Startup Valuation Services

Our Detailed Valuation Work Process

Step 1: Discovery Call.
This is the preliminary and most fundamental step of our work, where we discuss the company's business model with the founder and explain how we will break it down in our forecast. In this stage, we typically inquire about different aspects of the business and request additional documents that might help.

Step 2: Financial Analysis.
To begin, we will examine the company's financial history, which can provide valuable insight into the business. This will include reviewing past financial statements, management accounts, accounting system reports, user and client data, and more.

This step aims to understand the company's annual and monthly trends, current clients, revenue, headcount, and cash flow status. This information will help us build a structure and assumptions for our analysis. If you're starting up and have no previous financials, that's ok! We'll jump straight to step 3.

Step 3: Financial Model Structure and Assumptions.
To properly value a business, a financial model must be created. This model serves as the basis for the valuation, and its structure and assumptions are crucial.

If a financial analysis has been conducted, that information can be used as a starting point for the model's structure and assumptions. If a financial analysis is not relevant or available, the information gathered during the discovery call can be used to create a preliminary draft of the model's structure and assumptions.

Any additional questions about the business model can be raised at this stage to help refine the model.

Step 4: Revenues Model.
Once we finalize the structure and initial assumptions, we'll start building the revenue model. This is an essential part of the model for most businesses, and we'll dedicate an entire step just for that.

In this step, we'll break down the entire client acquisition process, which includes a detailed client or user base forecast, subscribers, tiers, pricing, conversion, and more. In this step, we'll have the first review with the client to seek feedback on the work accomplished so far. Any input is incorporated into the model before step 5.

Step 5: Costs and Expenses.
After we finalized step 4, we moved on to add the costs and expenses layer, which includes: headcount forecast per role and function, payroll, operating expenses, customer support, COGS, and all relevant costs. 

Once this part is done, we'll review the work together and seek additional feedback. Feedback is incorporated into the model before step 6.

Step 6: Income Statement Forecast.
Also known as the profit and loss (PnL) forecast. In this step, we put together the revenues forecast, costs, and expenses to produce an income statement summary forecast and a detailed summary forecast. 

Step 7: Cash Flow Forecast.
Once we finalize the income statement part of the financial model, we will start building the cash flow part, which is highly dependent on the income statement we completed earlier. In this step, we will add cash flow-specific items such as debt, funds raised, depreciation, dividend payouts, etc. 

Step 8: KPIs and Analysis Elements.
In this step, we add the final piece of the puzzle – the key performance indicators(KPIs) and analysis elements such as vertical analysis, horizontal analysis, charts, etc. 

Step 9: Final Draft Of The Financial Model.
In this step, we'll wrap up the financial modeling part of the valuation process. In this step, we'll review the entire financial model together. We'll walk through every tab, section, table, and chart in the model to make sure they all make sense from a business and financial perspective and support the general theme.

In this step, we'll ask you again to with the financial model to see that you understand how to update it and how it works if you have any additional feedback after you review the model that we haven't covered before, we can cover it in this step.

Step 10: Comps Analysis.
In this step, we're adding the first layer of the valuation by building the comparable companies' analysis, or comps analysis. The comps analysis breaks down different financial aspects of significant comparable companies in the niche, whether privately held or publicly traded.

Is your business model not that straightforward, and you don't have too many (or any) comparable companies? No problem.

We'll synthetically break down your business model into different pieces, find comparables for them, and combine them to mimic your business model.

To these comparables, we'll add relevant information from previous transactions in the niche to build a comprehensive market analysis.

Step 11: Valuation.
In this step, we'll add the final piece of the puzzle – the valuation.

In this step, we combine everything to calculate the startup's valuation. We take the relevant pieces of the financial model, combine them with other components of the comps analysis, calculate some additional elements, and calculate the final valuation.

To increase accuracy and benefit from the strengths of the different valuation methods, we'll calculate the business' valuation with several valuation methods, such as the revenue multiple, EBITDA multiple, the Discounted Cash Flow (DCF) method, and any other methods that fit the case.