Essential Skills for Entrepreneurs and Small Business Owners

Research studies into the failure of small businesses in Australia, have identified that in over 90% of small business failures, a lack of appropriate management skills have been cited as the key cause of that failure. One way to offset a lack of management skills is to outsource them to experts. For most small businesses this is beyond the reach of their limited budgets. A more viable option is to develop the skills you need to manage your business operation. Let’s examine the key competencies you will need.

Strategy Development

You need to develop skills in undertaking appropriate business research, including how to identify and locate relevant business information, analyse the data in order to determine an appropriate strategy. You then need to develop skills to effectively communicate that strategy in both a formal way, such as a business planning document, or to informally articulate it to your staff or other stakeholders when required.

Sales and Marketing Management

Strong sales and marketing skills are vital in the promotion of your small business and its products and services. You need to be able to undertake market research which will help you to identify where your markets are, the total market size and the size of each of its key segments. You should also be able to profile your customers, identify their needs, wants, behaviours and ambitions and parlay the information into powerful and effective marketing campaigns and sales techniques which will help to drive sales revenue.

You need to be able to keep your finger on the pulse of your customers ever-changing demands and the business environment in which you operate and to identify the threats and opportunities that may impact on your small business. Inability to adjust to changes in the market place was identified by market research as one of the key skills lacking in small business operators.

Financial Management

Many entrepreneurs abdicate responsibility for the financial management of their business to their accountants.This is a rookie mistake. As the business owner you must take responsibility for the management of your finances.

The first core requirement is the ability to maintain an accounting system that is compliant with current taxation requirements, such as MYOB or Quickbooks. These systems provide a raft of automated processes including the delivery of key financial documents such as Balance Sheets, Income and Expense Statements and Cash Flow forecasts.

You need to develop the core skills that keep your business liquid as more businesses fail due to a lack of cash rather than a lack of profit. You also need to ensure that your business has sufficient capital to continue operating. Financial planning and management skills are also vital to your businesses survival and you need to develop working relationships with your accountant and your taxation specialists

Legal

It is essential that you develop an awareness of your legal rights and obligations. You need a thorough understanding of the Acts, Regulations, Codes of Practice and licensing requirements with which your business needs to comply. Taxation is just one of the complex legal elements you will need to come to grips with.

Which ownership structure you choose for your business will also carry with it further legal rights and responsibilities. Being able to fully understand and manage the impacts on your business is important.

Operational Management

You need to build operational management skills in order to develop the systems and processes by which you deliver your products and services. The more efficient and effective they are the more ‘productive’ your business will be. Core operational skills include planning, management, communication as well as effective systems design.

Resource Management

Your staff can be your most valuable business asset – or your most expensive, depending on your ability to hire right. Developing appropriate policies and procedures as well as the development of induction, coaching and mentoring programmes can assist in the development of a productive workforce.

Self-Management SKills

Your personal organisation skills may be the key to the success or failure of your small business. You need to be organised, productive, able to communicate and manage your time. You need to be able to negotiate effectively, motivate staff and be able to handle sustained levels of stress.

Technology Management

Technology is the great enabler. It can increase your capacity to deliver with less staff. It can also be a key competitive differentiator. You need to understand and manage technology and be able to identify and take advantage of the multitude of opportunities is offers to small business.

It is important to remember that each of the required skills are not discrete skill sets. To be truly effective as a small business manager, you need be able to integrate each of the core management skills.

You should set yourself the task of developing your abilities in these key management areas on a continuous basis as the skills and knowledge required is forever evolving. Master these core management skills and the chances of your small business being a huge success will improve dramatically.

How to Price a Business Using Business Valuation Techniques

When selling your business, or any business for that matter, the primary question should be focused on the value of the business. Business valuation techniques can range in complexity from a simple calculation that gives you ballpark figure to one that evaluates tangible and intangible factors to produce a more in-depth result.

Unfortunately, there is no standard business valuation formula that will work for all business types and circumstances. And, there is no generally approved ‘right way’ to arrive at an accurate business valuation. Accountants may view the figures one way while business brokers will evaluate based on a wider set of criteria. The difference is that accountants focus primarily on the books, while a good NJ business brokers will conduct in-depth research and use that data as a context in which to examine the numbers.

For example, a common business valuation technique includes calculating the set-up and entry cost of a new business. Factors like promotion, hiring and hard goods have to be forecast, along with the cost of competitive entry into an established market. Depending on how steep the competition is, the cost to build a new brand can be quite high.

Common business valuation techniques include:

  • Market-based valuations:frequently used by brokers, these and are based valuations are based on broker experiences selling similar entities. The broker may suggest a price based on the sale prices of other businesses in the same, industry. While not a terribly accurate business valuation method to it is common for the sale of smaller businesses.
  • Earnings-based valuation:here a business broker will consider hitstorical financial figures, debt payments, cash flows past, present, and projected, and revenue. These valuations are often combined with asset-based valuations to arrive at a more accurate figure.
  • Asset-based valuations:address figures like the book value and liquidation. Brokers consider these to be the bare minimum values and are not generally used singularly.

Determining a value for fixed and intangible assets is an essential step that has an enormous margin for error left in unqualified hands. to perform a business appraisal valuation to help determine how to price a business. The business valuation technique of estimating the value of fixed assets is fairly straightforward.

ManyNew Jersey area business brokers will do this for you, but you can get a general idea by doing it yourself. The estimate should be based on the real market value of all physical assets in the sale. Fixed assets include items like stock, machinery, property and any other tangible ‘object’

When dealing with intangible assets it’s time to call in an expert business broker. Trying to evaluate concepts like reputation, customer loyalty, or your customer base can lead to wildly inaccurate numbers that will cause disastrous business valuation results and unhappy parties on both ends of the business deal. Only a qualified business broker skilled with business valuation techniques can help you accurately quantify the true value of your intangibles.

Many business brokerage firms will provide a free approximate estimate for small business values. NJ based firm like A Neumann & Associates have been in business for many years and can offer qualified free valuation reports.

Other key considerations to address when evaluating a business include:

  • health of the industry the business is in
  • economic climate of the industry
  • availability of loans
  • cash flow

There is no one-size-fits-all business valuation technique. There are experts who use a combination of many calculations and years of experience. Only trained, credited and most of – experienced brokers are qualified to perform accurate, certified business valuation technique.