5 important factors to consider before the valuation of your company
You may want to know how much your startup business is worth today, based on the growing market. Or does your company look like a beautiful bungalow, well structured and with a nice color to match? And maybe you want to rebuild it; to make it bigger and a superlative building.
Well, today we will talk about 5 important factors that professionals consider when valuing a company, which I think should be in your note.
On the other hand, I recommend that young people and aspiring entrepreneurs take these important factors seriously. What I mean by that is that it’s like when you want to buy or sell a property in a certain location. I mean you have to know the factors that make the houses in that place have a certain price. You must be informed so that you do not blindly buy above or sell below what the market is willing to pay at any given time.
company valuation
The company’s valuation is based on its asset values and future earnings capabilities, which it can develop and lead to future success, which also may or may not materialize.
So now, the 5 important factors that I think you should know, before the valuation of your company/startup:
#5. The market price of the shares of corporations in that same industry, whose shares are actively traded on an open market, or on the exchange.
There are many industries that you know. There is medical industry, transportation industry, music industry, manufacturing industry, etc. So what that means is, for example, you make some piece of software. The market price of shares of Dell, Microsoft, etc. Who are in the same industry as you, as a software manufacturer. Now, that will take into account how you are valued.
#4. Investors will value their participation in the gross capital of the block. It means that the professionals will calculate all the total assets of your company such as computers, furniture, the building, cash and value them.
#3. The capital stock of the company’s common stock as seen on the balance sheet and the current financial condition of the business. Again, you will need to present the values of your shareholders. Examples: providing voting rights and the right of shareholders to a portion of the company’s profits, through capital appreciation, as detailed on its balance sheet. And again, is the company moving forward financially or is it liquidated? How is financial health?
#2. The general economic forecast and condition, and the point of view of the specific industry in particular. It’s like I mentioned earlier, (the industries). Let’s take the manufacturing industry again as an example. What is the value of the manufacturing industry to the economy of your country or in the world market as a manufacturer?
So the conditions behind that question will, in a way, apply in some way to the valuation of your company. What I mean by that is that investors are going to value your company based on that.
#1. The nature of the company and the history of the beginning of the business. Professionals would want to know if the business is a high risk business or vice versa. The foundation of the business, how it got started, how you managed to build your team members, marketing strategies and the like.
Bottom Line: Your company’s value is considered based on total company assets first, followed by the Big 5 Factors we just talked about. If there is any other factor that is not listed then you can add it in the comment section or share it with your friends. Until next time.