Company Valuation

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Company valuation basically includes the following steps:

  1. Investor looks at money to raise
  2. Investor looks at required rates of return given the investment stage:

  1. By looking at the required rate of return the investor calculates what he wants his money to be worth in year 'n'
  2. Then by looking at the projected value of the company from the business plan, the investor calculates what percentage of the shares he then would need.
  3. Then the share price can be calculated from the # shares and the original required investment.

Session audio: <<AudioFragment /static/files/MBI/Module%2010/M10-S5%20-%20Explaining%20Company%20Valuation.mp3>>

Process explained in /static/files/MBI/Module%2010/Company%20valuation.xlsx spreadsheet (picture below:

Company valuation 'rules of thumb'

Type of business Formula
Retail 3 times sales
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