How do You Valuate your Business Ideas?

Many people dream of escaping the 9–5, and living a more independent and self determined lifestyle. Oftentimes, you may find yourself dreaming of becoming a business person, or pursuing your dream business and passion. However, in the real world, business comes with obligations, and obligations come with liabilities. With liabilities, there comes risk.

In the modern era, digital modes of selling and marketing products have made market entry a lot cheaper than it has been in the past. However, successful use of digital means to penetrate the market, and manage a modern business, require a thought out and well designed plan. A big part of this business plan is understanding how to attribute costs and values to your idea, before you put any of it into practice.

Valuing a business and measuring business feasibility can make or break a new business, before it has even been incorporated. For startups in particular, there are a number of steps which need to be taken before the plan can be put into action.

Figuring Out Startup Costs and Estimating the Annual Budget

The first step in operating a business is not thinking about how amazing your idea is or planning how successful it will be. It is important to think first about how much it will cost. The first step is to establish a cost breakdown for the first year of operations. This includes the cost of incorporating, the legal fees, the cost of rent for one year (of the office premises), and the marketing expenses you would be willing to outlay.

Once this is done, you can review the numbers to see if there are any areas where you can cut down on costs, or reduce expenditures. For example, we very often help clients to reduce significant costs and liabilities (contractual obligations), when establishing their company, by adjusting their corporate structure. Many times, businesses can start off via an agency or partnership agreement with an existing entity, or between individuals to share the risks. In addition, with digital sales strategies available, a physical office space or retail store may not be necessary, and a cheaper premises can be obtained for incorporation.

Having everything planned on paper beforehand, with an understanding of the legal setup procedures, will help you make your setup economical and far less risky. We offer these services as the first stage in our feasibility study, and charge around BHD 150 / USD 500 / AED 1500 for this.

Determining Whether the Business is Marketable and Executing Your Idea

Many business ideas, which could have a high economic value, and contribute a great deal to society, are shelved because there is no way to monetize or market them. Oftentimes, mediocre ideas, or sometimes downright useless service offerings, (think cigarettes, some legal service providers such as ambulance chasers and ponzi schemes), get a great deal of traction because of their fantastic marketing strategy or societal positioning. A successful marketing strategy will take into account the positioning, traction and budget that is needed to break in a new idea and make it earn money for the business owner.

For most, societal positioning, or readymade traction (such as a rich family member, sponsor, investor, or well connected business partner) are not available. Therefore, you have to first figure out if the idea is feasible to market and secondly, figure out how to execute a marketing plan. The first aspect, figuring out the market feasibility, can be done based on research regarding competitors, and digital surveys, created with applications such as Facebook and Instagram (or even Linkedin). Then, a marketing plan can be developed based on this research. A good marketing plan will have a mix of online/print marketing materials, face-to-face networking, cold and warm calling, and targeted client research. Only with time and experience will you figure out which mix works best for your business, and the marketing plan will have to be constantly adjusted to match the evolution of your target market.

We help clients with this second phase as well, and usually charge BHD 150/ USD 500 / AED 1500 for this second phase.

Putting it altogether

If you do want to try out your business idea, it is important that you at least try to take the steps described above. Figure out how much your idea will cost, and then think about whether it is marketable and feasible. Do a cost benefit analysis, and when you feel comfortable with the risks…go for it!

You can only get somewhere if you begin the journey, after all.