investment incentive schemes
• Development of the SMME market
• Labour market flexibility
• Education and training policies need to fill the growing “skills gap”.
• Targeted employment subsidies
• Accelerating rural development

The continent needs to create a cross functional task force to create and execute the jobs plan and strategies. Private sector business leaders can help identify the most pressing blockages to growth in their sectors and to measure the success of overcoming them. This should also be supported by broad civic engagement.

THE BOTTOM-LINE IS WE CAN DO IT. AFRICA RISING.........

7 Red Flags that can Kill an M&A Deal

If your company is looking to acquire or to be acquired, one of the most important areas to evaluate is the ability to manage money. Because of this, the accounts receivable department will be at front and centre of evaluations.

A competent team should be able to demonstrate that they can bring in clients’ money within the defined payment schedule. After all, if working capital is deficient, there will be added costs to borrow to pay to keep the company moving forward. To be certain, the acquiring firm will want to confirm whether best practices are in place, and will try to establish and update those credit practices found wanting.

Collecting accounts receivables is one portion of working capital but proactive cash flow management is vital to avoid a short-term liquidity crisis.

Smart firms get ahead by demonstrating that the business owner was not cutting special deals to his buddies or writing things off ad hoc, but rather that there were formalized systems to ensure the money is collected consistently.

Once the deal is struck, the first 90 days are the most critical. In the credit department, the acquiring firm will be vigilant for a gap between what was said on paper and the company’s actual ability to collect money within the 30 days or 60 days. The key question on the buyer’s mind is: will there be a cash flow hole?

The following are seven red flags to look out for, and although one red flag does not necessarily kill a deal’s success, several can indicate problems ahead:

1. Payment history changes. If receivables were 45 days, and are extended to 60 days to collect payment, an increase in working capital will be required.

2. Projected payments. As the M&A deal is finalized, there will be projections made about the expected time frame for collecting money from clients. DSO (Days Sales Outstanding) is the key indicator of how fast the accounts receivable is being converted to cash. If the DSO begins to slip from 30 days to 60 days, that gap will have serious consequences on the amount of cash the company has to pay for operations. If timing for actual collections begins to slip from 30 days to 60 days, that gap will have serious consequences on the amount of cash the company has to pay for operations.

3. Initial payments. Credits coming through in the early days after the acquisition will be analyzed with a fine-tooth comb. The acquiring company will want to see if the credit department is passing journal entries to clean them up. The credit history in the first 90 days after the acquisition date can reveal a great deal.

4. Employee turnover. Talent management is reviewed and employees leaving the department might indicate management issues.

5. Vacation schedules. When people do not take vacation, it could indicate fraud. If credit write-offs do not require a second approval, many problems can be hidden.

6. Performance management. How can the acquiring company give incentives to address the issue of collections? The credit department’s number one goal will be to reduce the number of days of payment. One way is to show the credit department the impact of late payments on the overall company. For example, if there’s $10-million of receivables, reducing the time to bring in that cash from 60 to 50 days means the company needs less working capital. Leaders in the credit department could even get their employees to share in part of the benefits by collecting at the 50-days target.

7. Team incentives. The biggest challenge for the credit department is to stay motivated. The best performing teams know how to reward the right behaviour and to celebrate when the big goal is met. Hopefully, with spring around the corner, an employee BBQ goes a long way towards creating a positive credit collection culture.

GBSH Consult is a company which focuses on succession advice for large, medium-sized enterprises, family businesses and closely held private companies. GBSH develops customized strategies, particularly in relation to sale of companies, M&A, financing and corporate strategy matters. Follow us on twitter @gbshconsult. Sign up for our weekly newsletter.

Want your Business to Take Off? Follow these 10 principles

You’ve identified a niche and are poised to meet a need. You’re prepping to deliver a wonderful product into a market you hopefully know like the back of your hand. Feels good, doesn’t it? The tips may provide some lift to your business wings during your entrepreneurial flight and ensure sustainability along the way. 

 1. Warm up your wings before you leave the nest — or crash like a rock. There are thousands of risks in starting a new company. Reducing those risks as much as possible beforehand is vital. It’s an unknown road, yes, but without the unknown, we don’t really have an entrepreneurial adventure on our hands. Foresee the ups and downs of your journey; no one else will do it for you, and it will also help you feel less stressed as you navigate uncharted territory. The clever predictions you’ve forged from your upfront due diligence will serve you well

Sustainability is the operative word here. Once you get going, don’t stop. Anyone can start a company, but few can sustain one. The key is seeing every possible outcome and determining the required pivot you must make along the way. Remember, this is a journey, not a destination. What do the first two years look like? What are the major milestones? Do you have all you need to meet your goals? Validate your revenue model for roadblocks. Create a journey map for your business that highlights the first major achievements.

