Earning a high company valuation is important for a number of obvious reasons. But how can you ensure you receive a high business valuation? What can you do to increase the perceived value of your start-up?
The following are six tips for increasing your business valuation:
Understand Your Competitive Advantage In Your Industry.
Understanding how your business can stand out from the competition is crucial for receiving a high business valuation from investors. Specifically, you need to figure out what advantages you have over the competition that allow your business to thrive in a competitive landscape.
When pitching your business to investors, you must be able to convince them that your new venture can grow and earn money despite a potentially crowded competitive landscape. You must show them that your business can sustain a competitive advantage and uniquely appeal to various stakeholders.
Conduct a Thorough Competitive Analysis.
To effectively execute the tip described above, you must conduct an in-depth competitive analysis of your industry. This involves understanding what your competitors offer and how you can beat them in your industry. Figure out your competitors’ strengths and weaknesses and how they impact your position in the field.
Conducting this competitive analysis will broaden your knowledge of the industry and help you show investors that you know what you’re doing. This will in turn help you earn a higher business valuation.
Highlight Your Revenue, Not Your Post-Tax Profits.
The profits a company earns after taxes can be slim and not sound as appealing as the revenue that same business earns. For example, if your company has an annual revenue of $50 million, but after costs and taxes only nets $2 million, which number do you think will appeal more to investors?
Highlight the more impressive number. From a presentation perspective, this will catch the attention of your potential investors. You should discuss costs and net profits as well, but lead with your strongest point.
Ensure You Understand Your Assets and Liabilities.
When valuing a business, investors want to see that you know the ins and outs of your business like the back of your hand. Make sure you know every asset and liability of your company. If you were an investor, would you price a company highly if the owner didn’t even know his or her own assets and liabilities?
Show Off Your Profit Forecasts…Realistically.
You should obviously show off your projected profits (assuming you have promising projections), but do so realistically. Investors will see through any nonsense and will give your business a lower valuation if you inflate your profit projections too much. Do your research to figure out what is realistic. Then, weigh your research against what you truly believe your business is capable of achieving.
Moreover, don’t be afraid to show off your business, but don’t brag too much to the point where you seem desperate to gain a high valuation. At the end of the day, you’ll have to read the room while you’re presenting to investors to determine the best way to forecast your profits.
Hire Professionals To Help You Out.
Receiving the proper business valuation is crucial for your company, and you should not spare any resources to make sure you get started on the right foot. Because of this, it can be beneficial to seek professional help to ensure you receive the best business valuation possible.
If you need assistance with assessing and increasing your business valuation, please don’t hesitate to reach out. Krowne Certified Public Accountants offer unparalleled financial guidance and professional services specifically tailored to our client’s needs. Please feel free to reach out to us at Krowne Certified Public Accountants by filling out the form on our contact us page or via phone at 818-831-6075. We would love to discuss your situation and help you grow. We look forward to hearing from you.