Valuation is the process of determining the current market value of a company, taking into account factors like its potential for future growth, revenue, intellectual property, team expertise, and market conditions, essentially estimating how much the company is worth based on its current and projected future performance. It is a simple tool to measure the net worth of the company.

A company should conduct a valuation for several critical reasons, as it helps stakeholders make informed decisions and understand the company's financial standing and potential. Some of the key reasons include – Investment Decisions, Strategic Planning, M&A, Exit Planning, ESOP options, Debt Financing, Market Comparison, Shareholder Communications, and many more.

Business valuation is typically done by considering various factors such as financial statements, market analysis, industry trends, and future projections to determine the value of a business.

Valuation methods are used to determine the value of a business or asset and fall into three main categories – 1) Income-Based Methods – DCF Method, Capitalization of Earnings, and Earnings Multipliers; 2) Market-Based Methods – CCA Method, Precedent Transactions, Market Capitalization; 3) Asset-Based Methods – Book Value, Liquidation Value, and Replacement Costs.

Choosing a method depends on factors like the company’s financial stability, industry, and purpose of the valuation. You can choose one of the below method. Stable Earnings or Cash Flows: DCF or Capitalisation of Earnings. Startups or High-Growth Companies: Venture Capital Method or Market Multiples. Asset-Heavy Companies: Asset-Based Methods. Public Companies or M&A Scenarios: Market-Based Methods.

The cost of valuation differs based on your requirements, the inputs provided, and the valuation methodology or purpose you choose. Based on various such parameters, the cost and time would vary. However, you do not have to worry, we can get on a quick call and set the expectations right on cost and ETA.

Any company who had done achieved scalable revenue can do valuation. If you are start-up who are looking to raise funds or investments, then it's advisable to go for valuation once there are some business activity, esp. traction. However, if you are a technology company who is having an innovative technology with a complex business model, then you can do the valuation at prototype stage once your technology is defined. If you are startup, looking for ESOPs, then also you can go for valuation.

Different inputs are required for different valuation methods and purpose of valuation. More the information you provide, the better it is for our valuer to do the exercise. Some of the required inputs are mentioned below. 1. General Inputs (Applicable Across Most Methods) Financial Statements: Income statement (for revenue, expenses, profits). Balance sheet (for assets, liabilities, equity). Cash flow statement (for cash inflows and outflows). 2. Industry and Market Data: Industry growth rates. Competitor performance metrics. Market trends and benchmarks. Additionally, based on specific valuation method, additional inputs like IRR, Financial Metrics, Acquisition Details, Asset Values, Historical Earnings Data, Exit Value, Market Risks, etc., may also be required. Having accurate and detailed inputs ensures the valuation is reliable and reflective of the company’s true worth.

Yes, imagine a company XYZ who is already there in the market and are planning to raise investments. They wanted to do Valuation and the company is estimated to have worth of ₹2.5 Crores. The DCF analysis incorporates projected free cash flows (FCFs) over a five-year forecast period and a terminal value to estimate the present value of the company. To access a sample valuation report of above case, click here.