2. Welcome the opportunity to punch holes in your business – from everyone. Entrepreneurial wisdom can be found in the strangest of places, but be careful where you seek it. Great advice can carry the side effect of fear, so maintain your energy throughout and let nobody dampen your flame. Most times, good advice from friends or family is exuberantly given from a personal obligation to see that you don’t fall on your face. Don’t let them take the wind out of your sails.

The worthiest advice can be given from those with defeatist attitudes and the worst advice can sometimes come from those who are most qualified to give it. The least qualified can sometimes be the best for challenging your assumptions early on. They also bring an added layer of creativity, as they’re not informed on the traditional roadblocks in your industry.

Validate what you see as real threats and have a system for solving them. Punching holes in your business will serve you extremely well. Leverage all the minds around you to mitigate risk while putting your pride aside.

3. Form your board of advisors: The Specialists. Once you get past the embryonic phases of your business concept, one of the quickest and easiest ways to sidestep landmines is to form a team of advisers, ideally consisting of successful entrepreneurs who have made the journey at least once, and leverage their expertise and experiences often. Believe it or not, most entrepreneurs love helping other businesses. They miss the startup phase and like to join in the conversations. Start with one or two people that you can call at anytime for advice. Ask family members and friends to refer you to people they know. Look for ‘specialists’ with knowledge in a specific area, such as obtaining funding or taking a new product to market. You don’t need anything formal and your “board” never even has to have official meetings. In fact, my personal board of advisors has never gathered together to meet since we’ve been in business, but I know I can call on each one of them to advise within their specialty. They really enjoy it.

 4. Find your tribe. Find the local, entrepreneurial tribes on the same journey as you and get involved. Attend all the events and discover the ones for you. Try entrepreneur.Meetup.com, Cofounderslab.com, LinkedIn entrepreneurial groups, and spend some time on Google searching for entrepreneur societies and small business groups in your city. If you cannot find anything, create your own. The university or college near your city will probably have an entrepreneur institute on campus. Contact the director and see how you can get involved.

Co-working facilities are my favorite places to connect locally. They cater to entrepreneurs and host mixers and business pitch nights to share ideas and contacts, and are great places to meet all types of local mavens; I met my developer at one. The most important thing is to be involved; after that, the possibilities will present themselves.

If your tribe is not present locally, find them digitally. Ask your social network to make recommendations.

5. Sell the idea that your business is great in 30 seconds. Nail down a succinct description of your business that you can communicate in 30 seconds or less. Know it by heart. Whether you’re taking to an investor, an advisor, or a random person at a football game, it’s essential that you describe your business consistently and effectively. This also helps sharpen the way you describe your company to press, video, social media, etc. You’ll use it more than you know, so really know your company and its reason to exist.

 6. Create a business plan that you actually use. Unless you need capital, you don’t really have to have a formal business plan. Business plans tend to be stagnant documents that are read once and then forgotten. Instead, create a living “planning document” that is continually updated and revised as needed, with next steps and actionable line items that can be instantly assigned as tasks to be performed. Keep a good two-page executive summary on your company that you constantly update and are able to send out to those who express interest. Find a cloud solution that allows you to store your business work in a central location and assign out tasks with ease to others working with you. This makes it easily accessible to anyone on your team and more apt to evolve with your business. It’s great for instantly adding new team members to the conversation as well.

7. If you need capital, multiply whatever you think you need by two, and then assume you won’t get it. Raising capital may be the biggest challenge for businesses. It was definitely the hardest thing I’ve ever done in my business. Many entrepreneurs don’t want to ask for the amount of capital they really need because they don’t want to scare off potential investors, but then end up underfunded and unable to sustain the business. It also signals to the investor that you don’t know the industry and the operational requirements for your company. Break the real number out and try to raise it in tiers.

Make 100 per cent sure that if you miss an investment round, you can still keep your company in business. Funding is a moving target; it usually won’t happen when you think it will. It’s vital to have strong insulation by assuming you won’t raise the capital at the intended time. There is no way to put a timeframe on when investment will occur, but you do know when your own money will run out. When you estimate the month you need to secure the next round of working capital, add another 8 months to that and find a way to keep things moving until then. See where you can cut some up-front costs to add this investment padding.

Start with a short list of where you can go to raise the first round of capital you need–friends, family, bank, etc. Learn the art of crowdfunding. Learn all the platforms (Kiva.org, Kickstarter.com, indiegogo.com, Fundable.com, Peerbackers.com). The recent Jumpstart Our Business Startups (JOBS) Act encourages funding of small businesses by making it easier to raise money from many small investors instead of a few large ones. It can help you bridge the gap in funding for things like prototypes before you get to larger investors. What happens on crowdfunding sites is also valuable for validating whether or not your concept really has wings. When you’re ready to approach larger investors, divide whatever you think your business is worth by 1.3. Entrepreneurs are notorious for overvaluing their companies. This keeps you on a level with what the investors will be thinking.

