Ideas are Worth Nothing Until They Are Executed

Ideas Are Worth Nothing

When many decide to start a business, there seems to be a big misunderstanding about the worth of their idea. An idea is just that until it is executed and sales are generated.

Over our time in business, my business partner and I have written many business plans and developed proforma financial statements for clients who were starting a business. For the most part, the majority of those we have worked with have a great understanding of their business, its potential, and they themselves made an investment in their business. In those cases, we have been able to develop a business plan where they were able to obtain financing or investment.

There suddenly has been an increase in individuals starting their own business whether because they wanted to be self-employed or out of necessity due to the job market. There are so many misconceptions about what it takes to get a business up, running and funded. It is sad to see that people sometimes get too far down the path before they realize there could be an issue in getting proper funding or investment.

There are three major components to business valuation.

  • Net realizable assets (all you own minus all you owe), plus

  • Net present value of future cash flows (past results are a good indication of future results), plus

  • Synergies; someone believes in you – it is why one person pays more for something versus someone else; it's the person who sees the future in what you are doing – emphasis on "doing.

No assets means Value = 0;

No revenues means Net Present Value = 0;

Synergy, in this case, with no value, what multiples will an excited investor pay?

Grants and Government Loans

There are many grants and loans available for businesses, as long as you understand the requirements and limitations. There are very few start-up grants, and for those that are, most are tied to equipment, real estate, or were created to help stimulate growth in the economy by funding employees such as students or those on unemployment. Where the grants are for "hiring," it means "net new employees," not funding the owner's salary, and there most likely will be audits to ensure you did what you said you were going to do. There is only so m