key to evaluation

You have finally developed your product, and the next step is marketing. At this stage, you are confident about the value that your start-up has helped to create. But how do you explain this value to your interlocutors (donors, associates or business partners)? If it were possible to count in liters of sweat or sleepless nights, counting would be easy! Valuing a company is a complex and often subjective exercise, especially in the context of a start-up, and this is due to its business model (sometimes untested) or the innovative nature of the technologies developed. Based on this observation, are valuation methods applicable to start-ups? And what are its limits?

Compare Better Prices

One of the most commonly used evaluation methods is comparison. This method involves defining the value of a company in relation to the precedents of the market or the region in which that company is located. The variables analyzed will be economic data (turnover, results, EBITDA) of companies already in the market. This relatively simple method assumes that the projects are comparable. Which isn’t really that common, especially when it comes to innovation. In addition, as with target companies, it is difficult to find the information needed to perform this comparison task.

value future prospects

A forward-looking approach involves evaluating the growth potential and performance of a company according to certain indicators, such as future cash flows, turnover or projected results. This method assumes the pre-validation of the economic model, and hence the beginning of marketing.

additional financial appraisal

The question remains open as there is no precedent. What we are seeing more and more is that additional financial parameters are also taken into account during valuation.

With regard to evaluating your product, it is important to consider the amount or psychological value that a large company would be willing to pay to buy it rather than spend time designing it with its teams (replacement product). The “time” element, which determines marketing, can have a significant impact. From design, compliance, customs clearance to its pre-marketing, all the elements that contribute to the development of the product can be taken into account. Notorious indicators like the number of prospects on social networks, or “followers,” can also weigh in the balance.

In the end, remember it’s all about the conversation! A well-documented and well-reasoned valuation file will be representative of all of your company’s assets in front of your financial or other contacts, and show signs of confidence for future prospects.

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