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The art of valuation - how to determine the true worth of your startup

Starting a business is a thrilling experience. You've got a fantastic idea, you've assembled a great team, and you're ready to bring something new to the world.

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But before you can get your startup off the ground, you need to know how much it's worth now and in the future.

Business valuation is a tricky process, and there are many different factors to consider. In this blog post, we'll explore the art of valuation and how to determine the true worth of your startup. First, let's define what we mean by "worth."

A startup's worth is the amount of money someone would be willing to pay for a percentage of ownership in the company. This is typically expressed as a euro amount per share. Valuation is not an exact science, but some common methods can be used to determine a startup's worth.

One popular method is the discounted cash flow (DCF) analysis. This involves projecting the future cash flows of the business and then discounting them back to their present value. The resulting figure is the net present value (NPV) of the business. DCF analysis is popular as, at the end of the day it's cash flow that defines the existence of your startup business. DCF combined with proper business modelling is a "killer" combination.

Another method is the market approach, which looks at the prices paid for similar companies. This is similar to how real estate appraisals are done. The market approach involves researching the sale prices of similar companies, and/or businesses and using those values to estimate the worth of your startup. The main challenge in this method is to find those similar companies.

Finally, there's the income approach, which involves looking at the company's current earnings and projecting future earnings. This method is particularly useful for startups that are already generating revenue.

Valuation is a complex process, but it's an important one. Knowing the worth of your startup can help you make better decisions about financing, hiring, and growth planning and potential. By using a combination of methods and taking into account all of the relevant factors (key value drivers), you can determine the true worth of your startup and set it on the path to success.

Read more about valuation, business modelling and Value Based Management

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