valuation what does it mean

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Valuation: What does it mean?IntroductionBusiness/Product Life CycleDefinitionsThe Phases of Start-upsHow much am I worth?How are valuations done?SummaryA T A1

Building BusinessVALUATION

Is understanding how to create value to obtain the right...A T A2High marketing spending & some profitMaximum profit & CashLow profit & Cash coupled with high costs

Break-even OrLossBusiness /Product Life CycleIntroductionGrowthMaturityDeclineA T ABusiness Life CycleA T ADefinitionsThe process of determining the current worth of an asset or company. There are many techniques that can be used to determine value, some are subjective and others are objective. www.Investopedia.comAppraisingorestimatingtheworthof something having economic ormonetary value. www.businessdictionary.comThe process of examining various economic factors of a business using predetermined formulas to assess the value of the business or an owners interest in a company. Business valuation may be conducted to provide an accurate snapshot of the companys financial standing to present to current or potential investors. . www.businessdictionary.comA T APhases of Start-up Development

IdeationModels and proto-types

ConceptionClear target and direction

CommitmentLegal entity and able to deliver the product

ValidationRevenue and market approval

GrowthShowing a big number of customers in a growing marketA T AHow much am I worth?Part IA T AInventoryCashBuildingsEquipmentCopyrightsPatentsTrademarksBrand EquityUnpaid SalariesLoansVendor?

Basic WorthTangibles IntangiblesLiabilitiesValue+-=A T AHow are valuations done?Part IIA T AThree important methodsNPVNet Present ValueIRRInternal Rate of ReturnMarketValueWhat is the best method?There is no best method or approach for valuations, your value is what you can earn in the future.A T ANPVNet Present ValueIs the value of future money calculated today1 JD in five years is worth less todayThis means we have to discount it, so what is the rate of discount?The Excel formula is: NPV= (Discount Rate, Cash Flow 1, Cash Flow 2, Cash Flow 3, .)Cash Flow 1 = Profit of year 1 and so onThis discount rate depends on many factorsA T ANPVNet Present ValueDefining the discount rateNotesRatingDiscount RatePhaseAngel RoundWorst.8Ideation1.6Conception2Most deals.4Commitment3.2Validation4Best.1Growth5Discount rates are negotiated based on evaluating a number of factorsA T AFactors Influencing Discount Rate - 11Uniqueness 2Industry3Trends4Competitive Positioning 5Market Share6Customer Diversification 7Profitability8TimingA T AFactors Influencing Discount Rate - 29History of Sales & Profits10Product Cycle Point11Product Development12Strategy for Growth13Value of Similar IPs14Growth PotentialPolPolitical RiskProdProduct RiskA T AThe internal rate of return (IRR) or economic rate of return (ERR) is a rate of return used in capital budgeting to measure and compare the profitability of investments.The Excel formula for IRR is: IRR = (Investment, Cashflow1, Cashflow2, Cashflow3, )The IRR is best used when comparing investments with similar risk or with similar financial forecastsIRRInternal Rate of ReturnIRRInternal Rate of ReturnA T AA companys value is similar to another firm in the same industry, and at the same phase of the business cycleMarket value is used for the acquisition of mature or well established companiesTo estimate a companys market value we can use the PE ratio, that is: The value of the company/EarningsThe PE ratio is called the multiplierTo obtain the market multiplier one needs to calculate the average PE for the relevant industry or market segment

MarketValueA T ASummaryNPVNet Present ValueIRRInternal Rate of ReturnMarketValueWhat is the best method?NPV for start-upsIRR to compare investmentsMarket Value for mature companiesA T A