5 valuations methods acquirers may use to evaluate your startup
Valuing your startup is like waiting for the school report card after submitting your favorite science project. Only this time, you’ve labored for years, not a long weekend, and the stakes are so much higher. No one would blame you for feeling emotional and anxious for approval.
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A one-week feature took two months, mostly spent keeping three systems in sync
I wrote this tool
https://increnovation.azurewebsites.net/fermi/highlevel
It can help you map some financial models that makes sense.
Love the simple and clean design of the website!
By the way, looking for feedback on Make A Card, a tool to create invitation cards: https://www.makeacard.info/
Anything you like or don't like about it? It's just a tiny project and I am not sure if I should expand this further.
Two things:
I would use white as a background, since most website visitors outside web developers will most likely prefer white.
Also, a little bit about what the product does on the homepage would be helpful.
Thank you. New landing page is coming soon
you can also use flippa
I like that he included this breakdown of the Berkus method (which is a particularly good choice for a pre-revenue startup.) Where, rather than value a startup using its financial forecasts, you value it on its risk factors, splitting it into the following categories:
Sound idea. Is it scalable, relevant, protected, and proven?
Prototype. Have you demonstrated proof of concept with a working product or service?
Quality management. Do you have the skills and experience to grow the business?
Strategic relationships. How will you leverage partnerships to help you grow?
Product roll-out or sales. How well can you market your product?
Your startup is then weighted under each category on a scale of $0 to $500,000. Your valuation is the total.
Nice, I like that! Of them all, I was least familiar with the Berkus method. That feels like it'd be perhaps the most difficult to reach a consensus on, but great to know.
I don't see the point in paying for this annually or even twice a year when you could just get it valued when you're selling. Feels like a waste of money.
If it's a simple SaaS product that might be true. But if your company is larger, regular business valuations give you a much better understanding of your business and its trajectory.
Better knowledge = less uncertainty and less risk to a buyer. It can show where revenues can be improved and expenses reduced and create a track record for someone that wants to buy it.
My friend that recently sold said her buyer used the discounted cash flow method. It resulted in a slightly lower sale price for her but she was able to close the deal within 6 weeks.
I also like this article, which gives a step-by-step guide: https://theygotacquired.com/resources/selling-a-startup/
One piece of advice that I see consistently from founders that have sold their companies is to start preparing for a sale well in advance — even if you don't have an intention of selling for a long time.
That's because what's good for preparing your business for a sale is also good for its growth, such as professional bookkeeping, well-documented contracts, staying lean, and ensuring the company can run without you.
Another helpful component is regularly getting valuations. There are many methods to valuing a company, and the type of buyer you attract may prefer a different method. What I liked about this piece is that it dives into the most common methods and gives you the tools to, theoretically, do it yourself.
Here's another piece specifically for valuing SaaS firms.
yeah always have exit plan from day 1