What market valuation really depends on?

Setting up a company’s market valuation can be a tough rope walk for many entrepreneurs.  Entrepreneurs often tend to be too optimistic about their overall business market valuations.

A high valuation has its negatives as it could mean reduced interest from investors making it hard to raise funds and deliver promises to clients and customers. The essence of any startup businesses’ true market value depends on various yardsticks which includes the following:

Knowing the development stage

The valuation of any business depends on its development stage. A startup which has recently started operations is likely to be valued lower than a business which has been in existence for a longer time. This is irrespective of that unique business idea or innovative business model you may have for your startup. There is no substitute for a time-tested business entity when it comes to valuations.

Startups team composition

Startups with a great team and all bases covered are better in terms of valuation than a company run by a sole individual. The overall team composition and their specialization ranks high when it comes to determining the overall market valuation of the company.

Market size of business

The final market valuation of any business will depend on its market size. For example, if the business is operational in a large market with a sizeable chunk of likely buyers, the chances of generating good returns in less time are higher. Compared to a business which is innovative and unique but targeting a small chunk of potential buyers and in a smaller area the returns are likely to be relatively slow resulting in lower valuations.  

Assets

Tangible and intangible assets, stocks, machinery, inventory are all part of the overall financial credentials to sum up market valuation of the business. Established partnerships with established brands along with involvement in any patents add up the overall market value.

Traction and growth rates

A company with higher traction and growth rate numbers is in all likelihood to get a better financial valuation compared to its rivals and peers. Complimenting higher growth rates with a positive projection for the future can result in maximization of valuation.

Talent management

A captain is as good as its team and a startup valuation is as good as the talent it holds. Businesses worldwide are realizing that more than its machinery and technology, it is the talent of their employees that make or break their future including their market valuations.

Financial forecasts

Being profitable is a good thing when it comes to market valuations. Whether the startup is profitable or not or merely in its inception stage of development, positive financials forecasted could work just as well to ensure good market valuations.

However, there is no single yardstick to find out market valuation of a startup. A deep look into all the essential aspects finally determines the true market valuation of any startup.

What’s your take on ways to determine true market valuation for your company? Please put in your comments.