Valuations of start up businesses

It is possible to attach a value to a start-up business because it is largely assessed on projections of future earnings rather than past results.

Often the objective when valuing a start up operation is not sale or restructure but securing investment. To achieve this goal it is necessary to demonstrate three things:

  • The investor won’t lose their initial investment
  • The investor will actually make money
  • The investor can understand how much money could be made over a given period of time so they can assess just how long their investment will take to realise a satisfactory return

The minimum documentation you would need to provide is financial projections over the next 4 years (i.e. forecast/budgeted Profit and Loss)

Other documents that will assist with the valuation of your start up business should cover a minimum period of 3-5 years and include:

  • Business Plan incorporating
    • Detail of your offering, be it a service or a product, and where you are at in the development stage
    • Industry segment review and analysis identifying your sustainable competitive advantage and an appreciation of the competitive landscape
    • Sales/Distribution plans
    • Marketing plans
    • Any contingency plans you may have developed in response to identifiable threats
    • Any dependencies that may exist
  • Legal Structure

The Bizval Insight Paper on Start-Ups and Business Valuations is available for free. Register Now.

An independent business valuation compiled by a professional can help. Contact BIZVAL or order your business valuation today.

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