To set the valuation for your company's online Reg A+ equity offering, you should consider a multi-faceted approach that includes both quantitative and qualitative analyses. Here's a breakdown of the methods and factors to consider:
Market Comparables (Comps): Identify companies within your industry that are of similar size and growth stage. Look at their market capitalization, price-to-earnings ratios, and other relevant multiples. Adjust these comparables based on your company's unique characteristics and performance metrics.
Financial Analysis:
- Historical Performance: Review your company's past financial statements, focusing on revenue growth, margins, and profitability trends.
- Growth Rate: Consider how quickly your company is growing compared to industry peers and how sustainable that growth is.
- Profitability: Evaluate your company's ability to generate profit relative to its revenue and its peers.
- Cash Flow: Analyze the cash flow statements to understand the liquidity and financial health of your business relative to its peers.
Future Projections:
- Develop a financial model that projects your company's future revenue, expenses, cash flow, and earnings before interest, taxes, depreciation, and amortization (EBITDA).
- Be conservative in your assumptions and ensure they can be justified to potential investors.
Discounted Cash Flow (DCF):
- Calculate the present value of your company's projected future cash flows using a discount rate that reflects the risk profile of your business.
- This method is particularly useful for companies with stable and predictable cash flows.
Asset-Based Valuation:
- If your company has significant tangible or intangible assets, consider their fair market value.
- Subtract any liabilities to determine the net asset value, which can serve as a floor for the company's valuation.
Cost to Duplicate:
- Estimate the cost of replicating your company's assets, technology, customer base, and market position.
- This method can be particularly relevant for technology or IP-driven companies.
Demand for the Offering:
- Conduct market testing to gauge investor interest in your offering. Reg A+ TestTheWaters (TM*) is a great way to test the appeal of your offering and valuation.
- A high level of interest may allow for a higher valuation, but it's important to remain realistic to maintain credibility.
- Seek advice from entrepreneurs and fellow CEOs – run your numbers by them and get a reality check on your valuation thinking. Make sure you prompt them to be candid!
*Reg A+ TestTheWaters(TM) is a trademark of Manhattan Street Capital.
Valuation Service:
- Engage a professional valuation service. Manhattan Street Capital will be pleased to refer you to a valuation professional as needed.
- Check with one or more underwriters. They can provide you with good input on the appropriate valuation for your company, if your business is appealing enough for them to be interested.
Investor Sentiment:
- Consider the current investment climate and how investors perceive your industry and business model.
- Positive sentiment can support a higher valuation, while skepticism may require a more conservative approach.
By combining these methods and considering the unique aspects of your business, you can arrive at a valuation that is both attractive to investors and reflective of your company's potential. It's important to present a compelling narrative that aligns with the valuation and resonates with the investment community.
Manhattan Street Capital coordinates with all the appropriate service providers to provide an integrated and complete service, helping you to navigate the valuation process effectively for your Reg A+ offering.
I am happy to schedule a call with you to help you assess if Reg A+ is a good fit for your company and your liquidity goals, and to send you more information - just contact me using the button below and send specifics on your company and capital raising plans. And in the meantime, I wish you great success!
(1).jpg)
Rod Turner
Rod Turner is the founder and CEO of Manhattan Street Capital, the #1 Growth Capital service for mature startups and mid-sized companies to raise capital using Regulation A+. Turner has played a key role in building successful companies including Symantec/Norton (SYMC), Ashton Tate, MicroPort, Knowledge Adventure, and more. He is an experienced investor who has built a Venture Capital business (Irvine Ventures) and has made angel and mezzanine investments in companies such as Bloom, Amyris (AMRS), Ask Jeeves, and eASIC.
www.ManhattanStreetCapital.com
Manhattan Street Capital, 5694 Mission Center Rd, Suite 602-468, San Diego, CA 92108.
