• Friday, June 21, 2024
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Business evaluation as a medium for SMEs growth in the new year

Business evaluation as a medium for SMEs growth in the new year

Small and medium scale enterprises (SMEs) continue to be a force to reckon with in Nigeria’s fast-growing business ecosystem. This emerging business phenomenon has positively impacted our society by reducing unemployment rates and contributing to the gross income of economies. Small and medium enterprises have come to stay in Nigeria and the world over, but their sustainability and eventual growth depend on an intentional effort to diversify their business strategies to fit the global space.

For most SMEs, the end of the year is a period of assessment, strategizing, and planning for the upcoming year. This translates to the availability of updated information on the state of the business and eases the evaluation process for an SME focused on growth as a strategy for the upcoming year. The first step to achieving this is a thorough business evaluation mechanism.

As small businesses, one of the major struggles for continued existence is capital. As such, SMEs in a bid to upscale their businesses, which is their goal, may seek such financial and capacity infusions through investors, partners, financial institutions, and the government. To achieve this, SMEs must ensure that the right measures are in place to create an atmosphere of trust and security for potential investors by first putting their businesses in order. Ascertaining the actual value of the business is crucial to building investor trust and buy-in to business growth plans.

Business evaluation models, when effectively utilized, assist entrepreneurs in repositioning their businesses for expansion through funding through the measurement and analysis of varied business performance metrics.

An effective way to evaluate business growth is through the asset-based approach. This business evaluation approach focuses on a business/company net asset value. This is a company’s total assets less its total liabilities. Entrepreneurs need to be aware of the value of their businesses to ascertain the actual state of the business at a particular time, boost productivity and give room for other investment opportunities.

Read also: Digitisation: Tackling access to finance for SMEs

Similarly, better and strategic positioning of the businesses for prospective investors is a viable means of business growth in the new year especially for SMEs seeking to expand their businesses through collaboration. Inviting investors for seed funding, or selling shares or equity requires a well-structured business atmosphere binding on trust and transparency since most investors are sometimes reluctant to invest in small businesses for fear of losing their investment due to inappropriate structures for business growth. Therefore, before taking the step of putting out shares or equity and inviting other investors, SMEs must first ascertain their business value to know the amount of equity that can be sold out of the worth of the business and put an appropriate structure in place to provide better remuneration to investors in form of dividends, interests, and appreciation. A well-structured remuneration pattern creates an avenue for better business collaboration in subsequent times.

Also, SMEs can expand their businesses by merging with other brands that provide similar services in line with their business. This will stimulate business growth, gain competitive advantage, increase market shares or influence the supply chain of their businesses. To effectively utilize this approach, entrepreneurs must look at the past and present business transactions of both companies before signing or sealing up the contract.

These business evaluation models have been propounded by various researchers with divergent views and interpretations owing to their standpoint in the business world. However, these stakeholders have a mutual agreement that these business evaluation models should be realistic and accurate in their approach. Where necessary, SMEs can employ the service of an affordable business strategist who will analyze business growth through the documented report and proffer timely advice that will help increase productivity, adapt better employer-employee relationships, imbibe better customer service, increase online and offline sales, and in general boost the efficiency of the business.

It is safe to conclude that business evaluation by SMEs is an important tool for positioning for business growth in the new year. Small and medium scale enterprises, through a timely business evaluation, can properly position themselves to attract significant investments and achieve their growth and upscaling ambitions.