Income-based Valuations
Income-based valuations are a crucial tool for investors and business owners in determining the value of an asset based on its expected financial performance. But they are not the only way to go.
Category: Valuation
Market-Based Valuations
Many factors weigh on the valuation of a company, and for sure there are no two businesses alike. Furthermore, even similar companies find themselves at different stages of their lives when they start talking with investors and buyers: some are consolidating while others are expanding; some are profitable right away and others are not for a long time; some are not even generating revenues when they are acquired.
But a very effective way to monitor the market (albeit quite simplistic) is to benchmark the M&A activity in a specific sector and in a given period. Markets go through different phases after all and there might be more or less appetite for companies like yours, and therefore investors might be inclined to accept higher or lower valuations.
THE CHECKLIST VALUATION METHOD
The Checklist method compares early-stage startups within the same geographical market, taking as highest value the highest valuations in the market, with the exclusion of outliers and notable “crazy” exceptions.
After gathering this local data you are left with a maximum pre-money valuation and you will discount this valuation by the quality of the criteria assessed. In other words, it’s impossible to end up with a valuation higher than this maximum benchmark.
Valuation: Qualitative Methods
When looking at early-stage valuations, our favourite approach is to rely on benchmarks from the market and then compare them with the start-up we are valuing. We normally arrive at a final value by using two different methods: the ‘scorecard’ and the ‘checklist’ methods…
The Scorecard Valuation Method
Have you heard about the Scorecard Valuation Method? It is a way of determining the value of a startup and can be seen as particularly useful by pre-seed and seed-stage investors.
Valuations Made Easy
We are happy to announce that we’ve partnered with Equidam: an online platform for startup valuation that enables entrepreneurs to understand their valuation, transparently discuss it, and close fair deals.
Who Decides Your Company’s Value?
In the past weeks we have established why valuations are helpful, when it makes sense to get your venture evaluated and what are the most common valuation methods for revenue generating companies and early-stage startups.
101 Startup Stages
The startup life cycle has 6 stages, no wait 5, no, another website said 7 stages and then if you actually read The Lean Startup by Eric Ries then you will have read that there are 3 startup stages.
Let’s face it, it doesn’t really matter how many stages there are, as long as you understand the steps involved you will be able to figure out where you are at and what the next steps on your growth path are.
Early Stage Valuations
The question is: how can we evaluate the startup if we have not yet reached the stage where recurring revenues are the norm?
Fundraising 101
Managing to raise capital is rarely easy, and can prove to be an uphill battle, even at the best of times. This is the case even though you have a stellar idea and your business is performing in the marketplace.
Business Valuation For Beginners
In order for an investor to gauge how much they are willing to invest in any business, no matter the stage, they would need to know what the market value is of the business they are considering investing in.
Funders’ Dilution
It’s important to plan ahead and have your exit strategy clear from the start. What do you want to do with your life and your company? And how much of it should you give to investors in order to see new equity flowing into the business, propelling you towards the next stage of expansion?
DCF Valuation Template
This Discounted Cash Flows technique involves deriving the value of a business by calculating the present value of its expected future cash flows. Projected cash flows, inferred from the Business Plan, are used for the five years ahead while the Terminal Value is adopted for the remaining foreseeable future.
Valuation
How to value my company? Sure, you want to minimize the number of shares you will eventually give to investors, but you don’t want to scare them off as well. Above all being reasonable is the key when it comes to valuing your own company…
But first, let’s talk about the theories behind assets valuation.