Business valuation is both an art and a science—and getting it right matters whether you’re raising capital, selling your company, or bringing on a new partner. An inaccurate valuation can cost you money, credibility, or strategic opportunities.
There are several common valuation methods:
- Income Approach (Discounted Cash Flow) – Calculates the present value of expected future earnings. Ideal for established businesses with predictable cash flow.
- Market Approach (Comparable Sales) – Looks at what similar businesses have sold for in your industry. Often used in acquisitions and fundraising.
- Asset-Based Valuation – Based on tangible and intangible assets minus liabilities. Useful for asset-heavy companies or liquidation scenarios.
Key factors that influence valuation include:
- Revenue and profitability trends
- Customer retention and churn
- Market size and competition
- Brand equity and intellectual property
- Management team strength
- Growth potential and scalability
For startups, valuation is often based more on traction, team, and vision than revenue. In such cases, pre-money and post-money terms matter more than traditional metrics.
Hiring a professional financial consultant or valuation expert is crucial when stakes are high. They’ll use accepted methodologies and help avoid common pitfalls like emotional overvaluation or underestimating liabilities.
Remember: valuation is not just about numbers—it’s about storytelling backed by data. Make sure your narrative aligns with your metrics and market.
A well-supported valuation builds trust, attracts better offers, and strengthens your negotiating position.
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