We can consider 7 things which contribute for the valuation 1. Fixed Assets, 2. The team, 3. Founder, 4 Scalability, 5. The size of the market, 6. Customers, 7. Analytics.
The first item which considers at the time of valuation is fixed asset and easy to conclude the assessment either. It values not only the assets which you can see physically also could be an application or a tool developed, of course, furniture, office space, computers. Fixed assets would be very few in the early stage of startups.
Tip: Plan every asset you buy can be valued in future with less depreciation and file all the bills and receipts without fail.
The team is one of the big assets:
The profile of every team member considers as an asset. Every team member’s academics and professional experience will be considered as an asset, for instance.
- The guy with two years of experience as an IT professional.
- The guy with 15 years of experience in Business Analytics, Sales, and Management.
- The guy with 15 years of experience. in various roles with domestic and international expertise.
- The guy with 10 years of experience in different roles at local, international space and as an entrepreneur.
- The guy with 10 years of experience in various roles at domestic, international space and as a successful businessman.
- The guy with 10 years of experience in various roles at domestic, international space and as a successful entrepreneur with a reputed brand. etc.
Every combination of the above profile has its own value and treats as an asset to a startup.
Founder’s maturity, academics, professional experience, his/her vision towards the business valued if the founder was already proved as a successful entrepreneur will definitely have a high value.
Scalability- Startup valuation calculator:
Volume and potentiality of target customers. One single design where you can sell to many customers is substantially more profitable. For instance.
Many of you know about world class Cars like Mercedes, Audi, BMW, Honda, Toyota, etc. Every 2 to 3 years, one new model or new car launches in the market. However, the number of successful engines are just one or two for each brand…this is the truth.. this is what scalability is since it is more expensive to invest time and money multiple times on designing more products unless a proved brand.
The size of the Market:
Volume and potentiality of target customers. The bigger the market, and the higher the growth projections from analysts, eventually the startup worth is more. Simple example.
We buy vegetables from big supermarkets, malls where we get it for INR 100 price though it is a bit far from home.
When we don’t have time to go far prefer to buy from the nearer supermarket for INR 120.
Buying vegetables from a stall/small van right next to home may costs the same vegetables INR 140. We need to know few things from these three instances 1. Demand 2. Necessity 3. Price.
Though the price is high at right next to the home store, the customer is ready to pay as the product is highly usable and frequently consumable, that’s how the demand gets created. Consequently, when the demand is more eventually, we can have a great valuation of the startup and more space to have numerous startups in the same area.
Tip: Get some analytics about your target customers and plan your marketing strategy accordingly.
Early contracts and customers:
The value of existing customer base, repetitive customers, contracts, relationships, contracts in the pipeline and subscriptions can be highlighted and valued.
Tip: Track every customer relationship in the mode of soft/hard copy and keep it handy from the day one.
The Web & Mobile app Analytics:
last but not least and this is the most important part in the current eCommerce era, track the analytics of your portal and mobiles app with the increasing traffic of user base from various demographics and segments.
All the best have a good valuation and growth 🙂