If you are like most business owners, you need all the financial help you can get at the time of starting a company. Oftentimes this means any one or more of the following:
- Crowdfunding, or raising money from a large number of people through the Internet.
- Angel investor funding, or getting money from an angel investor who often provides all the money you need to kick-start your venture as long as you have a great business idea.
- Venture capitalist funding, which means raising business capital from people who are willing to invest in your business because of its promising financial projections and possible lucrative future.
In any case, equity financing often means that external parties take equity positions in your company in addition to being involved in decision making, leaving you with part and not full ownership or equity in the venture.
While none of this is entirely bad, it can get frustrating when the revenues are not coming in as projected. You are answerable to other parties and they expect you to maximize profits.
How do you evaluate your business to determine it true value at any point in time? What options do you explore to keep the business running without having to incur any new debts? Here are the three places to look.
- Common stock and preferred stock
Stock is one of the key items that comprise equity in a business. Stockholders receive dividends as their unit of income from the revenues the company generates since their ownership interest is represented in these stock or securities.
When it comes to evaluating the business to see whether you are keeping the rate of growth as projected at the time of forming the company, there’s nowhere better to look than at the private equity. This is the company’s owned stock that is not publicly traded, meaning that the value is not always public knowledge. Getting this figure can paint a clear picture of the business’ current net worth. This can be especially useful where financial statements are fairly unstandardized or downright inconsistent and therefore challenging to interpret.
Most business owners tend to forget or overlook a fundamental aspect of their equity when determining their business’ success: assets. It may be surprising just how much you have in assets that you can convert easily into cash when your business needs it. If you have assets or equipment, the better for you. You’re just among the many businesses that are not quite aware of the exact figure of equity in their equipment or assets. The beautiful thing is, you now know that you can sell some of these and use the cash to keep your business on its feet.
Another hidden gem that you’re hardly aware of are your current customers. With good customer relations, you should be able to obtain advance payments from your customers to help you meet the immediate financial needs that may be facing your business at the time. The matter of fact is, you should always use what you have to get what you want – and your customers fit the picture.
Relying on your customers can be quite an effective strategy for achieving faster growth and with limited resources.
So, have you been looking into all these places when doing a quick valuation of your business or when in need of cash? If not, now you’re a few ideas richer.