You may want to know what your startup company is worth today based on the growing market. Or does your business look like a nice looking, well structured, nicely color coordinated bungalow? And you might want to reconstruct it; to make it bigger and a superlative building.
Well, today we’re going to talk about 5 important factors that professionals consider when evaluating a company, which I think should be included in your note.
On the other hand, I recommend young and aspiring entrepreneurs to take these important factors seriously. By that I mean it’s like wanting to buy or sell property in a certain location. I mean you should know the factors that offer houses in this location at a certain price. You should be informed so that you do not blindly buy above or sell below what the market is willing to pay at any given time.
The business valuation is based on your assets and future earning capabilities that you may develop and lead to future successes that may or may not be realized.
Now for the 5 important factors I think you should know before your company/startup company valuation:
#5. The market price of the shares of companies in the same industry whose shares are actively traded on an open market or stock exchange.
There are many industries that you know. There’s the medical industry, the transportation industry, the music industry, the manufacturing industry, etc. So that means you make, for example, a piece of software. The market price of the shares of Dell, Microsoft, etc., which are in the same industry as you as a software manufacturer. Well, that will take into account the way you are appreciated.
#4. Investors will rate your gross block equity interest. This means that professionals calculate and value all your company assets such as computers, furniture, buildings, cash.
#3. The company’s common stock as seen on the balance sheet and the company’s current financial position. Here, too, you must present the securities of your shareholders. Examples: providing voting rights and entitlement of shareholders to a share in the company’s benefits through capital appreciation as reflected on your balance sheet. And again, is the company developing financially or is it going into liquidation? How is your financial health?
#2. The general economic forecasts and conditions, and the perspective of each industry in particular. It’s just like I mentioned above (the industries). Let’s take the manufacturing industry again as an example. What value does the manufacturing industry have in your country’s economy or in the world market as a manufacturer?
So the conditions behind this question will apply to some extent to the evaluation of your business. What I mean by that is that investors will value your corporate base based on that.
#1. The nature of the company and the history of the company’s beginnings. Professionals want to know if the company is a high-risk business or vice versa. The formation of the company, how it started, how you managed to build your team members, the marketing strategies and things like that.
Bottom Line: Your enterprise value is first looked at in terms of the company’s total assets, followed by the 5 key factors we just talked about. If there is another factor that is not listed, you can add it in the comments section or share it with your friends. Until next time.