Set up your business to function even if there is an economic downturn, or if you do not secure investment at the intended time. Have backup suppliers. We have Indie Peace to the point now where we don’t need investors, but when we first started out, our business model relied heavily on investment rounds being achieved. This put us in dire straits when the economy tanked a few years ago. Investors were hard to find, boutiques were going bankrupt, banks were frozen, and suppliers were in the danger zone as well. Determine what your initial needs are and then take all of them off the table and figure out how the business works on the alternatives you’ve selected.

8. Develop a multi-channel strategy. Pick the right megaphones. Take advantage of multiple online channels for promoting your business, but pick the right ones. Get to know all of them: Facebook, Twitter, LinkedIn, Google+, Tumblr, Instagram, Pinterest, Stumbleupon, etc. There are endless choices and new ones appearing every day. Find a company similar to yours on each channel and study the moves they make. There are thousands of megaphones out there–let your voice be heard, but spend time in the right places as a lot of time wasting can occur here. As with anything, measure your effectiveness. What does success look like for you on these platforms?

9. Automate you and all there is to do. Focus on the important stuff. Take advantage of the small business productivity applications available in the cloud–they’re some of the best things to happen to solo entrepreneurs. They’ll help you automate basics such as accounting, invoicing, file sharing, and tasks management. Plus, most of them have pay-as-you-go programs that grow with your business and keep costs manageable. Plus, the less time you spend on tasks, the more time you can devote to learning how to develop your business. You know all of the things you have to do. Find a comprehensive cloud solution that lets you get more of them done in less time with fewer headaches, and as your business grows you can easily plug in new team members. An all-in-one cloud solution helps you run lean, mean, and organized.

10. Do the work . Be a business even when no one is watching, because success and character are built when no one is watching. With no one breathing over your shoulder checking in for status reports, distraction is everywhere. Act like you go to work by setting your own hours and sticking to them. Dedicate work times and let no one or nothing affect them. Know each day what you are going to accomplish and actually accomplish it. Have a dedicated workspace away from your “outside work hours” spaces. As an entrepreneur, you are taking success into your own hands. Staying organized and on-task is vital. Be careful to watch your effect on the business. Sometimes the business owner is the biggest problem.

GBSH Consult’s goal is to help companies systematically and efficiently enhance their negotiation strategy and organizational and operational capabilities in order to achieve or maintain the leading position in the rapidly changing business environment. Follow us on twitter @gbshconsult. 

Sign up for our weekly newsletter.

10 Tips For A Successful Crowdfunding Campaign

Did you know that nearly 70% of all crowdfunding campaigns that are launched don’t actually reach their minimum funding goals? Typically, if you only reach a portion of your desired pledge amount all donated funds are then returned to investors once your campaign end date arrives. In other words, in most cases it’s all or nothing so it’s in your best interest to really do your homework and make your fundraising campaign count.

Of course there are many different ways that people try to raise money and a lot of the so called “old-fashioned” techniques still work. Before launching a campaign there’s really no way to predict the outcome but there are ways to help ensure better odds. The following is a list of 10 helpful tips to avoid failure and achieve success.

Tip #01: Plan Your Campaign Far in Advance

Like the age old saying you need to plan your work and work your plan and crowdfunding campaigns are no exception to this rule. Look at it this way,  you’re attempting to convince total strangers to invest in your idea. Some of the people who fund your project may very well be friends or family members but a large portion of pledges will come from investors you've never met before. This is one of the many reasons why you really need to prepare your campaign long in advance. The last thing you want to do is go in blind and you really need to think your pitch through from all angles and from start to finish before taking that first step.

Tip #02: Have a Proper Business Plan

Not having a proper business plan is like is like having a vehicle with no wheels, sure you can sit in the driver’s seat but you won’t end up going very far. Having an innovative new idea is only one piece of the puzzle. Not only do you want your idea to come to life but you want your new startup launch to become a long lasting success. Thus the reason that realistically planning the long term goals for your small business, company or service is essential.

Obviously finances are a big part of what fuels a company and either keeps it going or not. Managing your finances is just as important as raising capital through a crowdfunding site. Have you asked yourself;

• How you plan to execute certain types of spending? 
• Where will your revenue go once it’s generated? Those are just a couple of the many questions 9 out of 10 investors will want answers to before they whip open their wallets and you need to have these types of answers well in advance in order for your startup idea to be taken seriously. Some people get stumped at this early stage in the game but that’s why there are companies like the Funding Roadmap out there to simplify the whole process and help you get started.

