Asheesh Advani, President of Virgin Money US and writer for Entrepreneur.com, says that although it is difficult to forecast revenue at a startup, it is necessary in order to determine value, and, eventually, defend the valuation. Startup valuations are largely determined based on qualitative attributes, such as cost, market, and income approach. One can also research what similar companies in the industry and geography are worth. (There are sites on the internet to help determine what comparative businesses are selling for.) Keep in mind that if the business is not profitable, it is probably not worth very much. Another way to determine valuation is to ask investors. If they tell you that the business is worth $1 million, then that is likely what it is worth. It is also possible to tell the market what you value your company at by revealing future expectations.
How to calculate a startup companies valuation?
July 20, 2010
Read more stories about:
Like this story?
Adam Toren is a serial entrepreneur, mentor, investor and co-founder of YoungEntrepreneur.com. He is co-author, with his brother Matthew, of Kidpreneurs and Small Business, BIG Vision: Lessons on How to Dominate Your Market from Self-Made Entrepreneurs Who Did it Right (Wiley). He's based in Phoenix, Ariz.
Ads by Google