Startup Scratch (Startup Solution Hub) > Startup Research > How to Grow your Startup Brand through Business Valuation from experts

How to Grow your Startup Brand through Business Valuation from experts

Young and start-up companies pose the most problems in valuation, for a variety of reasons. They have a limited history, are generally not publicly traded and often don’t survive to become successful commercial enterprises.

 

They have little or no revenue or profits and less-than-certain futures, the job of assigning a valuation is particularly complex.

 

Valuation determines the economic worth of company under certain assumptions and limitations on a valuation date.

 

You need business valuation for:

  1. To grow your brand regularly
  2. Mergers and acquisitions
  3. Fund raising
  4. Sale of business
  5. Succession planning
  6. Regulatory purposes (FEMA, Income Tax, Companies Act, SEBI Norms)

 valuation experts startup scratch

Globally there are 3 approaches to valuation:

Approaches for Valuation of Startups

  • Income approach method: in this method discretionary cash flow or net cash flow is discounted to perform the valuation
    • key to the effective use of the income-based business valuation methods is the proper selection of the capitalization rate, discount rate, and valuation multiples

 

  • Market approach: market-based valuations focus mainly on comparative company data from both the public and private sector within the same or similar industry
    • for this type of valuation, it is essential that the appraiser have the appropriate industry resources and is fully appraised of current statistics relating to similar businesses

 

  • Asset approach: for businesses whose income is derived primarily from its assets, the asset-based valuation is most appropriate. The main characteristics of this particular valuation are:
    • company’s balance sheet items are valued at current market value and intangible asset are added

 

  • Factors that affect a company’s value either favorably or unfavorably are considered and compensatory adjustments are made.

 

Asset and income approach results in fundamental valuation while Market approach determines relative valuation

 

Fundamental MethodRelative MethodOther Method
Income Based MethodAsset Based MethodMarket Based Method
Capitalization of Earning Method (Historical)Book Value MethodComparable Companies Market Multiples Method (Listed Peers)Contingent claim Valuation (Option Pricing)
Discounted Cash Flow Method(Projected Time Value)Liquidation Value MethodComparable Transaction Multiples Method ( Unlisted Peers)Price of Recent Investment Method
 Replacement Value MethodMarket Value Method (For Quoted Securities)Rule of Thumb (Multiples: Customers, Rooms, Seats, No. of Visitors etc.)- Depends upon Industry

 

Real Challenge for valuer lies in deciding Which Valuation Method to apply, depending upon –

  1. Purpose of Valuation
  2. Stage of Business
  3. Business Model

startup valuation startupscratch experts

Some valuation methods are to acquire your enterprise value and Similarly Some valuation methods are suitable for minority worth control value

 

For judging business, what we do analyze:

  1. Company History and Business Plan
  2. Comparable Listed Companies
  3. Comparable Transaction Multiples
  4. Qualitative Aspects

 

 

 

Comments

Leave a Reply