Valuation: a fancy word for the price someone is willing to pay for your company. I.E., a number that can either make you feel good about your company or think, man, I got to step up my game to be more competitive in the market. A valuation is like ranking a football team in the NFL. You consider how many games they have in the previous season, how many games they have lost, their division, and whether have they been in or won a Superbowl. All these factors influence their ranking, just like similar factors determine your company’s value. Let’s dive into what some of those influencing factors might be.
When determining the valuation of your company, it is vital to consider the market valuation because the fundamental valuation drives the market valuation. So, what is the difference between market and fundamental valuation? The market valuation is based on when your company is sold, and fundamental valuation determines if your company and the stocks are valued correctly. This means you can ensure that you sell your company for what it is worth without getting ripped off. There are three primary approaches to determining the valuation of your company, and no one approach is better than another. The best practice to determine your company’s valuation is using at least two of the below approaches, if not all of them. Let’s begin by defining each of these approaches and how they can best determine your company’s worth.
A word of caution: Like a snapshot, a valuation captures a moment in time, and while they do include forecasts for the future, a business valuation can change at any moment due to fluctuations in the market. Selling your business is a gamble. Many business owners get stuck on when to sell because they can gain a higher sell price in the future. Don’t get so caught up in potential gains that you loose the advantage you have.
Ready to dive into the numbers? C-Level Strategy can help you determine the valuation of your organization and compile an exit strategy, even if you aren’t looking to sell for a while. Research has shown that you are 42% more likely to achieve a goal if you write it down, so let’s map out and write down your valuation so that you have an exit strategy representing your hard work, sacrifice, and success.
Gain a competitive edge in the marketplace and free up valuable time and resources to focus on growth and innovation.
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