Risks, Probability Revealed In Small Business Success Calculator

June 11th, 2009 by Erin Posted in Small Business | 1 Comment »

Leave it to the little folks to come up with some big, brilliant ideas.

There’s a new small business tool over at StartupNation – one that either budding entrepreneurs will love or hate.

It’s called the “Odds of Success Calculator For Business”. Designed in part by EquityNet, the ‘calculator’ is designed to help entrepreneurs identify and evaluate business risk. It also calculates the probability of whether a small business will succeed or fail.

Part tough love tool, part Magic 8 ball – the small business success calculator lets business owners get a snapshot of their own business risk profiles based on eight key risk factors:

- amount of capital investment

- difficulty in obtaining funds

- quality of financial management

- degree of business planning

- annual industry growth rate

- management experience

- industry experience and timeframe.

One click – free of charge – and the calculator spits out the odds for success within a given timeframe identified by the business ower.

EquityNet says this tool is best suited for companies that are younger than four years. The company also insists that the methodology used to generate the risk assessment is fair and accurate.  The comprehensive version of EquityNet’s Risk Quantification System (RQS) analyzes 30 important business variables including industry sector and enterprise age. It then compares them against hundreds of thousands of data points of companies that have failed or succeeded, thereby computing the probability of success for the individual company.

And there you have it. A hard dose of reality all wrapped up into one tight little tool.

As they say in small business – boom or bust.

Why not let the ‘calculator’ break the news to you first?

 Tags: , ,

One Response to “Risks, Probability Revealed In Small Business Success Calculator”

  1. Judd Hollas Says:
    June 12th, 2009 at 3:43 pm

    As CEO of EquityNet, I have personally reviewed over one hundred studies on business failure. In addition, I have also invested in dozens of emerging technology enterprises. I would like to offer the following perspectives based on my experience.

    In the world of entrepreneurship, standards and good statistical information are lacking. It is a common myth that only 1 out of 10 businesses succeed. In fact, according to research from the Bureau of Labor Statistics, around 45% of new firms survive their first 4 years. Given that entrepreneurs often consider inaccurate information when deciding to start up a company and potentially change their life, it is critical that they be empowered with a better sense of the risk of their venture. That, along with identifying helpful resources, is the intention of the Odds of Success Calculator.

    The Odds of Success Calculator is intended to educate entrepreneurs on the complex issue of enterprise risk in terms of rates of failure, primary attributes that influence failure, and resources to help avoid failure. It is not intended, as some may have implied, to produce a score that can be taken to the bank. That level of analysis obviously requires a greater scope of consideration.

    That said, the Odds of Success Calculator does generate a meaningful score. While consideration of 30+ risk factors, such as with EquityNet’s Enterprise Analyzer software, is more comprehensive than the 8 factors considered by the Odds of Success Calculator, many respected researchers have found as few as 4 criteria to be statistically significant in predicting success and failure. For example, Dr. Robert Lussier, a serial risk researcher and publisher, noted in a study that “only 4 of the 15 variables [measured] were significant in this study” and that “the [resulting] model will accurately predict the success or failure of a specific business approximately 70 percent of the time.” You can find this Lussier study here: http://www.allbusiness.com/accounting-reporting/budget-budget-forecasting/495836-1.html

Leave a Reply




« Developers Rave About Google Wave
Bypassing Iran Censorship Through Social Media »