Estimation of real and projected business value

- For purchase
- For sale
- For investment

METHODS FOR VALUING A STARTUP AT DIFFERENT STAGES OF DEVELOPMENT

Fixed Cost Method

This method is typically used by gas pedals and business angels who fund startups at the earliest stages. Due to the high degree of uncertainty at this stage, the investor applies a single valuation approach to all the startups it has screened.

The essence of this method is to determine the current valuation of the startup based on the projected valuation in a few years and the return the investor wants to receive. This valuation is also referred to as post-money.

Venture capital method

Discounted cash flow method

This method is based on a financial model, which is a detailed financial forecast for 3-4 years. In some cases the period may be longer, depending on the stage of development of the company and the industry. (What is a Financial Model).

In financial modeling, there is a rule of thumb that the planning period in the model should not be shorter than the payback period of the project investment. Therefore, for capital-intensive projects that require multi-million dollar investments in construction or startup, the model would be for 5-7 years or more. For a small store or online school, a forecast for 3 years is sufficient.

The essence of the discounted cash flow method is that the projected cash flow of the company is reduced by the cost of attracting investments - the so-called discount rate. This reduction is made according to a certain formula, which is easiest to calculate using the Net Present Value (NPV) function in Excel.

The discount rate is the minimum level of return an investor expects when investing in a startup, taking into account all risks and inflation. For startups, it is usually 30% or higher.

The method is quite complex for an untrained person, so in order not to make a mistake when applying it, it is recommended to seek help from a professional financier or a consulting company that provides financial modeling services.

When choosing a contractor, it is important to study their cases of working with startups and client feedback, and to make sure that they work in accordance with the principles of the international standard of financial modeling FAST. According to this standard, a quality financial model should be flexible, appropriate, structured and transparent.

Multiples method

The multiples method, also called the comparative method, is to value a company relative to its financial metric. Typically, annual revenue or EBITDA (operating earnings before taxes, bank interest and depreciation) is used.
To evaluate a project using this method, you need to find information about investment deals with similar companies.

How to choose the optimal solution?

Stratmod has experience in business analysis and valuation in various industries such as: financial products, IT development, trade, import, hospitality, manufacturing, leasing, construction
We can help:

• for a startup to evaluate the investor's stake
• for a sale to assess the buyer's benefit and not to sell cheaply.

Preliminary cost estimate

Free

Initial consultation

Collection of initial data

Client

Contractor

Analysis of the current state of business

Startup

Business is operating, there is management reporting

Business is operating, no management reporting

Analysis of industry, competitors, market research

Pricing is necessary

Financial model development

For selling/buying a business

For investor

For business forecasting

Summarizing the results in a Pitch Deck

Formalization of Business Plan

Development of Management Reporting

Standard reports

Development of unique reporting forms, KPI

Plan/fact and automation for business management

Building regular collection of Management reporting

Synchronization with Databases and CRM

Presentation of work results, training on the use of tools, customization

Expert consulting on results and optimization

Support of the company's activities by outsourced CFO

Support and assistance in re-presentation of the project to investor, partner, buyer

Free

By agreement

By agreement