You may want to know how much your startup business is worth today, based on the growing market. Or does your business look like a beautiful, well-structured bungalow with a nice color to match? And maybe you want to rebuild it; to make it bigger and a superlative building.
Well, today we will talk about 5 important factors that professionals consider when evaluating a company, which I think should be in your note.
On the other hand, I recommend that young and aspiring entrepreneurs take these important factors seriously. What I mean by that is that it’s like when you want to buy or sell a property in a certain place. I mean you have to know the factors that make the houses in that place have a certain price. You must be informed so that you do not blindly buy above or sell below what the market is willing to pay at any given time.
company valuation
The company’s valuation is based on its asset values and future earnings capabilities, which it may develop and lead to future success, which may or may not also materialize.
So now, the 5 important factors that I think you should know, before the valuation of your company/startup:
#5. The market price of the shares of corporations in that same industry, whose shares are actively trading on an open market, or on the exchange.
There are many industries you know. There is medical industry, transportation industry, music industry, manufacturing industry, etc. So what that means is, for example, that you make some piece of software. The market price of shares of Dell, Microsoft, etc. Who are in the same industry as you, as a software manufacturer. Now, that will take into account how you are valued.
#4. Investors will value their participation in the gross capital of the block. It means that the professionals will calculate all the total assets of your company, such as computers, furniture, the building, cash and value them.
#3. The capital stock of the company’s common stock as seen on the balance sheet and the current financial condition of the business. Again, you will need to present the values of your shareholders. Examples: Providing voting rights and the right of shareholders to a portion of the company’s profits, through capital appreciation, as detailed on its balance sheet. And again, does the company move forward financially or is it liquidated? How is the financial health?
#two. The general economic forecast and condition, and the point of view of the specific industry in particular. It’s like I mentioned before, (the industries). Let us again take the manufacturing industry as an example. What is the value of the manufacturing industry to the economy of your country or in the world market as a manufacturer?
So the conditions behind that question will, in a way, apply in some way to the valuation of your company. What I mean by that is that investors are going to value your company based on that.
#1. The nature of the company and the history of the beginning of the business. Professionals would want to know if the business is a high risk business or vice versa. The foundation of the business, how it got started, how you managed to build your team members, marketing strategies, and the like.
Conclusion: The value of your company is considered based on the total assets of the company first, followed by the 5 important factors that we just talked about. If there is any other factor that is not listed, you can add it in the comment section or share it with your friends. Until next time.