Michael Newman’s latest é-Wealth Daily’ article is titled ”Boost Your Chances of Luring Investors with an Accurate Valuation”. [‘e-Wealth Daily’Article]

Michael Newman’s latest ‘e-Wealth Daily’ article:

Boost Your Chances of Luring Investors with an Accurate Valuation

When you’re working on your start-up and looking for investments, it’s essential to come up with an accurate value for your business. This will help guide how much cash you’re looking and come up with numbers investors won’t scoff at. After all, securing capital from investors is extremely important for business growth.

Most times, entrepreneurs greatly overvalue their business. After all, they’ve likely incurred substantial start-up costs, have debt and have put long hours into building the business. The investments sought are often to keep the business liquid and expand.

However, just because you think your business is worth $2.0 million (based on the reasons above), doesn’t mean it is. Therefore, you have to come up with an accurate valuation for your business if you hope to secure capital from your investors.

To come up with your number, you need to look at where your business currently stands. Are you profitable, is there documented chance for growth — like increased orders arriving and interest from retailers/customers? Based on this, you can come up with a valuation that reflects where the business is going in the short-term future. Investors love this information.

If you haven’t started making sales yet, your business will be worth less to investors regardless of how much money you’ve put into it. Therefore, if they tell you the valuation is $1.0 million and you believe it to be $2.0 million, they’re going to walk. If you haven’t got a track record to show your business will be a profitable investment, it’s essentially worth as much as investors tell you.

Of course, you could attempt to justify your personal valuation by offering examples of current businesses that are similar to yours. By analyzing the numbers and scope of similar businesses, you can come up with an idea of who your market is, what they are likely to spend and what you can likely project your company’s sales to be. You must remember, of course, to look at businesses that are comparable. Don’t compare yourself to big-time industry leaders, but rather smaller companies that more accurately reflect where your business will be in the shorter term.

Remember, your business isn’t worth anything until it’s turning a profit, so you want to show investors that it is — or at least will be soon. Regardless of the work and money you’ve put in, your valuation has to reflect profitability. If it doesn’t, you can likely count on investors turning down your requests.

e-Wealth Daily

About e-Wealth Daily

The e-Wealth Daily Bulletin brings you daily tips, advice and breaking news related to home businesses, small businesses and internet marketing. Our team of experts gives you the information you need to take your business pursuits to the most profitable level. Founded by Adrian Newman in 2003, the e-Wealth Daily Bulletin and www.ewealthdaily.com are a division of Lombardi Publishing with online newsletters reaching over 100,000 subscribers each month.

* IMNewsWatch would like to thank e-Wealth Daily for granting permission to reprint this article.

Marketing Plans Essential to Small Business Success

Sharing is caring