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Determining the value of a start-up business can be done in a variety of ways. One method that you could use is the book value business valuation strategy. Here are the basics of the book value business valuation method.
Book Value
The book value is essentially the value that the company can show on their financial statements. With this method, you are going to start by totaling the value of the company's assets. Then you will total the company's liabilities. You will then subtract the liabilities from the assets. The value that you are left with is the equity of the company. This equity represents the book value of the business.
Drawbacks
Even though this method of valuation is common, it is far from perfect. With this method, you are not taking into consideration patents, human capital or strategic partnerships. You might be bringing in decent cash flow, but you are still trying to pay off a large amount of debt from when you started the business. In that case, you may not have a lot of equity yet, but the value of the business could still be high.
