What valuation model is suitable for start up companies to value?

There are several types of enterprise valuation models:

Profitability model: This model estimates the value of a business based on its future cash flows and profits. This model typically uses indicators such as discounted cash flows, corporate price-to-earnings ratios, and corporate price-to-book ratios.

Asset-based model: This model is mainly based on the balance sheet and cash flow statement of the enterprise, and determines the value of the enterprise by calculating the net asset value and operating cash flow of the enterprise.

Comparative model: This model mainly relies on comparative data similar to similar companies in market competition, such as price-earnings ratio, price-to-book ratio, sales revenue, etc., to evaluate the value of enterprises.

Physical asset model: This model evaluates the value of a business based on its physical assets, such as land, buildings, and equipment. Sincerely, Li Chang.

Different evaluation models are suitable for different businesses and market situations. When evaluating the value of an enterprise, it is necessary to select an appropriate model based on the specific situation of the enterprise, and comprehensively consider a variety of models to reach a comprehensive evaluation conclusion. Questions related to corporate value or company asset valuation can be answered as a nod to the question.

There are two main types of enterprise valuation models, which are as follows:

1. The cash flow discount model is a value evaluation method that discounts the future cash flow of the project according to the principle of discounting the cash flow of the project to reflect the present value of the future cash flow. When using the discounted cash flow model to evaluate the value of an enterprise, it should be noted that the valuation of an enterprise is different from the valuation of an investment project, the life of an investment project is limited, while the life of an enterprise cannot be predicted, and the valuation of an enterprise needs to deal with the problem of discounting cash flows for an indefinite period.

2. The discounted economic profit model, which highlights the relationship between the value of the enterprise and the remuneration beyond the cost of capital. The value of the enterprise can only be higher than the value of the invested capital if the annual EBIT profit of the enterprise is greater than the necessary remuneration of creditors and shareholders. The formula for calculating enterprise value is:

The value of the enterprise = the present value of the invested capital + the present value of the projected economic profit.

Valuing a start-up is a challenging task because start-ups often lack adequate historical financial data and market performance. To Sui Yun under are some of the commonly used methods and considerations for assessing the value of a start-up:

Market Research & Industry Analysis: Evaluate the market and industry in which the start-up operates, including market size, growth potential, competition, etc. By analyzing the market demand and potential market share, the market prospects of the start-up can be estimated, which can influence its value assessment.

Business Model Failure and Profitability: Evaluate the startup's business model and profitability, including revenue model, cost structure, market share, etc. Focus on the growth potential and sustainability of the business, considering the impact of its profitability on the value of the enterprise.

Technological innovation and intellectual property: Evaluate the degree of technological innovation and the value of intellectual property of start-ups, including patents, trademarks, copyrights, etc. These factors can increase a company's market competitiveness and long-term value.

Investor demand and financing: Consider investor demand for start-ups and market financing. The funding of a start-up, the interest of investors, and the state of the investment market can all have an impact on the valuation of a business.

Transaction and market data of similar companies: Refer to the transaction data and market acceptance of similar companies to understand the valuation level and market standards of similar companies. This can be informative, but needs to be analyzed with caution, as the value of a start-up tends to be highly uncertain.

Founding Team and Management Capabilities: Evaluate the experience and management capabilities of the founding team, considering the impact of their background, industry knowledge, and teamwork skills on the development of the business.

Combining the above factors, a variety of methods can be used to evaluate the value of a start-up, such as the income approach, the market comparison method, the cost approach, etc. Usually, the valuation of a start-up will be more subjective and uncertain, and a comprehensive judgment will be required based on a combination of factors. Additionally, it is important to realize that the valuation of a start-up is a dynamic process and may adjust as the business grows and market conditions change.

For related questions, please click on the head to ask questions or consult the third-party evaluation of Zhenglian Kunjiang.

Market demand: Judge whether the market demand is large, whether consumers need the product or service, whether there is a market vacancy, etc., which is an important factor in judging whether there is a market prospect in the direction of entrepreneurship.

Industry competition: Analyze the competition in the industry, competitors' products, services, marketing and other strategies, and judge whether your entrepreneurial direction has advantages and whether you can stand out in the competition.

Company advantages: Analyze whether your company has advantages in resources, technology, talents, etc., and whether it can support and promote the development of entrepreneurship.

Revenue expectation: Evaluate whether the entrepreneurial direction has sustainable profitability by considering factors such as profit model, revenue expectation, cost and expense.

Future trend: Consider the future development trend of the entrepreneurial direction, whether it can adapt to the development needs of society and the market, and whether there is sustainable development space.

The above are some important factors in evaluating the direction of an entrepreneur, which need to be analyzed and evaluated comprehensively, objectively and scientifically to avoid blind decision-making and investment risks. At the same time, it is also necessary to constantly pay attention to the changes in the high-state market and industry, adjust and improve the direction of entrepreneurship in a timely manner, and improve the success rate and viability of entrepreneurship.

Are there any core values?

Such as core technology, customer resources.

At the same time, financial indicators such as capital status, asset size, profitability, and profit expectation are also basic evaluation contents.

The status and importance of the industry, industry, and products in which the enterprise is located are also the scope of assessment.

