Innovation is crucial to the continuing success of any organisation.
Innovation is the creation, development and implementation of a new product, process, service marketing or management methodology with the aim of improving efficiency, effectiveness or competitive advantage.
Businesses confront “innovation” virtually every day. A slight change in a process, a different way of greeting a customer and developing a new methodology for the preparation of quotations, are all examples of innovation.
Innovation can be very valuable for a business because it can add to the “intellectual property” that is owned by a business. Whilst most businesses do not reflect the value of their intellectual property within their Balance Sheet, the importance of the development of innovation which is added to the intellectual property pool, is reflected in the multiplier that has been utilised in the valuation of the business because businesses that have been innovative can normally argue for an above average multiplier to be utilised within the calculation of the value of the business. For example: a business with an after-tax profit of $200,000 that has not undertaken any innovative activities would normally be valued at around 4 times the after-tax profit. This would be a valuation of $800,000.
If a business that has undertaken innovation and, as part of this process, incorporated as a company and has completed one or more research and development projects and is looking to apply for a special government grant for innovative companies and is contemplating raising capital direct from the public, the multiplier factor could be 5 which would result in a valuation of $1,000,000 or in some instances closer to 6, which would result in a valuation of $1.2 million. This is the value adding benefit to businesses that have made a commitment to be “innovative”!
Innovation is available to all types of businesses, both large and small. It normally starts with an idea which may have been suggested by anyone within an organisation.
Normally, someone within the leadership team will authorise 1 or 2 people to explore the “idea” and to bring a report back on what the benefits are relating to this “idea”. A decision could then be made as to whether to proceed with a research and development project in which case there is a special government incentive to encourage companies to undertake research activities.
There are also government grants to assist defray some of the costs that are incurred by innovative businesses. Towers Business Development can assist businesses, wishing to undertake an innovation journey, by implementing appropriate systems for the control of research and development, applying for a special government grant for innovative companies, preparing Business Plans, Budgets and Cashflow Forecasts to assist in applying for loans or seeking to raise capital to finance the innovative activities.
Towers Business Development is presenting a special webinar titled “The Innovation Journey Is Not A Closed Shop” on Thursday, 17th June 2021 at 12-noon AEST. You are most welcome to join us for this free webinar – to register please (Click here).
If you would like to discuss the implementation of an “innovation system” for your company or business, please do not hesitate to contact Peter Towers, Managing Director, Towers Business Development Pty Ltd – an experienced accountant, company secretary, director and business consultant for a discussion:
You might be interested in some of the issues that we have discussed in our recent posts and videos:
“Companies Can Raise Capital” - click here
Video recording – click here
“Virtual CFOs Services Help SMEs” - click here.
Video recording – click here
Towers Business Development Services
Towers Business Development does not give taxation advice but offers consultancy services for small/medium enterprises and accountancy businesses including:
Upcoming Free Webinars Presented By Towers Business Development
Want to know more about the services that Towers Business Development can supply to assist your business in its business growth?
You are invited to visit the Towers Business Development website; or contact Peter Towers:
Have a great day!