How To Know The Valuation Of Your Startup

Startup valuation is something that titillates the minds of the startup founders. Yes, you will become busy after indulging yourself in your business. But, at some point, you will have to borrow a few hours from your busy schedule so that you can calculate the entire valuation of your startup business. You must include your idea, customer value, service, and your products.

Calculate Startup Valuation

It is quite evident that the valuation of your startup is something that cannot be defined only using some monetary terms. You will find both science and art in the valuation. The scientific part is very easy as here, you will have to do some sort of valuation research and along with it, you will have to construct a revenue. But, on the other side, the artistic part is very subjective. Here, you will have to find out the strength of your team and in addition to this, you will have to highlight the innovative aspects of your products.

Calculate The Valuation Of Your Startup

It does not matter whether you are running an established business or startup business, you must know the worth of your business. In the case of an established business, you will have a good customer base, solid metrics and assets. Well, these make the calculation easier. But, if we talk about the startup business, you will not have these advantageous aspects and therefore, the calculation of your startup business looks complicated in the beginning.

A startup is something that always follows high-growth business strategies. There are certain factors that can change over the course of time and this is why you will have to make proper calculations. A single mistake can ruin your startup business. Investors look for absolute transparency before investing a single penny in your startup business.

Fortunately, there are various methods through which you will be able to know the valuation of your startup. Some of them are highlighted below:

·         Scorecard Method: scorecard method is one of the most popular methods of calculating the valuation of the startup business. Most investors implement this method. Well, it allows you to make a comparison between other average startups and your startup in the same industry. There are certain factors that are inextricably associated with this method and these are the strength of your products, team experience, competition and many more. If the outcome looks great after calculating the valuation using this method, you will definitely get a solid investment from the investors.

·         Comparable Pricing Method: Comparable Pricing Method is a very simple startup valuation method. In terms of accuracy, it is not very effective. But, if you are looking for a method for the early-stage valuation, it will be ideal for you. First of all, you will have to find out a comparable company and then, you will have to implement this method to know the valuation of your startup business.

·         Discounted Cash Flow Method: Cash flow plays a very important role in the startup business. Therefore, it is very important to know how much cash flow your startup business will generate. With this method, you will be able to know the potentiality of your startup business. However, when it comes to reliability, this method might not give you a fruitful outcome. You will have to make some sort of assumptions to get the result.

Pre-Money Valuation And Post-Money Valuation

Pre-money valuation and post-money valuation are some important aspects that are inextricably associated with a startup business venture. Pre-money valuation indicates the worth of your business before getting any kind of investments or external funding. After receiving investments or external funding, the post-money valuation can be determined.

So, this is how you can know the startup evaluation. We hope that this article would be helpful for you.

Thanks 

Aamir Qutub