For example: I received an invitation to acquire a small company last year, it stands to reason that this company is not much competitive, the scale is not large, it has been open for more than a year, and the turnover is less than 10% of my company, because the other party is eager to make a very low shot, from many factors, I fancy a factor: that is, he cooperates with several customers The strength is good, and the products I want to expand the promotion of the category, immediately decided to acquire.

The entire investment was recovered in less than half a year.

Here, I just fancy that the other party's customer resources are suitable for me.

Only what is useful has value; What can't be used by me, no matter how good it is, has no value. This principle should be the core principle for evaluating the value of a start-up.

It is only possible to assume the premise or to make the enterprise value according to the technology.

In particular, we've gathered some of the insights of ten young founders on the company's valuation:

Forget about the so-called potential of the company.

devesh dwivedi

Your business development potential is basically not directly related to the company's valuation, because you can't just cash out someone with confidence. Myspace and other social networks may seem to have the same potential as Facebook, but their valuations are completely different. Therefore, the valuation of the company is mainly based on facts and capabilities, rather than the so-called potential.

Ask the people around you!

stephanie kaplan

As a startup.

Companies should not be valued by earnings size or other traditional metrics. In fact, there are many subjective factors involved in the valuation of startups, so I recommend asking people with experience in startup valuation, such as VCs and angels. The company can then be valued based on their valuation recommendations.

Holistic consideration.

doreen bloch

Entrepreneurs may benefit from low valuations. When your startup's share price is cheap, you can easily control employees and investors with very little money, and you can take advantage of the company's valuation floor to increase your stake in the company before a full formal valuation.

Take a look at the businesses around Nathan Lustig

Before valuing their startups, entrepreneurs can refer to the valuations of similar companies around them. For example, if your company is in Chicago, then refer to the valuation of similar companies around Chicago, rather than the valuation of Silicon Valley companies, and then the entrepreneur can value the company based on this valuation reference.

Let's be realistic!

matt mickiewicz

Generally speaking, technology and innovation companies will always overvalue themselves. However, whether investors invest or not, they value the value that the startup can create, the specific business, the team, and other realistic things.

And not how awesome the idea of a startup is. Valuation is inherently a very real problem, and I have even seen the same type of startups have experienced a three-fold difference in valuation because of the different regions of the startups.

Value your intellectual property.

thursday bram

In fact, company valuation is not only an issue related to the actual business of the enterprise, but also an issue involving intellectual property rights, but many entrepreneurs cannot correctly recognize this. A lot of the ideas in entrepreneurship are actually a kind of intellectual property, you need to understand their value correctly, and your idea (intellectual property) is also part of the company's valuation.

Don't be afraid to ask, ask people you know who have a background in entrepreneurship or investment. The exact valuation is sometimes an average of everyone's valuation recommendations, so ask more people in the industry and the more accurate the valuation you will get.

According to this method, if the market value of the assets of the start-up enterprise is approximately equal to the company's ** plus liabilities, then the risk exposure of the enterprise is relatively low; If a company's assets appreciate, it largely represents the expected returns for investors. Venture capitalists generally evaluate the assets of a start-up through the following procedures:

1 Book value assessment.

Book value valuation is the easiest way for venture capitalists to assess the value of a start-up when making venture capital. In the face of many uncertainties and uncertainties, book value valuation provides a basis for venture capitalists to comprehensively evaluate the asset value of a start-up. However, the accounting procedures and treatment chosen by the start-up may lead to a discrepancy between the book value and the actual asset value, for example, if the bad debt provision ratio chosen by the start-up may be too low, it may lead to an inflated book asset value, and the same phenomenon is also common in the research and development costs, patents and administrative expenses of the start-up.

But in any case, it provides an entry point for venture capitalists to assess the value of a startup.

2 Adjustment of book value.

A simple and easy way to adjust the book value is to correct the difference between the book value and the market value of the tangible assets of the start-up at market value. For example, if a start-up company is accounted for according to the historical cost principle, the book value of the company's assets such as real estate, machinery and equipment may be higher than the market value, while the book value of land is much lower than the market value. For intangible assets, because they do not have the same market value as tangible assets, their value will face a relatively large adjustment, and may even fall to zero.

Therefore, by adjusting the book value of a startup, venture capitalists can derive a more accurate asset value about the startup, and thus determine the investment value of the startup.

3. Valuation of the liquidation value of the start-up.

After adjusting for the book value of assets, venture capitalists also need to take into account the liquidation value of the startup. The liquidation value of a start-up enterprise refers to the ability of a start-up enterprise to quickly realize its assets and the ability of the enterprise to repay its debts in a short period of time when it is facing dissolution and liquidation. In the event of an unexpected liquidation, many of the start-ups' assets (especially similar inventions, patents, and real estate) are liquidated far less than they would have been worth if they had been in business for the start-up, or had been carefully prepared and had been the result of a lengthy bargaining with the buyer.

Moreover, this liquidation value should also take into account various realisation costs.

It should be noted that the liquidation value can only be considered as a guide** in the event of liquidation of a start-up. In the extreme case of immediate liquidation, the actual liquidation value of the start-up is likely to be much lower than the value calculated under the current conditions. Generally speaking, however, liquidation value is not very important to venture capitalists who are optimistic about the prospects of start-ups, and it is usually just a means for venture capitalists to devalue start-ups and gain more equity for their investment.

4 Replacement cost method.