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GTAN|EDUCATION - HOW TO VALUE YOUR BUSINESS

June 4, 2019 / Source: GTAN

On Tuesday, June 4th, Rob Hehl of BDO Canada hosted GTAN|Education for Entrepreneurs - How to Value Your Business.

Rob shared his expertise and experience with investors and entrepreneurs alike on how to properly value your early-stage business. He provided great insight into the terms individuals should know when completing this important evaluation.

Valuing your company

Important Value definitions:

  • Value in use/value to owner
  • Intrinsic value/fair market value
  • Market value/price

Valuations:

  • Valuations are always prospective
  • Future cash flow is what really matters
  • Risk associated with the future cash flow

Preliminary Due Diligence Checklist

  • As a valuator, important components to look for are:
    • Marketing & Sales
    • Intellectual Property
    • Employees & Directors
    • Finances (historical and future).

GTAN has created a Due Diligence checklist to get you started here.

Future Cash Flow

Future cash flow can be predicted based on the following:

Revenue

  • Well defined solution
  • Well defined market
  • Realistic market share

Costs

  • Direct costs
  • Marketing
    • Rob argues this is one of the most important costs to show your early-stage business has value.
  • Reinvestment

Discount Rate

  • Risk associated with achieving cash flow
  • Debt holders
  • Equity holders
    • Founders
    • Financing
    • Investing
  • Discount rate = weighted average cost

Pre-revenue

Relative valuation:

  • Comparable assets with market values
  • Standardize values
  • Adjust standardized values

The last piece of advice Rob gave entrepreneurs is that his advice is all relative. While it may apply to you and your new business today, it may not apply to every startup you are a part of throughout your career. Contact BDO Canada for more information or advice on how to value your business.

Do you have a fresh, new idea and are looking for investors? GTAN|RAW events will resume next season in September 2019. Learn more about pitching at GTAN|RAW here.