Company Valuation
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Company valuation basically includes the following steps:
- Investor looks at money to raise
- Investor looks at required rates of return given the investment stage:
- By looking at the required rate of return the investor calculates what he wants his money to be worth in year 'n'
- 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.
- 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 |
