It has been a constant effort of Eustan Ventures to enlighten young entrepreneurs.
We will talk of something related to terms- value creation and valuation. No doubt, today’s business tycoons have started presenting and perceiving both these terms as one. But they are not the same.
There are different meanings and comprehension associated with these words.
Today some entrepreneurs have learnt the trick of presenting an image of their brand in front of investors based on valuations rather than actual value creation.
And that is how they start that vicious cycle of changing investors year after year keeping their monetary support on. The ones who do this often believe themselves to be start enough but the only difference is that they are working on a bad business plan but they ignore it based on short term benefits.
What is Value Creation?
Value creation is based on actual fund generation. It means the money a firm has collected by selling their product. It means actual money generated including the investment and expenses. It is the actual benefit a company has in terms of money.
What the practice should be is that the companies must evaluate their losses and benefits and present it to potential investors. But this world is nothing but a delusion now with people playing trick and treat everywhere. And this practice being one of those games.
If they happen to entrap someone in this, it is a win-win for them. If they don’t, they still can go around in market with a tag of raised valuations and investors would be dying to invest in them.
Valuation on the Other Hand
Now this is a term you would need to understand loud and clear or else everything we have discussed in recent and even this discussion would all go down the drain.
Valuation is nothing but favorite game of entrepreneurs these days. Just like a basketball game they dribble the ball of valuation down the court of market and score by putting into the basket by getting an investor.
So there is nothing but a brilliant brain working behind the concept of valuation.
Valuation is based on the number of buyers a firm has. It depends on the number of people who have taken interest in your firm and bought products.
Now you can earn valuation by posing high discounts and keeping low prices of goods.
Why these eCommerce sites came into business was to reduce common man’s effort of going to the market and finding a product. So, that the person can have a shopping time being laid on a couch sipping coffee. But these websites have taken it otherwise.
Instead of focusing on convenience, they have focused on attracting crowd by giving high discounts. Some have even resorted to giving fake products under name of real brands.
And what happens when you buy something at 100 and sell it at 80? You end up kicking yourself in the crotch. And it is hurtful. And so speaks the story of various business houses that shut down due to this stupid business plan.
Do it the Right Way
Well there are many brilliant people out there who will tell you multiple ways of doing business. What I am doing here is telling you the way not to do it.
You should learn from downfall of these businesses and resort to not making these mistakes by yourself. It is a bad mistake to do it with a bad and failing business plan.
What today’s youth must be focused at should be actually doing some real work rather than playing tricks to win investors and customers.
Business must be done in a fair and just manner. This bias and cheating should be removed and these young entrepreneurs should act in a harder working manner.
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