As per me, the best valuation source or asset for any company is employees.
If employee is happy, he will serve customer best.
The money you can borrow from the bank but loyal employee cant be borrowed or purchased.
You need to invest time to find and hire and care for these people.
Report Tarannum's answer
Not sure I understood your question. If you are talking about how to value a company (estimate its money value), then for a new company, forecasting future cash flows are a good source of valuation. This, of course is very subjective since some people may see greater future value than others. To give you an example, in 2006, Yahoo offered 1B for Facebook, but Zuckerberg didn’t even consider the proposal. He trusted his valuation more than anyone else. He was right. Let me know if you were referring to this. Regards, Omar
Report Omar's answer
What Omar said. The method is seemingly simple: 1. add forecasted cash your business will generate each year, subtract expenses. This is your cash flow in year X 2. in theory, cash flow of a mature business stabilizes eventually so you should put a lot of thought in forecasting first handful of years and try your best at guessing when the cash flow stabilizes 3. discount your cash flows in each year back to present. Boom, this is how much your business is worth
The trick is, of course, to forecast cash receipts and expenses. Small / disruptive businesses are notorious for missing the forecasts and when they come pretty close, that's by accident=) Another method is to look at what similar businesses were sold, but the information is scarce (those deals are typically private) and unreliable (not all the details of such deals are disclosed). Again, you have to apply judgement to pick comparable companies, and for a company trying to disrupt a market there may be none. Facebook is an excellent example.
Report Hanna's answer
No, No--> No I meant, Online Valuation Calculators }| You can google it: "Online valuation calculators" There are 100's of them!
Which one is the best.?
Thank you for your uplifting reply.
Report Lizzy's answer
It really depends on the stage of your business. For example, if your business has been around for a while or has reached a "normalized" level of profitability, the most common valuation approach would be to apply a multiple to EBITDA (earnings before interest, tax, depreciation, and amortization) - i.e., if your business produced annual EBITDA of $100, and you are in an industry where publicly traded companies generally trade for 10x EBITDA, your business would have a value of $1,000 ($100 x 10).
For a company that is generating sales, but either has not reached profitability or has not reached "normalized" profitability, you would generally apply a revenue multiple (i.e., total annual sales of $500, and companies generally trade for 2x revenue, so you'd assume $500 x 2 to get to a value of $1,000).
The other approach for a newer stage venture, as folks highlighted before, would be based on a discounted cash flow model, which is where you essentially estimate what your future sales, expenses, and profitability will be, and use that to imply the value of the business today. The problem with this approach is that it is incredibly subjective, and there will likely be disagreements between investors and entrepreneurs on the risks associated with the forecast you prepare. There are a few ways to get around that with investors (e.g., preferred share structures to reduce the investor's risk by prioritizing their equity holding, earn-outs, etc.).
In terms of an online tool, I'm assuming each would use one of the approaches above, just depends on which is most appropriate for your business.