Early Stage Valuation Pricing and Forecasting

How much do I get for $50,000 investment?

At Pre-Startup time the valuation for a directly experienced CEO and a thorough Business Plan is often set at $500,000; so, raising $50,000 then would sell 10%. If the Team is Complete then the Valuation is often $1 million.  Is a strong proprietary service or product is credible then Valuation tends to move to:

• a discount on Valuation in Year 3 or Year 5.

The Valuation to Revenue Ratio is often the Key. Here is how you generate a Credible Forecast.

A credible Forecast and a Valuation Rationale should be presented and updated in reports to Investors.

Your Forecasts hang on 2 big issues: A Revenue Formula and Sales & Marketing Costs.  Forecast Monthly and update the Forecast at mid-month.

Examples for Revenue Formula and Cost: 

• You expect the average sales person to generate $0.5 million initially growing over a 2 year period to $1.0 million each.
• 45% to 55%, even 70% very early, as the Cost of Marketing for Advertising and Social Media Marketing is often appropriate for a high margin business.

Valuation, in early stage companies, uses the Valuation to Revenue Ratio. Identify Valuation to Revenue for publically traded comparable companies, like 4 times annual revenue. 

As a private company, use 50% of the Valuation to Revenue Ratio as a rough guide. A Rationale you might add is that your growth rate for the 1st 5 years is way above growth at Comparables.

A Valuation Example: In our 36th month, revenue for the month at $600,000 is a Run Rate of $7.2 million annually. Using 2 times revenue, that puts our valuation at $14.2 million. 

Rapid growth can be forecast well and controlled if you re-visit the forecast 2 times per month and if you insist on Measurement and Repeatability.

For more about a measurable and repeatable Revenue Generation Formula, please see my:

The Revenue Formula that Investors want to See.

Early Financing: Angels and VCs the Fit

At #quora a Question asks if Early Stage Companies should choose Angels or VCs.

1. I prefer Angels for very early stages. They can bring local contacts as Employees or Customers and they do not interfere is strategy or in management. So, I choose Angels Until ...

2. VCs, Venture Capital is preferred when you want to raise $2 million+ and when you want Coaching and non-local Contacts.

How can a Start-up save money, raise money and increase revenue?

Hello.

How can a Start-up save money, raise money, increase revenue?  In this blog we will explore experiences and principles that answer those questions.  For much about this, please consider what I have written for my small consulting company, Exxel International.

The best of my writing you should skim please:

10 Keys to a Business Plan that Gets Funded


Next see:

The Revenue Formula
that Investors
want to See

Articles about ways to increase revenue from Exxel International

• 10 Keys to a Business Plan that Gets Funded

 Is your business plan or marketing plan what it could be? Let the 10 Keys guide your Plan. The 10 keys include Vision, a clear Revenue Formula and 8 more issues you may not but should ... exxelinternational.com/10keys/index.html - Cached

• Most companies can at least DOUBLE initial appointments per ...

 You can set up measurement systems and A, B splits at several junctures, as welcomed changes in the marketing work. The measurement will affect ... exxelinternational.com/docs/revenue3.html - Cached

2 Keys for 50%+ growth in Major Account Revenue without increasing budgets

How can you test your Revenue Formula for less than $500?

• Most companies can at least DOUBLE initial appointments per ...

 You can set up measurement systems and A, B splits at several junctures, as welcomed changes in the marketing work. The measurement will affect ... exxelinternational.com/docs/revenue3.html - Cached

• Increase Revenue: Practical Support From Your Side Of The Table

 Increase Your Revenue using practical support. from Your Side of the Table. Q: What is the most significant way that you can increase the value of your ... exxelinternational.com/docs/reve_s.html - Cached

• Test you Revenue Formula for under $500

 7 different ways listed to test you Revenue Formula, each for under $500. Links, support material included.exxelinternational.com/docs/test_revenue_formula.html - Cached

• Most companies can at least DOUBLE initial appointments per ...

 Does your company sell to major accounts? Be honest. Your sales people don't get enough qualified, actively interested leads. Do they? ... exxelinternational.com/docs/leads_major_accounts.html 

-- An aside, you could be 2 to three times more Productive. 

Have you tried talking to your computer? 

Your voice can dictate into email, a web page, a Word file, into chat or where ever. Like I do, you can use Dragon Naturally Speaking.

The dictating process works best when you some of the ideas from my web site. The effective speed is over 150 words per minute with no errors, that is it will error only on new words.

$30 is all it costs some times to buy an older version.

See my related Amazon Store: