An economy is a network of organisations that use infrastructure, human resources and natural or manufactured resources to produce and sell goods and services. A growing economy needs funds to finance this growth. The same is true for all businesses. In Georgia we can see many business opening and offering goods or services. Six months or a year later, it has closed. This phoneme is related to two main problems in Georgia.
When starting a business, the key to success is, of course, to have good products and services, but also to have a good plan for financing working capital. When we talk about financing a business, we usually think of the bank, but here in Georgia, as in many countries world wide, interest rates are far too high. While the average net margin is around 10% for many companies, financing all or part of a company's activity with a rate higher than 18% is simply suicidal.
The first big problem is that companies are undercapitalised, resulting in a lack of liquidity to finance working capital and growth.
When starting a business, we need a place to register the company and to work. In Georgia,prices for renting real estate for a business is exorbitant. Often, the monthly asking price for a shop can be as high as the potential monthly turnover of the shop, a madness! Entrepreneurs in Georgia are risk-takers, which is good, but there is a limit: the break-even point.
The second big problem is the price of the real estate that the company needs to establish itself and grow in its market.
If we combine the two big black spots of business in Georgia, we clearly see the need for capital in Georgian companies. Funds to finance working capital and capital to finance a real estate investment that will be part of the company's assets and contribute to the strength of its balance sheet. Companies therefore need to raise capital.
There are several ways to raise funds, but the only way to stay in control of the margin is to raise capital and finance the growth of the business by opening the company to foreign capital.
The advantage for the entrepreneur is to quickly dispose of the necessary funds to enable the company to start its activity in healthy conditions with a long-term vision. The entrepreneur can very well allow small holders to enter the capital by setting a low share price, that will lead to many holders who will have less impact on the company's policy than a unique shareholder.
The advantage for investors is quite simple. A well managed company can easily have a net margin rate of between 8 and 10% when the remuneration of many financial funds, or others, reaches at best 3%. Diversifying one's investment by having a real estate and a securities part shared between companies in different fields of activity is a way of managing risks and finding the right investment opportunities.
To be a meeting place for foreign investors and Georgian entrepreneurs is the objective of BGG.