There are several methods used to value a company, each with its own strengths and weaknesses. Here’s a brief overview of some common approaches
Berkus Method: The Berkus Model is a valuation method that assigns a monetary value to a start-up based on five key factors: sound idea, prototype, quantity of the management team, strategic relationships, and early market feedback.
Market Multiples: As used in our tool, this method compares your company’s financial metrics (Sales or EBITDA) to those of similar publicly traded companies and apes the corresponding market valuation ratios. It’s a simple and readily available approach but may not fully capture company-specific factors.
Discounted Cash Flow (DCF): This method estimates the present value of a company’s future cash flows, considering factors of growth rate, risk, and discount rate. It requires detailed financial projections and is more complex than using multiples.
Transaction Multiples: This method analyses recent M&A deals in your industry and applies the valuation ratios observed in those transactions to your company. It can be more reliable for M&A scenarios, but data availability can be pitted.
Asset-Based Valuation: This method values a company based on the fair market value of its assets, often used for distressed companies or those with significant tangible assets. It may not fully reflect intangible assets, brand value or intellectual property.