Tip #03: Make Your Story Compelling

Your story could easily make or break your crowdfunding campaign so it needs to be a good one. The key here is to truthfully explain your campaign and what it’s all about in the most engaging way possible. You don’t necessarily need to be a novelist or marketing expert to achieve this, you just need to be knowledgeable and passionate about your idea and know the purpose of it inside and out. Make your story captivating and explain to people why they should consider investing in your idea over the thousands of other new ideas that are constantly out there each day. Why does your creative idea stand out above all the rest?

Tip #04: Start a Social Marketing Campaign

Everyone is using social media as a marketing tool these days, this has been the case for several years now. Having a well thought out social marketing campaign prepared in advance is a great way to create and maintain buzz around your product or idea. If you've never used this type of marketing strategy before it’s really a lot easier than you may think. For instance, it literally takes less than a minute to plug a link on Twitter, Facebook and Google+ and it’s not like you have to post an ad on trees all throughout your town or city to get the word out.

If you aren’t an expert when it comes to generating traffic or don’t have a large following there are several great resources out there to help you get started. Here’s a few that should help: 

50Social Media Marketing Tips and Tactics

17Twitter Marketing Tips From the Pros

12Google+ Marketing Tips From the Pros

Writing catchy and effective text and key phrases to draw attention can require a certain level of creativity, but if this is not exactly your forte there are social media marketing services available for small business too.

Tip #05: Constantly Promote Your Fundraiser & Interact

Frequently stay on top of your campaign, check the status often and never leave people hanging when they ask you questions. No matter how simple a question may seem, it’s critical that you treat all potential investors equally and with honesty, courtesy & respect. Certain questions may sound silly to you but to someone else having the answer could determine whether or not they decide to fund you. Also, be prompt rather than tardy. Obviously you can’t be glued to your computer 24/7 but the quicker you respond, the more you promote your campaign and the more actively involved you are the higher your chances of successfully reaching your desired funding amount sooner (if at all) will be.

Tip #06: Rewards & Incentives

Explain to potential investors the types of rewards and incentives they can expect by funding your project. Let them know that their contributions are well appreciated and provide them with as many reasons as possible to invest in your idea.

TakeLowLine: An Underground Park on NYC’s Lower East Side for example, a featured listing on the popular Kickstarter website. This project exceeded the desired funding amount with 15 days left in the campaign. Check out some of the rewards offered, this is a good example of being creative and putting some good thought into rewards ahead of time.

Tip #07: Include Informative & Engaging Videos

Having an informative, educational and entertaining video is a great way to help your crowdfunding campaign go viral. Using free services such as Vimeo and YouTube for example you can leverage the power of video marketing and take your campaign to the next level. Professional and engaging videos are a great way to express what your startup company is all about in a way that plain text on a screen could never do.

Creating a stunning video beforehand is also a way to show investors that you have good initiative and well planned execution. Anything you can do to prove and convince investors that their money won’t go to waste is a good thing. If you took the time to make a quality video to promote your product this will reflect positively on your overall campaign.

Tip #08: Being Unique Really Does Count

Let’s face it, although still in their infancy, crowdfunding sites are popping up out of the woodwork left, right and center these days. It’s no longer Kickstarter alone running the show. This means that the amount of people starting new crowdfunding campaigns is rapidly increasing. In other words, to stand out above the rest the more unique and creative you are the better your chances will be of getting noticed. More exposure equals more potential pledges.

Tip #09: Pick the Right Type of Crowdfunding Site

As mentioned above, there are numerous different crowdfunding sites out there all across the globe now and the number is constantly rising. This is why it’s important to do your homework and select the right one just for you and your particular project. Some of them are simply general crowdfunding sites geared towards all types of categories while others are geared towards specific types of campaigns for things like hobbyists, artists, film makers, musicians, game developers, app developers and the list goes on.

Tip #10: Know & Understand Your Target Audience

Don’t waste your time & effort creating a good pitch or campaign unless you fully know and sincerely understand your target audience. Be sure to do good research on this subject as it really is important. Being able to relate to your target audience is not only a plus but also quite a necessity.

Conclusion

We hope these tips have been helpful and would love to hear your feedback and/or suggestions. Perhaps you have launched your own crowdfunding campaign already and if so we’d love to hear about your experience. Feel free to speak your mind and leave your comments/questions below!

Interested in more crowdfunding advice? Follow us on Twitter @gbshconsult

GBSH Consult is all about making your Deals Successful

Join our experienced acquirers in mergers and acquisitions - analysis and trends in recent M&A middle market transactions, deals and private equity investment.