There are many established procedures to arrive at an early valuation for a company. The method ultimately selected also depends on a company's profile and is sector-specific.
Liquidation value:There's a 3rd way called liquidation value. Like book value, liquidation value is based on a company's assets. It is the amount of money one can get by selling off all the assets of the company. So, for example, you do know that the land on which your plant stands and its equipment will fetch some value as of today, if sold. That is one factor. The other factor in this method of evaluation is the inventory of your company and the receivables. These, though, be factored in at discounted rates.
Eg: Inventory would be the raw material in your stores, while receivables is the monies your company has to receive.
"For an early calculation, one should benchmark against a listed company in the sector and then give a discount. For startups, at least 30 percent discount is a must to arrive at the value," says Ambareesh Baliga, COO, Way2Wealth Broking.
> Profitability of the company
> The future prospects
> The sector your company is in
> How established your brand is